BusinessLine@25

It’s been a Great Indian shopping fest

Vinay Kamath | Updated on January 27, 2019

Consumption promises to drive the economy further, but many may miss the bandwagon

Here’s a bunch of compelling statistics. The number of households owning TVs in 1995 was 27 million, an increase of eight million since 1990. Sixty per cent of all urban homes that year had a TV set, compared to just 48 per cent five years earlier. Also, in 1995, 9.3 million homes in urban India had a cable and satellite connection.

Fast forward to 2019. There are close to 185 million Indian households which own a TV set, of which 85 million would be urban, against 100 million homes in the rural market. At present, around 85 to 90 per cent of urban households own a television set. And, 95 per cent of total TV households have a cable or satellite subscription. The industry churns out 12 million TV sets annually.

The TV example can be extrapolated over a wide swathe of consumer goods: from cars and two-wheelers and washing machines to air-conditioners and microwaves, the past 25 years have seen an explosion in purchase and ownership. Fuelled by low-interest consumer loans, and in the past decade by insane prices offered by online players, the Great Indian Shopper has shopped till kingdom come – even if that kingdom is one filled with debt! The pre-Internet, pre-mobile phone era was followed by a period when a bewildering array of products and choices was unfurled for the consumer. Freed from decades of Nehruvian socialism, the Indian middle class dream of a fairly luxurious lifestyle had come true.

You ain’t seen nothin’ yet

And it promises to get better, according to a report by consultant Bain & Co. It’s well established that India’s is a consumption-driven economy with domestic private consumption accounting for 60 per cent of GDP. The growth in income will transform India from a bottom-of-the pyramid economy to a truly middle-class one, with consumer spending growing from $1.5 trillion today to nearly $6 trillion by 2030 - by when India will become the third-largest consumer market, projects the Bain report. It anticipates that the growth of the middle class will lift nearly 25 million households out of poverty and, in addition, India will have 700 million millennials and Gen Z consumers, “who have grown up in a more open and confident country”.

On an even more optimistic note, the report says that by 2030 there will be opportunities to bypass Western growth trajectories driven by more than one billion internet users, many of whom will use only mobiles, driving the need for business model innovation.

Realitybites

But there could be a flip side to this story. Various reports put the middle class in India at 300 million to 400 million and projected to rise to 550 million by 2025. As a report in The Economist a year ago titled ‘India’s missing middle class’ points out, a lot of this middle class has little money to spend.

“There are many rich people in India—but they number in the mere millions. There are a great many more who have risen above the poverty line—but not so far above it that they spend much on anything other than feeding their families,” said the report. This could be a sobering thought for marketers as they seek out the next 100 million shoppers.

Published on January 27, 2019

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