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Mumbai, Nov. 4: The face of the Indian consumer is changing — it’s looking more southern.
After years of notching modest growth rates, the market for consumer durables and non-durables is keyed up to take a big leap, says a UBS Investment Research report.
The churning in the marketplace is driven mainly by south India. UBS predicts that accelerating income growth in the south may now enable it to overtake the traditionally richer states of northern and western India.
“The conservative south is rapidly catching up and the key southern states of Karnataka and Tamil Nadu are already above the national average and could soon emerge as the most prosperous states in the country.”
Jagdeep Kapoor, the managing director of Samsika, an outfit that finetunes marketing strategies for several fast-moving consumer goods companies, seconds the view.
Kapoor said one of the main triggers for the south has been education and the rapid growth of the services sector.
The south may overtake the north and the west, but he says the country as a whole will march together in the coming years. The market size of consumer durables and non-durables, which is estimated at Rs 344,000 crore, will grow 15 per cent a year, he says.
The smaller states of Punjab and Haryana were the most prosperous states in the country. But the northern average was dragged down by the large and poor states of Uttar Pradesh and Madhya Pradesh, while big and affluent Maharashtra and Gujarat pulled forward western India. Eastern India was a laggard.
Sifting data available in the National Council for Applied Economic Research (NCAER)’s India Market Demographics report 2002 and the Census 2001, UBS also concludes that there was a substantial reduction in poverty levels in the 1990s, especially in rural areas, and a narrowing of income inequality across rural and urban India.
The number of households in India, as estimated by the NCAER for 1989-90, was 142.4 million, which grew to 176.5 million by 1999-2000. The NCAER study estimates that the number of middle-income households expanded at a much brisker rate from 20.2 million to 51.9 million over the same period. The estimated size of the Indian middle class is now 275-300 million.
Unlike developed economies, the growth of rural markets for consumer durables in India is dependent on variables other than income — availability of electricity, for instance.
“This reflects the importance of infrastructure development for market growth,” UBS says.
Income is only the second most important factor, after electricity. For electrical products, availability of electricity has an impact on growth of over 50 per cent and income only 20 per cent.
“The Indian consumer has traditionally been slow in adopting new products,” UBS says.
This is a behaviour pattern that is best reflected in the slow-growing popularity of processed food — which is only a new product form — as large companies like Hindustan Lever, Godrej and ITC will vouch.