Mega malls in India's metro cities have triple-storied parking spaces, but during peak times there's a space crunch. With the pre-Diwali shopping frenzy these days, tens of cars keep getting in and out every minute causing some commotion near the parking area. The situation isn't different once inside. Food courts are often flooded with people and a half-an-hour wait outside your favourite restaurant is commonplace. The staff at the retail outlets have to be on their toes during the festive season, and consider yourself lucky if you find no queues at the trial rooms. Earlier, one witnessed this scene during festival time, but even weekends pull in foodies and shoppers to malls.

If you move to a remote place, you will find consumers are equally enthused as their counterparts in the metros and tier-1 cities. So it's not a surprise that many automobile companies, especially the two-wheeler manufacturers are focused on capitalising on the rural markets. Brands in the consumer non-durables segment are coming up with unique strategies to capture the rural market.

And yes, any discussion about growing consumerism can't be complete without having a mention of buzzing online marketplaces. The online shopping in India is no more a monopoly of a few prominent players. In fact, smaller marketers have become tough competition to well-established brands. Similarly, consumers across economic classes shop online. Although Cash-On-Delivery (COD) remains the most preferred option for many Indians, the trend of using e-wallets and other electronic payment mediums is catching fast.

Clearly, consumerism in India is on the tipping point. The Indian consumer is not only maturing, but also open to experimentation.

These days Indians are primarily spending on

• Automobiles
• Air travels
• Mobile phones
• Consumer durables such as air conditions, TVs, Fridge, and machines
• Clothing
• Fast food and hotels

Although some of these items have traditionally been customers' favourite, the noticeable change is in the price cautiousness. Therefore, when people go shopping for a television set nowadays, they are not keen on buying cheap Cathode Ray Tube (CRT) televisions, but they enquire about expensive LCD and LED televisions. Among these categories they might still buy the cheaper one, but the price is no longer the only deciding parameter, quality is. Similarly, you can see a gradual shift in how we spend on eatables. Earlier people spent Rs 20-30 on coffee, then came a period when coffee shop chains proliferated, wherein typically a cup of coffee cost Rs 80-100. Now we are witnessing entries of premium brands in the segment. Today, people are willing to pay even Rs 150-200 for a cup of coffee. The same holds true in the case of multiplexes. Individuals who are in their 70s laugh at youngsters when they hear about paying as high as Rs 200 for popcorn at multiplex cinema halls.

It wouldn't be wrong to say that, Indian consumerism has already gathered steam. However, it hasn't exploded as vigorously as it was expected to in the last 3-4 years. Two consecutive years of bad monsoon affected the rural growth, while high inflation and stagnating wages affected the urban demand. The good news is there are some green shoots of revival.

In Q2 FY 2016-17 i.e. the quarter that ended on September 30, the passenger vehicles segment reported a growth of 17.8% while two-wheeler segment has grown at an even faster rate of more than 20%. The passenger growth in the airline sector has witnessed an impressive jump of 23% from the beginning of the current financial year to August.

What fuels consumerism in India

• Good monsoon
• Salary hikes and bonus payouts
• Falling retail inflation
• Relatively stable retail balance sheet
• Availability of cheaper loans

Better monsoon this year (97% of the long period averages, which is considered normal) is likely to translate into better farm output. The first advanced estimates released by the Agriculture Ministry last month suggests that India is set to witness a record output this year led by an impressive 57% jump in the pulses production and 40% rise in oilseeds production—two categories that pushed the food inflation higher in the past. Moreover, the delayed exit of the south-west monsoon bodes well for the rabi crop. The impressive performance of the agriculture sector would have a positive impact on farm wages. Moreover, Government has also reiterated its commitment of doubling the farmers' income by 2022.

Those working in the organised sectors are likely to benefit from the bonus pays and salary hikes. Implementation of the 7th pay commission and possible adaptation of the recommendations by states, though with a lag, is likely to leave more discretionary income in the hands of the Government employees. The retail inflation has been sliding lower compared to two years ago. Of course, there exist inflationary risks even today, but the RBI and the Government are committed to acting tough against inflation. Medium to long term target for retail inflation is 4.0%--which is ambitious yet achievable. The RBI has slashed policy rates by 175 bps (basis points) from January 2015. A basis point is a hundredth of a percent. Banks resisted passing on the benefits of the rate cuts to the borrowers, but the situation is changing now. Banks and Non-Banking Financial Institutions are cutting their lending rates and offering teaser retail loans. Credit card spends, automobile loans, and white goods loans have witnessed a significant growth ranging from 18% to 30% in last 3 months. (Source: Business Standard dated October 13, 2016)

Will this consumption boom help India achieve 8% plus growth?

As per RBI estimates, Indian economy is likely to grow by 7.6% in the current financial year—a rate that concurs with the one International Monetary Fund (IMF) has projected in its update on the world economic outlook published this month. Industry expert, economists, and even a few prominent voices in the Government, have been optimistic about the pickup in growth backed by robust consumption.

However, not all experts are in agreement. Many believe that consumption alone won't put India's growth in a fast lane. To be able to achieve and sustain 8% plus growth, domestic savings have to grow significantly. Gross Fixed Capital Formation (GFCF) at 29.6% remained subdued during Q1 FY 2016-17. Lesser investment initiatives by corporate India remains a challenge for India's dream to grow at a faster pace. The historical evidence shows that from FY 1951-52 India has recorded over 8% growth only during 11financial years. Out of these, 8 years belong to the post-liberalisation era. Except for the time period between FY 2003-04 and FY 2007-08, India has always struggled to sustain the higher growth rate.

This exposes the shortcomings of the consumption-led growth approach in the Indian context. Remarks of Mr Yashwant Sinha, a former Finance Minister, on this subject make the picture crystal clear. He opined that "Since growth is a function of investment, we need about 40 per cent of savings, domestic and foreign, to sustain a growth rate of 8 per cent and more. The efficiency of the capital invested will also need to be improved so that we extract the maximum out of every rupee invested."

What investors should do?

Getting carried away by the consumption theme and investing in companies offering popular brands and services might be enticing, but in your own interest, its best avoided. The popularity of a brand need not always translate into high profits for the company. Profits and profitability is a function of overall demand-supply scenario and the efficiency of the management of the enterprise. Plus, you need to carefully watch out for the valuations of stocks before investing into them.

Therefore, unless you are an expert in stock picking or have time, knowledge and the perseverance to do things on your own, take a passive approach to stock market investing. To benefit from the ongoing consumption boom, you may invest in opportunity funds that have proven track records and are offered by fund houses following sound investment and risk management process.

In case you are unsure about the funds to invest in, you might consider taking advantage of the unbiased mutual fund research services offered by PersonalFN.

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