Consumer india i

Consumer India: General Features

Demographics

Size of population

India turned a 100 crore nation in May 2000. According to the Census 2001, the population of India stood at 1,027 million, as of May 2001. Uttar Pradesh continues to be the most populous state in India with 16.17 per cent of the country’s population. As per a UN projection, India would be the most populous nation in the world by 2030.

Demographics …Contd.

Density

India’s density of population is also quite high. As per the 2001 Census the number of people, per sq km in India, was 324. West Bengal happens to be the most densely populated state, with 904 persons living per sq km.


Gender ratio

India’s gender ration is loaded in favour of males. When the country turned a 100 crore nation in May 2000, the population consisted of 52 crore males and 48 crore females. As per 2001 census, the All India ratio of females per 1,000 males is 933. In Kerala it is 1058, while in Haryana, Delhi and Chandigarh it is 861, 821 and 773 respectively.


Literacy

According to the Census 2001, the nation’s average literacy rate is 65.4 per cent – 75.2 per cent of the male population and 53.6 per cent of females is literate. National literacy rate was just 17 per cent in 1951. It rose to 65.4 per cent in 2001 from 52 per cent in 1991. Female literacy has been particularly on the rise, with the 2001 figure going up to 54 per cent from 39 per cent in 1991.


Literacy …Contd.

In the coming years, there will be a faster progress in literacy. The proportion of youngsters enrolled in schools is going up and more neo-literates are emerging from among the adults, as a result of the National Literacy Programme. Over 21 per cent of all adults in the country, now read some publication or the other. In urban areas, the percentage is over 56. The government has targeted to achieve 80 percent literacy on a nationwide basis in the next 10 years.


A vast educated workforce despite high literacy rate

It is somewhat a paradox. On the one hand, India has the highest number of illiterates in the world; and on the other, it has the second highest number of literates and the third largest pool of educated and trained workforce in the world including over 5 million scientists/engineers and IT professionals. In modern fields like information technology, India has been displaying its strength very emphatically in recent years.


Age-mix of the population

Globally, India enjoys the most favourable age mix, from the development point of view. It has the highest share of its population in the below 15 age group and the lowest share in the 60 plus age group.


Age-mix of the population …Contd.

Here is a set of interesting observations on the age-mix of India’s population: A nation of working age people A nation of middle age people A nation of young people A nation with a huge kids population A nation with a huge senior citizen

population


A nation of working age people – A huge work force is the No. 1 reality about India’s population. India has over 400 million working age people. Nearly 40 per cent of the total population is in the working age bracket. India also stands at the top, globally, in the share of working age people in total population.


A nation of working age people – The country’s working age population will go up to 800 million by 2016. This augurs well for India in economic terms. A large, vibrant, working population, with fewer dependents can drive the economy and the market. With this age mix, spending patterns are bound to change significantly.


A nation of middle age people – India has been getting fatter in the middle: Share of people in the age group of 30-49 has increased to 24.1 per cent of the population from 22.6 per cent a decade ago. And, the growth rate of the group has been about 30 per cent. Within this group, the 35-39 years group is growing at 35 per cent. The middle aged thus is gaining importance as a consuming class.


A nation going through a youth explosion – India can also be justifiably described as a country of the ‘young’. More than half of India’s population – 51 per cent to be precise – now belong to ‘the below 25 years age group’. This is the age group, which is at the forefront of the current consumption boom and will continue to be so for many years to come.


A nation going through a youth explosion – The typical Indian consumer is getting younger. 40 per cent of India’s population is actually less than 19 years old. And the ‘youth trends’ of lifestyle and consumption are poised to become the country’s mainstream trends.


A nation with a huge population of kids – India has a largest kids population in the world, though the growth rate has decelerated in recent years. Kids in the 0.4 age group has grow01n by 8 per cent between 1991 and 2001. In absolute numbers they account for over 11 crore now, a tenth of the total population of about 115 crore. If we consider kids in the age group of 0-6 years, the number goes up to over 16 crore.


A nation with a huge mass of senior citizens – While, presently, ageing people do not form a big portion of the total population of India, in absolute terms, their size is very large indeed – over 11 crore. And it is growing too. People above 55 years now contribute to about a tenth of the total population. With a growth rate of over 30 per cent, the elderly is going to become a major constituent of India consumer in the coming years.


