The Great Indian Middle Class

NCAER-Business StandardNew DelhiJuly 30, 2004

Presentation to American Chamber of Commerce

About National Council of Applied Economic Research

(NCAER)

» National Council of Applied Economic Research - independent body

» Activities of NCAER include :- developing policy reports- macroeconomic monitoring & forecasting- human development- agriculture & rural development- industry & infrastructure- survey & general economics

Market Information Survey of Households (MISH)

Only survey to be done annually since 1985-86, so time-line available

» MISH holds a unique position because of its massive sample size – 3 lakh urban and rural households

» MISH provides income distribution separate for rural and urban areas

» MISH classifies consumers by – chief earner, highest education level attained by any household member, number of earners

» Growth of income based on MISH surveys is similar to that of the official NAS data

» NSS surveys, and all those based on them, capture less and less of GDP with each passing year

BS Contribution

» BS has done editorial analysis of the numbers» BS has published GIMC and will market the book on behalf of

NCAER

What’s new about this year’s MISH?

This report has been put together by NCAER and BS, as will several other reports that will be generated out of the MISH survey

» Data for past years, like 1995-96 and 1998-99, have been inflated to bring them to 2001-02 prices, to make all time-lines strictly comparable and relevant

» Number of cities covered in The Great Indian Middle Class has been increased from 24 the last time around to 67 this time. This means cities with a population of over 5 lakh have been covered as opposed to one million in earlier surveys

» Income categories have been extended upwards to Rs 1 crore a year per household for the first time

» Projections have been made till 2009-10 on an all-India level

Consumer spending on most items continues to explode …

… But there’s the tricky issue of ‘category collide‘(or how consumer spending in one area affects spending in other areas)

Crowing over crorepatisand other categories of rich people

Consumer Classification(2001-02)

Class Rs. ('000) per annum

US$ ('000) per annum (approx.

@Rs.48/$)

Deprived < 90 < 2Aspirers 90-200 2 - 4Middle class 200- 1,000 4 - 21Rich > 1,000 > 21

Annual household

Income ('000)

Households (%)

Two Wheeler

CTV Ref AC Car

Deprived <90 71.9 0.07 0.05 0.04 0.00 0.00Aspirers 90-200 21.9 0.47 0.40 0.34 0.02 0.04Seekers 200-500 4.80 0.70 0.74 0.62 0.13 0.29Strivers 500-1,000 0.91 0.75 0.69 0.64 0.28 0.54Near Rich 1,000-2,000 0.29 0.66 0.89 0.68 0.32 0.66Clear Rich 2,000-5,000 0.11 0.77 1.13 0.81 0.40 0.69Sheer Rich 5,000-10,000 0.02 0.91 1.17 1.00 0.38 0.77Super Rich >10,000 0.01 0.92 1.19 1.08 1.15 2.96

Total 100.0 0.20 0.17 0.14 0.01 0.03

Ownership pattern of major durablesin 2001-02

Income demographics changing, from an inverted pyramid to a rudimentary diamond(the number of non-deprived is slowing becoming bigger)

The change is starker in select cities

And it’s not just the big cities that matter

0102030405060

Moped Motor Cycle Scooter Refrigerator CTV WM

1985-86 1992-93 1997-98 2001-02

Rural demand is large in many products

Small towns are where the action is

Four-wheelersCategory Volumes Growth in 2003-04

Top 10 towns 391,306 2311-20 towns 105,216 3221-40 towns 102,708 2941-60 towns 55,686 2261+ 103,173 36(Maruti sells a fifth of its volumes in 61+ towns and 2003-04 growth was 33 percent. That for Hyundai was 56 percent)

RefrigeratorsMarket Size: Rs 3,500 crore5-10 lakh towns: Rs 365 crore

Colour TVsMarket Size: Rs 9,000 crore5-10 lakh towns: Rs 1,000 crore

Car LoansMarket Size: Rs 21,000 croreOutside top 20 cities: Rs 5,250 crore

Source: Business Standard, Business Today

Choosing which rural areas/small towns is important

(number of crorepati households per million households in state/city, or density)

Area Number of householdsDensity

HaryanaUrban 340 323Below 5 lakh town 241 280Rural 482 199PunjabUrban 726 498Below 5 lakh town 218 256Rural 501 183MaharashtraUrban 7023 890Below 5 lakh town 914 350Rural 295 27GujaratUrban 912 248Below 5 lakh town 270 203Rural 187 32Kolkata 525 180Bangalore 137 113Hyderabad 226 191

From Capital to Capitalism

Big boom in small towns

Rurban consumers

• A third of population in top 67 cities are ‘deprived’

• 23 per cent of Mumbai’s population is ‘deprived’

What if GDP growth slips?

• MISH numbers based on 8 per cent growth till 2009-10.

• What if growth is 7 per cent?

• Will number of rich decline dramatically?

Income Projection Population growth (Census 1991, 2001, RGI)

Sectoral income growth (NCAER)

Income distribution (MISH 1985-2001)

Demand Projection for specific product Ownership (MISH)

Penetration (MISH)

Structural change in the market

Production/Purchase (MISH and Secondary data)

Scrap rate (MISH)

PARAMETERS USED FOR PROJECTION

Thank You!