Why India's advertising market is losing space: Explained in four charts

Despite being a consumption-led economy, India's advertising market contributes just about 0.38 per cent to the country's GDP

Despite being a consumption-led economy, India’s advertising market contributes just about 0.38 per cent to the country’s gross domestic product (GDP). In 2018-19, ad growth lagged nominal GDP growth, the third time in five years.

A report by Care Ratings says ad spends are not expected to grow significantly as sentiment remains weak. Aggregate advertisement and sales promotion (ASP) expenditure in the past five years has grown at a compounded annual growth rate of 5.4 per cent, implying that companies have been conservative when it comes to ad spends.

On the other hand, ASP as a proportion of selling and distribution expenses has risen by 80 basis points over the last five years to 29.3 per cent.

Care Ratings points to a number of reasons for the slow growth in spends including demonetisation and introduction of the goods and services tax to lower consumer sentiment.

Some sectors though have bucked the trend including fast moving consumer goods, auto, health care and banking.