What is the truth about the age mix?

Paradoxical it might seem, yet, all the five observations made above represent the truth. The point is that the overall size of the population being so huge and the ongoing growth rate substantial, every age group in the population is huge. However, if we are to track the dominant aspect of the age-mix of India’s population, we certainly have to grant that India is a nation of youth and working age people.


How will it be in the future?

India is going to remain a nation of youth and working age people for the next couple of decades at the minimum. Even in 2030, the working age numbers will be about 70 per cent of India’s population. Table 1 gives details of projected population size, age group wise, over next two decades.


Table 1 Age-Mix of ‘Consumer India’ – Present and Projected

Age-group 2006 2016 2026

0-14 360(32.3)

343(26.9)

328(23.2)

15-64 702(63.0)

854(67.0)

967(68.5)

65+ 52(4.7)

78(6.1)

116(8.2)

All age groups population

1,114(100.0)

1,275(100.0)

1,411(100.0)

Note: Population figures are in millions; Figures in brackets are % share in total.


Highly favourable dependency ratio

India’s dependency ratio is low. It will drop significantly further over the next 20 years. A low dependency ratio is favourable to economic growth. The dependency ratio is defined as the number of children (population in age group 0-14 years) and elderly (65 years and older) as a percentage of the total working population (age group 15-64 years).


Highly favourable dependency ratio

The details below will show that India’s dependency ratio has been moving favourably and would continue to do so for quite some years to come.

Year Dependency ration %

1985 72

1995 68

2005 60

2015 52

2025 (estimated) 48

In sum, the country will be reaping attractive ‘demographic dividend’ in the coming years in view of the size as well as age-mix of the population.


An economic transition is on; the rich getting richer, the poor getting less poor …Contd.

It is sometimes said that in contemporary India, the rich is getting richer, the poor is getting poorer. Evidence available suggests that while the first part of the statement is true, the second is not. Though a large part of the population is still not able to join the consumption community, they are certainly becoming less poor. And, though the number of Indians below the poverty line is still very large, as a percentage to the total, it has been coming down.


An economic transition is on; the rich getting richer, the poor getting less poor …Contd.

It is sometimes said that in contemporary India, the rich is getting richer, the poor is getting poorer. Evidence available suggests that while the first part of the statement is true, the second is not. Though a large part of the population is still not able to join the consumption community, they are certainly becoming less poor. And, though the number of Indians below the poverty line is still very large, as a percentage to the total, it has been coming down.


A shift in the attitude towards spending too - From the way Indian consumers are taking to spending in the past 15 years or so, it is clear that they cannot be dubbed as a consumption shunning category. Not having enough money was what was stopping them from spending in the past. If at all they were consumption shunning, now there is definitely a shift in their attitude in the matter. Many sections – even outside of the rich and middle class now go for ‘choice-based’ / ‘desire-based’ consumption as against ‘need-based’ consumption.


A shift in the attitude towards spending too - Perhaps in the past, several sections among Indian consumers did believe that consumption per se was not a desirable phenomenon. The society as a whole was stressing the importance of ‘need-based’ consumption and the consumer accepted the dictum. There is evidence that there is a shift today in the above attitude of consumers. They are ready to buy different products, if only a sensible price-value equation is made available to them.


A cultural transition is on

Along with the economic transition, a cultural transition is also on with the Indian consumer. Often, two interesting, but opposite statements are being made on this: (i) Indians are reluctant to change their culture (ii) Indians have been changing a lot in recent times in the matter of cultural orientations. There is truth in both assertions.


A cultural transition is on …Contd.

Indians seem to be acquiring new cultural orientations, even while clinging to the core aspects of their culture. It can also be said that culturally Indians are becoming an amalgam of the new and the old, embracing the new even while sticking to the old. Of course, as with many other matters, here too, India’s diversity comes into play, defying the scope for a generalisation.


A social transition too

The social environment of Indian consumer is also undergoing a transition now. Expansion of education including technical education, growth of urbanisation, breaking down of the joint family and rise of the nuclear family and women taking to employment in large numbers, have been factors in the process.


Influence of media

Exposure to media, especially TV – and more so Cable / Satellite TV – has made a big contribution to social change. It has given the consumer the exposure to the lifestyles of the well to do and the products used by them. Besides bringing awareness about products, it also kindled their latent aspirations. ORGMARG date shows that 75 per cent of urban India watches television and the majority of them watch satellite and cable channels.


