Improving Consumer Sentiment for a Growing Economy: My Honest Thoughts

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December 31, 2023

“Mera beta engineer banega” I’m sure many of you can recollect this dialogue from the movie ‘3 Idiots’. Engineering has for long been the most opted-for graduate course in India. While everyone has reasons for choosing the course, we should thank the IT boom that fuelled the rapid growth of engineering as a career. I too am an engineer, a computer science engineer, and after engineering, there are two obvious career paths: a Masters in Engineering or an MBA. Many opt for an MBA to accelerate their career growth, but I had completely different reasons for pursuing an MBA.

From mergers and acquisitions to consumer sentiments, I was drawn by the world of business. Words like economy, inflation, IPO, brand, consumer psychology always drew my attention, and hence I landed up at business school. Keeping everything else aside, I developed an interest in marketing. The idea of retail stores stocking up items in a particular way, the catchy advertisements for higher brand awareness, and branding, in general, excited me. Slowly and steadily as I understood the subject better, I started realising the importance of consumer sentiment for a growing economy. And over the last few years, the Indian economy has been in full throttle.

Contributors to the growing Indian economy

With the rate at which the Indian economy has been growing in the last few years, it has the potential to become one of the top 3 major economies of the world. With a GDP of $3.09 trillion, we are the 6th largest economy in the world, marginally behind the UK. The Indian economy has seen its fair share of light and dark days. However, some key decisions helped India become one of the fastest developing nations in the world.

From Food Aid to World’s Largest Food producer

India’s first 5-year plan that was set up in 1951 was focused on agriculture and food production. From receiving food aid to becoming the world’s largest food producer, the journey of becoming self-sufficient when it comes to food is independent India’s biggest achievement. Thanks to the Green and White revolutions, 25% of global food production is done by India today.

Building India

India soon turned its attention towards building up in terms of infrastructure with a set of plans and actions that focused on developing the industrial sector, improving connectivity – rail and road – and setting up the infrastructure for a better India. During these years, there were massive strides taken when it came to setting up public enterprises. From manufacturing to construction, textile to services, these industries were there to build the India of tomorrow.

Liberalization and Foreign Direct Investment

The major contributor to the Indian economy’s meteoric rise has to be the liberalization policies of the 1990s. From reducing tariffs, taxes, deregulating markets, the policymakers took bold steps to get the economy back on track. With access to a new untouched market, many foreign players came to India and set up their shops. 

The Foreign Direct Investment (FDI) was a meagre $132 Mn in 1991, it zoomed to $5.2Bn in just 5 years. All of these led to better life expectancy, literacy rates, better infrastructure and everything you see around you today. In fact, in the last decade, FDI stood at a staggering $542 Bn!

Internet and the growth of e-commerce

The first publicly available internet service was launched by VSNL in 1995. The adoption and access remained slow until 2005 due to infrastructure. However, thanks to the broadband policy of 2005, which defined the minimum speed to be 256 kbit/s, things took up speed. However, it wasn’t until 2015, when the government held the auction of the 3G spectrum, that we were able to pave the way to the high-speed internet we use.

IRCTC laying the ground

Ecommerce was still a buzzword until the early 2000s when IRCTC started its online ticket booking service. For most Indians like me, booking a train ticket meant queuing up at the railway station, but that was going to change with the introduction of IRCTC’s online service. Around the same time, a company named Amazon was already creating tremors in the e-commerce space in the US.

Flipkart & Amazon change the way we shop

However, the major boost came in when two IIT graduates and former Amazon employees set up Flipkart which completely changed the way Indians looked at the internet and e-commerce. It was only a matter of time when the giants of the world came to India to set up shop and appease the consumer sentiment for a growing economy like ours. It was around 2013 when Amazon came to India and since then the e-commerce landscape has changed for good.

How do we improve Consumer Sentiment in our growing economy?

E-commerce has transformed not only the way we consumers shop but also the way business is done in India. The current e-commerce market is close to $46 Bn which is expected to be around $110 Bn by 2026. While these are great numbers, there are a few things that should be considered to ensure that not only consumers but even the investors’ sentiment is protected.

The legal framework to propel ease of doing business

Foreign investments have been prospering over the years, but to keep them growing, we need to ensure that we have a stable legal framework to improve ease of doing business. We have seen quite a few legal disputes like that of Future and Reliance and WhatsApp’s Payment system and that will only harm investor confidence. Unstable laws and dispute redressal medium will only decelerate the growth and also harm the booming startup ecosystem.

Corporate Governance

India has had a rough history with corporate laws. From the great 1992 scam to the recent ICICI – Videocon case, Corporate Laws in India have improved, but are still not perfect. The laws need to ensure that the directors of the companies transparently perform their duties. Fraudulent transactions will not only affect the company but will hurt investor confidence and eventually consumer sentiments. For any M&A’s or deals, there have to be tighter laws to ensure that the deals carried out are fair.

Minority Shareholder Rights

In any company, shareholders are the key to their progress. It’s because of them that the company was able to raise the money and run its business. While every shareholder is provided with the right to vote, the rights of minority shareholders need to be looked at. There have been decisions taken by large organisations that would benefit only the promoters and the minority shareholders would be at loss.

The Yes Bank fiasco or the more recent Reliance Future Retail deals are some examples where minority shareholders’ rights should have been protected. It’s time to take the interests of minority shareholders more seriously than that of promoters; which is where the genesis of independent directors lies.

Closing remarks

Why am I suddenly talking about e-commerce and consumer sentiments? Well, as I said, I’m not only an avid shopper but also keep a tab on the latest happenings in the commerce sector. Most of you enjoyed the recent bull run at the stock markets, thanks to those blockbuster IPOs, but how many of you actually thought about how the consumers are affected by all of this?

Companies have opened and shut shop during the pandemic, some investors minted money while others lost their life earnings. Such is the state of affairs, and I thought, what better way than to pen down my thoughts around improving consumer sentiments in this growing economy.

How did you like this article? Did you find this insightful? What are your thoughts on e-commerce in India? Mention them in the comments below, tweet to me at @Atulmaharaj, DM me on Instagram or Get In Touch.