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  Q2 2007, Volume 2, Issue:12
  Indian Consumer

All Things Consumer

India, one of the fastest growing large economies in the world, has a massive population of one billion consumers. A wave of liberalization coupled with a GDP growth in excess of nine per cent has triggered a change in the profile, status and demands of the Indian consumer.

20 million people, the number equivalent to Australia's population, are joining the country's middle-income bracket every year, with a spending power that is increasing substantially. The large army of youth in the country is becoming the biggest and most influential consumers in the marketplace. Factors such as demographics, easy finance, retail boom, media explosion and emergence of new sectors are driving up their consumption.

More than half a billion people in India are under the age of 25. A new generation that unlike their forefathers does not shy away from conspicuous consumption. Young consumers are in an eternal hurry, hungry for brands, hard to please, have fleeting loyalty, and eager to splurge on themselves.

The booming economy has led to the birth of the new rich category of consumers, who aspire for and consume a host of luxury and premium products and services. For these neo-elites housing in posh localities, education in the worlds most expensive and premier institutions and exotic vacations are the top three picks.

An interesting development is women in India increasingly becoming wage earners and making independent purchase decision for a wide range of goods and services.

The biggest consumer group that is on the verge of taking off is Indians in rural areas. With the economic boom spreading awareness to hitherto ignored rural areas, aspiration levels among 720 million Indians is growing. Given the fact that 17 per cent of more than half million villages account for 50 per cent of rural population and 60 per cent of rural wealth, it represents a huge market opportunity.

Consumption patterns of Indians are not similar to those in other Asian countries. As Indians have prospered, they have spent money on vehicles, phones and eating out in restaurants. Unlike other Asian consumers, their propensity to spend on clothes, personal care and household goods is much less.

Though India is one single nation, its sheer diversity in culture, preferences, languages and tastes makes it appear like having 50 countries within a country. In addition, regional differences and contradictions make it difficult to fit Indian consumers in a single model or a box. It therefore is more about cultural pockets within India that dictate the consumption behaviors of the people.

The Indian Consumer Story

The 2006 AT Kearney Global Retail Development Index indicates an abrupt boost in the spending habits of Indians on a host of goods and services. The Indian middle-class, the backbone of consumer market is using rising incomes and bank loans to splurge on food, clothes, cars, mobile phones, travel and leisure.

India had the highest average salary increase in the Asia- Pacific region in 2006, according to human resources consulting firm Hewitt Associates Inc, which predicts salaries in India to rise by as much as 15 % this year. UN Estimates India to add 71 million people to its working age population over next five years.

There are over 300 million middle-class Indians with growing buying powers and displaying a strong propensity to spend.

According to The National Council for Applied Economic Research (NCAER), the great Indian middle class household is estimated to be around 56 million, earning on an average US$ 4,400- US$ 21,800 a year.

The upper middle and high-income urban households in India, is likely to grow to 38.2 million in 2007 from 14.6 million in 2000.

To cater to the expanding market, several Fortune 100 companies have invested in about 3,000 new factories and expansion projects worth about $21 billion in India since mid 2004.

All key sectors in India are witnessing a humungous spend by consumers, which is only expected to accelerate. Here are examples.

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