Influence of media …Contd.

In some states, one out of two rural people watch TV and in others, the number is one out of three. We are talking about over 500 million people, whose lives are being impacted by television. Further, the per capita TV watching is 100 minutes on weekdays and 150 minutes on weekends. And the viewership is particularly high among women and children and those in the lower socio-economic classes.


IT influences consumer India significantly

Influence of IT needs a special mention. Today, IT touches Indian consumers in all strata. It is no longer confined just to the IT professionals, or the middle class. It can, in fact, be said that it touches more than a half of India, directly or indirectly. Obviously, most of these people do not belong to the upper sections of society. Nor do they live in the top 23 cities of India. IT is quietly shaping a new social environment in India.

The ‘Many Indias’ Within

‘Consumer India’

The ‘Many Indias’ Within ‘Consumer India’

Structure of Demand, Extremely Complex

‘The Many Indias’ applies best to the structure of consumer demand in the country. In fact, in the marketing sense, Many Indias simply means that there are many divergently distinct demand segments in the country. The ‘two India’ explanations – ‘India’ and ‘Bharat’, ‘rich India’ and ‘poor India’, ‘urban India’ and ‘rural India’, and so on – do not help understand properly the country’s demand structure, as there are many distinct demand segments, not just two.

The ‘Many Indias’ Within ‘Consumer India’ …Contd.

Structure of Demand, Extremely Complex …contd.

To understand ‘consumer India’ and ‘market India’ one has to first recognise that the demand structure here is multi-tiered and multi-layered. It has to be analysed after being sliced into specific tiers and layers. Each tier/layer has to be treated as a separate market and the demand structure thereof must be studied in detail, assessing what its size is at present and where it will go in the coming years.


Harish Manwani’s views on the diversity

To quote Harish Manwani,

“Consumer India’ is a complex pyramid with a number of differentiated consumer segments. The Indian market represents many ‘Indias’ rolled into one: urban and rural, rich and poor and diverse cultures across regions. Despite India’s GDP growth over the next several years, the socio-economic disparity in income is likely to continue and may actually increase. …..”


“…..These factors will result in a large pyramid of consumers with vastly segmented needs. For FMCG companies, a unique challenge arises in such markets – adopting a “one-size-fits-all” approach to the market does not work. Also, focusing on any one segment will mean limiting growth and profitability the most value-creating strategy will be to straddle the entire pyramid. This, however, is easier said than done..”


Rama Bijapurkar’s views

Rama Bijapurkar is of the view that there is no such thing as an Indian market.“What is referred to as the Indian market is a collection of many diverse demand segments. Only when one recognises the fact of “many Indias” within “consumer India”, can one grasp India’s consumer demand. Every business would be well advised to develop a mental model of “my target India” and then translate it into a well-defined construct of a consumer market. The onus is clearly on them to define what their India and what their market is.”

All Round Diversity, the Hallmark of Consumer India

Religious diversity

The one billion plus people of India belongs to seven different religious groups – Hindus, Muslims, Christians, Sikhs, Buddhists, Jains and Zoroastrians. In addition, there are the sects and, sub-sects, and castes and sub-castes. Each religion has its way of life, concretised through centuries of practices.

All Round Diversity, the Hallmark of Consumer India …Contd.

Linguistic diversity

The same diversity is seen in the matter of language. Twenty-three languages have been specified in the Constitution of India as national languages. In addition, there are hundreds of dialects.


Diversity in density and growth rate of population

While India as a whole is a populous country, there a21e wide variations in density and growth rates of population from state to state. Delhi is the densest state in India with 9.294 people per sq km. Arunachal Pradesh is the least dense with 13 people per sq km.


Diversity in literacy

Kerala has a literacy rate of 90.92 per cent (the highest), followed by Mizoram at 88.49 per cent, and Goa at 82.32 per cent. Bihar has a literacy rate of just 47.53 per cent (the lowest).


Cultural diversity – social customs, dress, food habits

There is indeed a great amount of diversity among Indians in culture, cultural orientations, and social customs, arising out of the religious as well as regional diversities. According to experts, India carries 62 different socio-cultural regions. Dress is one visible manifestation of the variety. The same is the case with ornaments and jewellery.


