The Telegraph
Since 1st March, 1999
Email This Page
Bye-bye citizen, hello emizen
- Retail loans more than double in two years to Rs 100,000 crore

Meet the emizen.

Amresh Chandra Khowala. Age 36. Profession: spare parts business. Marital status: married with children. Prized possessions: flat in Calcutta’s tony Alipore area, a car. Income: Not known. EMI: Rs 28,000.

It’s not polite to ask a man his earning but Khowala does place the Rs 28,000 he pays each month for his home and wheels somewhere around the half-way mark of the family income. But he doesn’t mind. A businessman can’t sink capital in personal purchases.

“If I had to pay Rs 22 lakh at one go for the flat and Rs 4 lakh for the car, I could have never purchased a decent flat in the city and my dreams of driving my car to office would have remained just a dream. It is true the huge sum pinches me at times, but I plan my expenses accordingly,” Khowala says.

When living is built around equated monthly instalments, better known as EMIs, the emizen is born.

Khowala, a first-generation businessman, is among the millions of Indians feeding the engine that is driving economic growth at over 6.5 per cent. The number of India’s emizens is not known but the money they are borrowing is quantifiable.

An ICICI Bank estimate shows retail loans have swollen from Rs 44,100 crore in 2002 to Rs 100,000 crore in 2004 ' more than double in two years. For the financial year 2005, the projection is Rs 134,000 crore.

Although the composition of this huge sum of borrowings is skewed towards home loans, the share of auto and personal loans is also growing.

“The ability of the population to consume is high and at the same time there is a rise in the supply of consumer goods and long-term assets like housing. There is a mutual interplay between these two factors and retail credit is fuelling the growth,” says P.J. Nayak, chairman and managing director of UTI Bank.

How is the “ability to consume” measured' Some amazing things have been happening to incomes, at least some people’s incomes.

The National Council for Applied Economic Research estimates that the number of households earning more than Rs 1 crore a year grew more than 20 per cent to 20,000 between 1995'96 and 2001'02. By 2009'10, the number of crorepatis is expected to touch 140,000.

While that number may not still be much in comparison with the US millionaire row, for example, income growth will ripple through a wide section of population outside the creamy layer.

The survey estimates that the share of the upper middle class in the population will virtually explode ' from 19.6 per cent in 1995'96 to 42.6 per cent in 2009'10. As that happens, the proportion of people in the lower income category is expected to drop from 46.8 to 14.4 per cent over the period.

If the forecast holds good, this roughly 15-year period will be an era of unprecedented growth. It could also mean the end of the debate over whether or not reforms have benefited the poor, in spite of wide income disparities.

An upper middle class population of some 43 crore is a number marketers see only in their dreams.

That’s not all. Demographic factors are also working to their advantage. Every year over 3 million young earners, in the age group of 18 to 24, are estimated to be joining the workforce and 70 per cent of the population is under the age of 35.

“Jobs are available and young graduates are working in call centres and retail outlets. These young earners are not from the privileged class, but they have discretionary spending power. We think this middle class is fuelling consumption,” explains Arvind Singhal, chairman of KSA Technopak.

Research by the consulting firm suggests that each of India’s 25 million more affluent households spent an average of $1,500 (about Rs 65,000) in 2003 on discretionary purchases, which was a jump of around 16 per cent over 2002.

“We think this rate will accelerate as the investor community is bullish about India’s prospects. So, we can expect more investments and multiplication of employment opportunities. What we see today is just the tip of the iceberg,” adds Singhal.

The other side of the coin, of course, is availability.

“The turning point is 1991. Not only did the domestic market expand, international players also entered and brought along innovations, besides adapting to Indian tastes,” says Sarang Panchal, executive director of AC Nielson-ORG Marg, which does market surveys.

Cars are the best example. Some 30 new models are expected to be launched this year. Alongside, from sales of a few thousand annually, car companies this year have crossed the magic number of 1 million.

Car designer and automobile industry observer Dilip Chhabria says growth has occurred in all segments, which is an indication of depth. “With interest rates softening and the general mood in the economy buoyant, the market will keep growing at around 15 per cent for another 20 to 25 years,” he adds before vrooming off in his custom-made DC.

In the days of a closed economy, some had the money but spending opportunities were limited. The story goes that a top government functionary landed in Bangkok and asked his aide: Is a 2-in-1 (radio and tape recorder) available here'

Don’t laugh. Those were hard days for the consumer ' the days of the Amby and the Fiat and that was the end of the world. Today, the end of the world is already nigh for the Maruti 800 as we know it, the ultimate symbol of an India starting to speed up.

Email This Page