Saturday, November 25, 2006

India today and in the future

The Story today ( excerpt from "In Spite of the Gods : The strange Rise of Modern India" )

“…To me, the new expressways provide an intriguing juxtaposition of India’s multi-speed economy. One of the best ways to observe India’s galloping new economy is to count the number of car brands that whirr past in the fast lanes…Toyotas, Fiats, Hondas, Hyundai, Fords, Volkswagens, Skodas, Mercedes’, Rolls-Royce…But your speed on the expressway is never quite what it should be. Coming far too frequently from the opposite direction are scooters, bicycles, camel drawn carts and goat herds. It is to the side of the expressways in the glaring bill-boards advertising mobile phone, iPods and holiday villas and in shiny gas stations with their air-conditioned mini-supermarkets that India’s schizophrenic economy reveals itself. Behind and around them is the unending vista of rural India, of yoked bullocks ploughing the fields in the same manner as they did 3000 years ago, primitive brick kilns dot the endless patchwork of fields of rice, pulses, wheat and oilseed. Along the way you might also find the glimpse of an occasional factory assembling washing machines or making accessories for automobiles. There are pockets of rural India that are becoming prosperous but they are truly islands. In this almost continuous contrast you observe the two most striking features of India’s 21st century economy: booming service sector in a sea of indifferent farmland…”

Consumer Landscape

• Population will continue to grow, till in 2025 it overtakes China. Nuclearization of households in Urban India will drive a faster household growth rate. However, number of households in India in 2025 will be less than that in China in 2000.
• Urbanization will progress at a very slow pace (29% in 2010 vs. 28% in 2005), compared to China (47% in 2010 vs. 36% in 2005). 10% of households will be concentrated in the Top 35 cities; whereas 71% of households (rural) will remain dispersed in 0.6MM villages.
• It will remain a young population with 27% of the population below 15years in 2025. Not surprisingly, India has the largest baby population in the world.
• Adults living with kids (56%) and Single Adults (22%) will continue as the top 2 household types. Nuclearization of families will lead to significant increase in “empty nester” + “old/ retired” people living without children (19% in 2025 vs. 13% in 2005).
• Though employment in services sector will grow (19% in 2025 vs. 11% in 2005), most people (51% in 2025) will continue to be in agriculture.
• The average household income will keep increasing at 6-7%p.a. The number of “rich” (annual income $10M+) will triple and those in middle income will increase by 50% in the next 5 years. The rich people will be concentrated in the Top cities, while bulk of India will continue to be low income and live in rural areas.
• Housewives will continue to get busier with more of them working outside the house in addition to managing the house. 37% of India housewives work (in 2006) up from 35% (in 2003). This is being led by both urban and rural increases in women working.

Economy Landscape

• The GDP is expected to grow at 6-8%p.a. over the next decade. This will fuel the increasing incomes across India.
• Increased investment in infrastructure can lead to significant changes in consumer lifestyles. Increased investment in agriculture can step change agriculture growth rates, step changing the lives of many rural people. Only 1/3rd of rural India has electricity; electricity consumption in India is 40 index of China and 20 index of Brazil. Retail Landscape
• While HFS outlets will dominate rural India and smaller towns, organized “modern format” retail outlets will grow (20%p.a.) in the Top cities.
• Government relaxation of the FDI regulations into Retail could significantly step change the salience of Modern Retail in the Top cities. Reliance Industries, Food Bazar could become the largest Indian players in Modern Retail. Wal-mart, Tesco, Metro, Carrefour are all looking to set-up/ expand operations in India.
• Wholesalers will remain an important agent in making goods available to HFS stores in rural areas and smaller urban towns.
• Beauty Stores (focused on women beauty products and accessories) are growing 2X the national growth rate of Beauty Categories.
• “Direct-Selling” as a channel is growing at 15%p.a. and is now estimated to be about 600-700MM in sales. It is estimated to cross $1B by 2010. Health and Nutrition accounts for 50% of the channel sales.

Media Landscape

• Television is and will continue to be the most penetrated communication vehicle across urban and rural India.
• Radio is the media vehicle with #2 reach. Given only 1/3rd of rural India has electricity, battery operated radio is an important supplementary medium that we have qualified.• Use of cell phones is growing – while more than half of households in Top cities have a cell phone, only 7% in rural India have a cell phone.
• The penetration of Internet is growing at 8.5%p.a. While 40% of management employees living in top cities use the internet, on an overall basis only 1.8% of India uses the internet. We are learning on this.

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