Cut the Fluff: Basics of Consumer Spending in India
The Economic Times - September 25, 2006
As for the surprise that the percentage spend on debt servicing and durables being so low, and the suggestion that maybe the news is not all good for marketers: here's a quick clarification on the trickiness of interpreting numbers relating to the Indian consumer market, before we all confuse ourselves further, or rather before the media confuses all of us who really ought to know better. Supply side numbers are different from consumer window numbers. A small percentage of a huge 'middle' or 'belly of the market' consumer base buying a durable or a cell phone could result in enormous growths in the number of cell phones. So if one number is true the other can also be true and ought not to surprise or shock any business writer. That's why we say the Indian market has huge potential for a long time to come. And that's why we are always under building capacity and getting increasingly surprised by our own consumerism! And now for the surprise that the article evinces that the share of savings in the expenditure basket is larger than they expected it to be. The NDSSP (National Data Survey on Savings Patterns) survey done for the Finance Ministry and available in the public domain, has shown that 45% of the total household savings are with the top 10% income earners. Those who have the money to spend ... also have the money to save.
The fact is that real stories about Indian consumers are not about how close to their western counterparts they are, but about how they tight-rope walk on a shoe string budget in order to balance pragmatism and indulgence. Further, there have been far too many impulsive and reckless articles in the media, which make sweeping statements about "Indian" consumer behaviour. It does appear to be distinctly unfashionable to flag the fact that the story does not apply to all Indians, but only a mere fraction of them - often to not even 10% of Indians. Consider all the media hype about the rampant spending of the youth and their exotic hang out places. Media articles usually neglect to mention who exactly they are talking about when they use the catch all phrase "Indian youth". Typically they are talking of urban SEC A (highest socio-economic class ) youth. If their definition of youth is 15 to 25 year olds, they are talking about at best, 5.5 million urban youth; more likely, they are talking about 3.1 million big city youth, and even more likely, all the hype is about SEC A1 youth in large cities, who number 1.2 million! In contrast, we are talking of 159 million 15 to 25 year olds in rural India , 74% of whom have not gone up to std 10, and certainly do not know one kind of video game or sports shoe brand from another. (Data source: IRS survey of Hansa Research).
Rama Bijapurkar is an independent market strategy consultant |
