Dialing up the Indian consumerMobile technology could drive India’s middle-class growth


Joseph Devine

  • Senior Vice President, Chief Investment Officer — Global Ex-US Equity
  • Read bio

With so much attention on trade in 2019, we find ourselves speaking often about the opportunity China represents over time, and our perspectives on the potential for small Chinese companies to flourish over time. Many emerging markets (EM) gain from leveraging the developed world’s technology innovations. This tendency is not new, nor unique to China. India, is another large market with potential to “leap” certain stages of development via the adoption of modern technology. India’s recent consumer technology trends – mobile adoption in particular – have broad ramifications for the Indian economy. As we will see below, however, it takes careful analysis to identify the best opportunities presented by technology trends.

The mobile effect

When investing in emerging markets, we often ask what’s next? What innovation will create meaningful results and who are going to be the beneficiaries? India’s need for infrastructure is well-documented, and prospects for the country someday having an influential middle-class consumer base have also often tantalized multinational companies and kept investors of all stripes watching closely.

Recently, Indian smartphone penetration has started to increase from a relatively low base based on country data published by Reuters. Smartphone penetration is projected by Statista to increase from 26% in 2015 to 39% in 2019 (an increase of 175 million users), and by global standards there is an incredible amount of room to grow further. This type of growth in technology adoption speaks to burgeoning consumer appetite, and the potential within India to “leapfrog” certain stages of advancement – a key tenet of how technology can spur emerging market development.

Smartphones offer a gateway to many online applications, and mobile video consumption is a key winner with handset streaming increasing tenfold over the past three years. On average, Indian mobile-internet users download 8.5 gigabytes of data, or approximately 40 hours of video, per month; the highest amount globally and 12% more than China (source: Reuters).

In 2018, online video streaming, often driven by mobile, accounted for 75% of all data traffic in India. The rate of the country’s media consumption has been growing twice that of China and nine times the United States. YouTube recently experienced a 400% year over year increase in “watch-time” across its Indian audience and expects the current 245 million regular users to grow to 500 million by 2020. (Source: Reuters)

Smartphone penetration by country (2018)

Source: Reuters

Growth drivers

A capable 4G network and highly affordable phones is enabling millions in India to stream content for the first time. The aggressive pricing is being driven in our view by players like Reliance Jio, which has been offering 4G-enabled phones virtually free of charge, with free unlimited voice calls and cheap data plans. This budget market, known as feature phones, includes phones that lack a touch screen or advanced features. A July 2019 Wall Street Journal feature highlighted the success of the segment overall in India, including how Reliance Jio’s sales of more than $60 million has driven the trend.

Average monthly data consumption per user

Source: Wall Street Journal

When we compare the time spent on mobile devices in 2017 and 2018, online video records one of the highest marks for “time spent” and continues to grow, while other uses such as social networking and Internet browsing are in decline (source: Reuters). A survey by YouTube found that, for most people in India, videos are their first source for financial, medical, travel, and even religious advice.

Where the mobile economy leads

Growing smartphone use creates new consumer behaviors, which can bring massive opportunity for active investors. Opportunities go beyond just the most obvious, like mobile applications or devices. In a country often cited for needing better physical infrastructure, the speed of digital communications can spur economic activity and heighten the pace of transactions across the economy very broadly.

That said, we believe it takes careful analysis to invest in India. We are focused on three key areas:

Fiber optics

The necessity for India’s networks to accommodate this explosive online demand will be paramount. We believe 4G and 5G network suppliers will be obvious beneficiaries. With increased pressure on the networks, we think fiber optics, as a necessary component for 5G, should be in strong demand and the infrastructure builders to continue to be busy.


If viewing demand is surging for content, then one would think content providers could benefit. However, in our view Indian film studio stocks have faced a number of other headwinds. We believe active investors need to look deeper to understand and invest in this phenomenon, and be keenly aware of the challenges of the space. We find the area of content particularly attractive, but we are taking a prudent approach.

Applications and support

The seismic growth in mobile device usage comes with increased demand for mobile applications. The question is, who will build it? We see particularly attractive opportunities for companies with the expertise and resources to build, support, and provide mobile applications for consumers.

These are just a few areas we find promising within the mobile space in India. We feel it is essential to be selective when seeking out the beneficiaries of fundamental change. For example, handset and device makers may seem logical beneficiaries of the upswing in mobile use, and arguably device sales should continue to be strong. However, competition is so fierce in handsets, for example, that it may still be difficult to turn profits.

Across EM countries, we often see personal technology trends that offer similar promise due to the broad social impact. Connectivity, along with the speed and ease of consumer transactions, often create positive effects for an emerging economy. Areas like ecommerce, video games, eSports operators, social networks, and payment processors / banking all may be growing. Companies in these spaces sometimes aspire to becoming a hub for individuals’ digital activity, and each competes for the consumer’s attention and “share of wallet.”

That is to say that identifying beneficiaries of these trends is another thing altogether, and requires the research and insight found in active equity management.



Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

The views expressed represent the investment team’s assessment of the market environment as of July 2019, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may ¬not reflect the Manager's views.

This content is for informational and/or educational purposes only and is not an endorsement of any app, service, or publicly traded company.

At time of publication, Reliance Jio was not a holdings of any mutual fund or separate account managed by the author and the Macquarie Investment Management Global ex-US Equity team.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Technology companies may be subject to severe competition and product obsolescence.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors. A sector is a segment of the economy that includes companies providing the same types of products or services. Although companies within a sector tend to be reasonably consistent in their fundamentals, these fundamentals may differ substantially from one sector to another. For example, some sectors are cyclical, rising and falling with changes in the economy while others are defensive, maintaining their strength despite economic ups and downs.

Healthcare companies are subject to extensive government regulation and their profitability can be affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure, and malpractice or other litigation.