Global corporations view India as one of the key markets for the source of future growth. India is really unique not only because it has a large population of 1.2 billion people - and rising - but also because half the population is under 25 years of age1. The growth in India’s consumer market will be primarily driven by a favourable population composition and rising disposable incomes.
Economists agree that in India the huge middle class is a more-than-promising market. Yet it is difficult to define and evaluate its size with any degree of precision: depending on the criteria used, this market varies between 100 and 300 million people2. Furthermore, the term "middle class" covers both those who earn enough to meet their basic needs and can occasionally afford extras, and the tens of millions of Indians with assets comparable to the middle class in the Western sense.
Accordingly, in this country the size of a continent there is not one middle class but several middle classes with very different needs and expectations. An attorney from Mumbai is not looking for the same thing as a wealthy farmer from the Punjab or a computer programmer from Bangalore. Not to mention the expectations of the new millionaire consumers whose numbers are also increasing yearly.
Yet, one fact is clear: annual per capita income tripled between 2001 and 2010 and should more than triple again by 20202, when 80% of Indian households will earn over US$ 5,000 annually and will be able to satisfy their new needs.
1 Source: Goldman Sachs, A view from India, 2012
2 Source: Motilal Oswal Research
Global Source : Rapid-Growth Markets Forecast, Ernst & Young, July 2012
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1/ Despite talk of a slowing Indian economy, small-town shoppers are starting to splurge.
Sheltered by government subsidies, good monsoons, high land prices and a low reliance on credit, rural incomes were up by 12% last year and have been growing more rapidly than urban ones since 2008 according to brokers Kotak Institutional Equities.
2/ The Indian middle class is defined by a system of 12 socio economic classes (SEC) from A1 to E3 (each letter has 3 levels).
This system results from the crossing of education with the number of durable objects owned by each household (color TV, refrigerator, washing machine …) and possession of agricultural lands. To give an idea of the corresponding income level, the middle classes begin at A2 for the highest and stop at B2.
In terms of income per household:
- A monthly income of 30 000 to 40 000 rupees corresponds to SEC B1/B2 (approximately 461 to 615 euros)
- A monthly income of 40 000 to 50 000 rupees is the SEC A2/A3 (approximately 615 to 769 euro)
3/ “The typical consumption cycle always begins with cosmetics, then watches, leather goods, and jewellery before fashion or travel”
Senior Partner and Managing Director of Boston Consulting Group
“La Chine, pays du bonheur des géants du luxe pour encore au moins cinq ans”
[China, heaven for the luxury giants for at least five more years]
17 May 2012