Diversity in food habits

Rice is the staple food in the south and wheat in the north. While, in the south, people now consume wheat products as co-food items and likewise, certain southern dishes have become popular in the north, the traditional differences in food habits persist for the most part. Some people use coconut oil as the cooking medium, some use groundnut oil, and some others, mustard oil.


Diversity in food habits …Contd.

There are large communities of vegetarians. Findings from surveys show that coastal states have the lowest proportion of vegetarian families and land-locked states, by and large, have the highest proportion of vegetarian. And within the population of non-vegetarians there is a great diversity in what they will and will not eat. For the Hindu, beef is taboo, for the Muslim, pork is taboo, for the Christian, both are delicious.


Diversity in economic conditions / income / consumption

The most important aspect of the diversity is the disparity in economic conditions / income / consumption. The top tier / top 10 per cent of households account for 34 per cent of the total income of the country while the bottom 20 per cent of households account for just 5 per cent of the total disposable income. In the matter of income, there are Indias within Urban India and within Rural India.


Diversity in economic conditions / income / consumption …Contd.

There are state-to-state variations in the consumption spend. In 2004, urban Kerala and urban Maharashtra, with a 22.5 per cent share of consumer goods and services in the total consumption expenditure were on the top spots in consumption pattern. Urban Tamil Nadu followed with 20.7 per cent of its total monthly consumption expenditure going for consumer goods and services.


Diversity in economic conditions / income / consumption …Contd.

At the other end, there are several states where the corresponding figure is less than 15 per cent. If we take the rural areas, similar variations, state-to-state, are seen. In the agriculturally rich Punjab, in 2004, rural households had spent on an average 16.4 per cent of the total consumption expenditure to purchases of consumer goods and services. The all India average was only 12.8 per cent. The households in the eastern states have generally lagged behind the national average in this regard.


Diversity in poverty rate

While India has in general reduced its poverty rate since 1990, considerable sub-national – regional, state, district, and block level – variations exist in the incidence of poverty. According to an analysis of the World Bank. Punjab has the lowest incidence of poverty with 6.16 per cent, followed by Haryana with 8.74 per cent, and Kerala with 12.72 per cent. Orissa has the highest per cent of people living below the poverty line (47.15 per cent), followed by Bihar (42.60 per cent), and Assam (36.09 per cent).

Classifying ‘Consumer India’

Classifying ‘Consumer India’

NCAER has Come Up with a Classification Based on Income

NCAER has come to the rescue of marketers / market researchers. It prepared a definition of each class using income bracket as the base. For example, it defined middle class as households earning Rs. 2 lakh – 10 lakh annually, income measured in FY 2001-02, at FY 2001-02 prices.

Classifying ‘Consumer India’ …Contd.

SEC vs Income Classification

For long, marketers in India have been classifying the consumers on socio-economic variables – of occupation, type of house owned, and education, which have a bearing on consumption. It is known as the ‘SEC Classification’.


How Does the SEC System Operate

Marketers use separate SEC systems for urban and rural households. The urban SEC system is based on the occupation and education of the head of the household, while the rural SEC system is based on the education of the head of the household and the type of house occupied.


How Does the SEC System Operate …Contd.

The urban SEC system classifies the households into 8 categories (A to E with A, B & E subdivided further into A1 & A2, B1 & B2 and E1 & E2) while the rural SEC system classifies the households into 6 categories (R1 to R4 with R3 and R4 further divided into R3 A and R3 B, and R4 A.


How Does the SEC System Operate …Contd.

A1 signifies the highest purchase potential and E2 the lowest purchase potential among the urbanites and R1 signifies the highest purchase potential and R4 B the lowest purchase potential among the ruralites. The details are presented in Tables 2 and 3 in next two slides.


Table 2 – The Urban SEC System

Occupation Illiterate

School up to 4th literate

but no formal

schooling

School classes 5th-9th

SSC / HSC

Some college but not

graduate

Graduate / Post

graduate general

Graduate / post

graduate professio

nal

1. Unskilled workers

E2 E2 E1 D D D D

2. Skilled workers

E2 E1 D C C B2 B2

3. Petty traders E2 D D C C B2 B2

4. Shop owners D D C B2 B A2 A2

5. Businessmen /

D C B2 B1 A2 A2 A1

industrialists with

C B2 B2 B1 A2 A1 A1

no. of employees

B1 B1 A2 A2 A1 A1 A1

None

1-9

10+


Table 2 – The Urban SEC System …Contd.

