Decoding the Indian Middle Class - Random Thoughts

This is the first article in a series of views and expression that I wish to share on Consumerism in India…..

DOMESTIC CONSUMPTION – WHY ARE WE DIFFERENT

 A lot has been said and written about the great Indian middle class and the opportunities that they offer to the consumer sector – what I am going to write in the next few paragraphs is my take on the domestic consumption story – the perception around which estimates are prepared, the analyst take on the middle class, the expected consumption levels, etc.,

 

a.       The mystery around the growth projections that we believe would be generated by this class

This is the larger point – across sectors and sub sectors as you dissect the building blocks of growth you will find that analyst and planners have re-calibrated the numbers with the changing dynamics.  Why do we project with a lot of optimism than be realistic while estimating them?  I have had the opportunity of working with some of the best minds in the corporate world – as a subordinate, peer and supervisor. Many of them lead and impact businesses in India and aboard  and I am sure the optimism still continues to remain as they look at Great Indian market place.

We continue to believe or claim to believe that there is indeed a prosperous middle class in India with deep pockets ready and willing to spend on everything that is on offer in the market place – whether it is eating out, buying branded stuff, spending on fast moving consumer products, splurging on personal care and hygiene products and services, investing in assets, ability to pay at private health care service providers and the list is endless. This belief transcends into numbers given the absolute might of the middle class and the growing perception that infrastructure development would lead to increased urbanisation. How many times have planners and analyst taken a pause and revisited their estimates and projections against actual numbers and figured out what went wrong when the economy was perfect and growing at around 8%+

b.       The organised sector vs the unorganised sector

India is a perfect example of a parallel economy for just about everything – and here perhaps the planners and analysts have accurately predicted that the parallel market is atleast 4-5 times larger than the organised market.

How do we go about defining the unorganised market – it could either me  cheaper substitute or unbranded product or service, traditional product or service, pirated stuff from other countries, duplicate product passed off as genuine branded product,

We are all living with the hope that the organised market would slowly eat into the share of the unorganised market – and why would this happen? The theories floated are ability to spend more, brand and quality consciousness, awareness and…,

Do we think that the market forces controlling the unorganised trade will let their trade die ? Would they not take steps to build their business – play the pricing game, distribute better, bring in better value for money, use improved  technology to ape products, - certainly they would do all and more.

The belief that the organised market would grow ahead of the unorganised trade and capture their market seems slightly off the mark. The unorganised trade has been set up, built and consolidated on a platform over the years in India and to believe that their trade will give way to the organised trade is farfetched. Yes, there could be challenges from the organised market, but there would still remain a significant section of the Indian consumer seeking comfort from the unorganised trade  

I may sound a wee bit pessimist and an outlier and my comments might not be entirely based on any scientific analysis or trends. But, I am basing my thoughts on a few things:

a.       What I have seen and worked in the market place – as a consumer and an observer

b.      Heard people of repute  talk and visualise the future

c.       Read books on consumer behaviour and insights

d.      News reports

e.      Prosperity within the middle class led by spending power, urbanisation, globalisation

f.        The manner our economy has performed over the last 2 decades

I would love to write sector and industry specific trends and thoughts in my subsequent blogs – and as I mentioned I may not be entirely right in my understanding of the sectors, but certainly would like to know the views and perspective that others might have.

 

As I sign off, I need to bring in this disclaimer ----------I work in a private equity firm and my job is to extract WISE knowledge from first generation entrepreneurs about their businesses and figure out more about their future plans and their ever optimism belief around the India growth story – their optimism certainly gives people and professionals like me the much needed adrenaline kick to believe  …….WOW there are indeed Dreams that can be converted to reality someday…..