The Indian furniture production has been recording an acceleration since 2002.

This surge in production has gone hand in hand with the overall economic performance; the GDP growth averaged 8% over the period 2002-2006 with a two percentage-point increase compared to the previous decade.

The Indian manufacturing’s growth doubled in five years – from 6% in 2002-03 to a record 12.3% in 2006-07.

Wood and wood products as well as furniture and fixtures are among the best performing industrial sector.

India
’s furniture industry is dominated by the “informal sector” with only a few large firms operating. This is particularly true for the wooden furniture segment. The “organized sector” is estimated to account for only 15% of the total.

Clusters play a prominent role in the production structure of the Indian furniture industry. Furniture clusters serve an important function as a “bridge” between the informal sector and the organized one. Moreover, clusters represent the zones where the modern furniture industry is more likely to take off in the coming years.

MAIN DRIVERS OF FURNITURE CONSUMPTION

First of all, the favourable performance of the Indian economy that has embarked on a steady growth path since 2002 and the demographic trend; indeed, India’s young population is likely to provide the economy with a large and well-qualified labour force, which is bound to boost both production and consumption in future years. The coming decades will witness a constant increase in the urban population, which can rely on a higher disposable income and is more accessible to distributors.

A further driver of demand is the construction boom on the residential, hotel and commercial real estate markets. There is a surge in demand since 2002 and furniture consumption rose by an annual average of 13.5% over the period 2002-2006.

About two-thirds of Indian furniture consumption is claimed by home furniture and the other third is distributed equally between office and contract furniture.

According to NCAER, National Council of Applied Economic Research, there are five Consumer Classes, which differ in their consumption behaviour and live in urban as well as in rural Indian regions.

Data for 2005 were the following:

     
The rich.  
Annual per capita income above US$5,600. They amount to 6 million households. They can afford cars, personal computers and luxury items.

     
The consumers.  
Annual per capita income between US$1,000 and US$5,600. They amount to 75 million households. They can afford branded consumer goods and durables such as refrigerators.

     
The climbers, the aspirants and the destitute.  
They amount to 78 million, 33 million and 17 million households with annual per capita income between US$ 500 and US$1,000, US$ 360 and US$ 500, below US$ 360 respectively.

Some major changes can be witnessed over the years in the breakdown of private expenditure. A shift towards services and durable goods, which includes furniture (has risen from 2.6% to 3.3%) has occurred in recent years which is typical of economies undergoing structural changes.

Since liberalization started at the beginning of the 1990s, the furniture market has reacted to branded products. This has brought about changes in the tastes of the consumers, especially in the urban areas, for modular board furniture and accessories. Various overseas brands are now cooperating with Indian companies to service this demand. In any case, branded furniture is still in its infancy and volumes are low;

Multinational companies in this sector are now competing with domestic manufacturers to win market shares. Profitability is being achieved by focusing on increasing volumes, which in turn requires deeper penetration of the market through well-developed distribution channels.

The office furniture and contract segments should offer the best opportunities to foreign companies. Sales of kitchen furniture show rosy prospects for growth.

CONSTRUCTION

In February 2006 the Indian Government opened the real estate sector to foreign investors by allowing 100% foreign direct investment (FDI) in construction projects. This move prompted many foreign players to enter the Indian market.

HOUSING

India
’s Planning Commission forecasts that the urban population will rise by more than 40% by 2010. This will bring an increase of about 140 million over the next 15 years or nearly 10 million per year. Sector experts estimate that by 2030 India will need up to 10 million new housing units per year.

OFFICE AND COMMERCIAL

The demand for new office space has grown continuously over the past few years. This is due to India being the prime destination for outsourcing IT services. Over the next five years, 55 million sq.m. of extra office space needs to be completed. The information technology (IT) and IT-enabled services industry, the main driver for commercial real estate demand throughout India, has reportedly grown at a rate of 36% in the past decade.

According to sector estimates, up to 70% of the demand for office space is driven by the over 7,000 Indian IT firms.

By 2008 this industry is expected to account for more than 7% of India’s GDP and 30% of foreign exchange inflows, creating more than 2 million jobs.

The setting up of multinational company’s office in major India’s cities has boosted the demand for high-end office furniture with prospective gains for both Indian manufacturers and foreign players.

RETAIL & MALLS

India
is considered to be one of the most attractive retail destinations among all emerging markets. Total sales account for more than US$ 300 billion and are projected to rise from 2% to 10% per year considering India’s upward growth trend and favourable demographics. With India’s accelerated growth potential, the rise of a growing middle class with a high disposable income and greater contact with the West has sparked a boom in modern shopping centres. Some 600 shopping malls are expected to be completed by 2010.

TOURISM

Tourism contributes 5.3% to India’s GDP and employs around 8% of the total workforce. Indian tourism industry was declared a priority sector in the early ‘90s and was opened up to foreign investment. For the ninth and tenth five year plans, the Ministry of Tourism’s official projection of hotel rooms is pegged at 125,000 for an estimated 3.5 million foreign tourists million (estimates 4.43 million in 2006) a year.

These hotels will have to satisfy demand from overseas and reach international standards, thus an increase in the use of modern, top quality, exclusive, “western” style furniture is expected in this sector.

INTERNATIONAL TRADE

Although the furniture industry in India does not play an important role in international trade, the modernization process underway will consequently boost Indian furniture exports while new driving forces of furniture demand are likely to result in more import products.

The major Indian furniture export is still the United States (60%). The other eight major Indian furniture trading partners are all located in the European Union (30%).

Regarding Indian imports, Asia and Pacific countries continued to be the major furniture suppliers in 2006. Malaysia is again the largest supplier with a 24% share. Yet we record the fast rise of China, whose quota rose from 2% to 17% over the period 2000-2005.

(cited from CSIL 36
．
December 2007)