Occupation Illiterate

School up to 4th literate

but no formal

schooling

School classes 5th-9th

SSC / HSC

Some college but not

graduate

Graduate / Post

graduate general

Graduate / post

graduate professio

nal

6. Self-employed professional

D D D B2 B1 A2 A1

7. Clerical / salesman

D D D C B2 B1 B1

8. Supervisory level

D D C C B2 B1 A2

9. Officers / Executives Junior

C C C B2 B1 A2 A2

Officers / Executives Middle / Senior

B1 B1 B1 B1 A2 A1 A1

Source: Market Research Society of India.


Table 3 – The Rural SEC System

Type of House

Education Pucca Semi-pucca Kuchcha

Illiterate R4 R4 R4

Literate but no formal schooling

R3 R4 R4

Up to 4th standard R3 R3 R4

5th to 9th standard R3 R3 R4

SSC / HSC R2 R3 R3

Some college but not graduate R1 R2 R3

Graduate / Postgraduate (General)

R1 R2 R3

Graduate / Postgraduate (Professional)

R1 R2 R3

Source: Market Research Society of India.


McKinsey’s Fivefold Classification Based on Income

McKinsey Global Institute have classified the Indian consumer into five categories based on income levels as shown below:o The Global Indianso The Striverso The Seekerso The Aspirerso The Deprived


McKinsey’s Fivefold Classification Based on Income …Contd.

Indian households can be divided into five economic classes based on real annual disposable income as shown below:

1.Global Indians (Rs. 10 lakh +; $21,882 +)

This class corresponds to the cream and comprises of senior corporate executives, large business owners, politicians, big agricultural-landowners and top-tier professionals.



1.Global Indians (Rs. 10 lakh +; $21,882 +)

More recently, the class has acquired a new component – the new breed of the upwardly mobile midlevel executives, usually graduates from India’s top technology / B Schools, who are able to command premium salaries from the international companies. This class is truly global in its tastes and preferences, and enjoys a very high standard of living.



2. Strivers (Rs. 5 lakh-10 lakh; $10,941-$21,882)

People in this income band are regarded as well off in Indian society. They may be traders in cities, established professionals, senior government officials, medium-scale industrialists in towns, and rich farmers in villages. Typically, they have stable sources of income and a reasonable wealth base.



3. Seekers (Rs. 2 lakh-5 lakh; $4,376-$10,941)

This class consists of sections varied in terms of employment, attitudes, age and other factors. They range from young college graduates who have just started working to traditional white-collar employees, mid-level government officials, and medium-scale traders and business people.



4. Aspirers (Rs. 90,000 – Rs. 2 lakh; $1,969 - $4,376)

Small-size shopkeepers, small farmers, or low-skilled industrial and service workers form this group. Although they cannot be described as deprived they nevertheless struggle to live comfortably, typically spending almost half of their income on basic necessities.



5. Deprived (less than Rs. 90,000 or $1,969)

Households in this income bracket form the poorest group, with those in the lower end of the bracket constituting the BPL/BoP category.

Note: All figures of income mentioned here are in real 2000 terms.



Note 2: The Middle Class

The strivers and the seekers together constitute the middle class. Both NCAER and McKinsey have assumed that the two groups together comprise of the middle class. Actually, the classification was introduced by NCAER. McKinsey follows it in their report, with one minor variation. Whereas NCAER uses fiscal year 2001-02 for measuring the income levels, McKinsey use base year 2000.


McKinsey’s modifies NCAER’s sevenfold classification

McKinsey’s classification is actually based on NCAER’s classification. The difference is minor. NCAER had gone for a sevenfold classification. McKinsey have combined the three wealthiest income brackets used in NCAER’s classification into a single class, which they refer to as ‘Global Indians’.


The Traditional Fourfold ClassificationTo make the understanding on the subject complete, we have to refer to one more classification of Indian consumer – the traditional fourfold classification shown below:o The Richo The Middle Classo The Lower Income Sectiono The Poor or the BoP / BPL (Bottom of Pyramid /

Below Poverty Line) SectionThis is same as the fivefold classification except for the fact that here the strivers and the seekers are clubbed together into the middle class.

Date post:	21-Jan-2018
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