With World’s Largest 0-14 year Old Population India is an Attractive Market for Toys

India is one of the most dynamic countries globally in toys and games sales recording an impressive 19% CAGR in value terms between 2005-2010. The global recession has had little impact on toy sales in the country. With GDP growth rates of 6.8% in 2009 and 10.1% in 2010, India was one of the few large economies that continued to grow fast despite the economic downturn. With world’slargest 0-14 year old population alongside increasing incomes and purchasing power it is appealing country for toy sales.

In the first of two articles, Euromonitor International explores the growth potential in rural areas while analysing the main challenges posed by low disposable income and other factors.

World’s largest 0-14 year old population

For toys and games sales 0-14 year old population is undoubtedly the most important consumer group. In 2010, 0-14 year old population stood at 365.1 million, accounting for almost one third of the country’s total population. This is much larger than China’s, which stood at 218.5 million, or 18% of the total population same year. However, despite the big 0-14 population, in terms of per capita spend still remains one of the lowest globally.

World’s Top 10 largest 0-14 year population by country, 2005 – 2020

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Source: Euromonitor International from national statistics/UN

India’s rural population could offer good potential

India’s rural population accounted for more than two-thirds of the country’s total population and one-tenth of the world population in 2010, making it a highly important market segment for businesses including toys and games. As incomes of rural Indians continue to grow, these consumers offer significant market expansion potential and can become a driving force behind the country’s economic growth if rural infrastructure can be improved and poverty reduced.

While per capita purchasing power in rural areas may be lower than in urban areas, India’s rural population constitutes an important consumer market that is vital to the domestic economy due to its sheer number. Although poverty remains a major problem, rural Indians have seen improvements in their living standards as a result of strong economic growth, state rural development programmes and rising prices for agricultural goods. As most rural areas have agriculture-based economies, they were less affected by the 2008-2009 global economic downturn. Due to rapid urbanisation, however, the share of the rural population to total population in India has been declining, from 72.3% in 2000 to 69.9% in 2010. During 2005-2010, India’s rural population grew at an average annual rate of 1.0%, compared to 2.4% for the urban population.

India’s Rural and Urban Population: 2005-2010

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Source: Euromonitor International from national statistics/UN

Main Challenges

India’s large rural population represents a significant “bottom of the pyramid” market with much potential but also challenges. The country’s consumer income and expenditure levels have been growing strongly as a result of the country’s robust economic growth. Annual disposable income and consumer expenditure per capita reached Rs53,547 (US$1,171) and Rs38,083 (US$833) in 2010, respectively, representing a period growth of 29.2% and 28.0% in real terms during 2005-2010.

India’s Annual Per Capita Disposable Income and Consumer Expenditure: 2005-2010

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Source: Euromonitor International from national statistics/OECD/Eurostat.Note: Rs current prices

Rural Indians have seen significant improvements in their incomes and purchasing power, thus providing growing business opportunities for businesses given their large numbers. According to India’s National Sample Survey, monthly per capita expenditure in rural areas stood at Rs953 (US$20.9) in 2009-2010, up by 64.4% compared to the 2004-2005 level in nominal terms. This, however, remains much lower than the Rs1,856 (US$40.6) for urban India in the same period.

In spite of major improvements in living standards, however, rural Indians still lag behind their urban counterparts in terms of income, education, infrastructure and employment. The poverty rate in rural areas is estimated to be higher than the national average, which stood at 37.0% as of 2010 according to national statistics. The illiteracy rate in rural regions such as Orissa (26.6%) was significantly higher in 2010 than, for example, in urban Delhi (13.7%).

Many rural regions still lack adequate infrastructure, including roads and electricity and water supplies, posing further challenges. Therefore, manufacturers who are planning to tap into this market should consider these all in advance and plan their strategy accordingly.