NCAER-Business Standard
New Delhi
July 30, 2004
Presentation to American Chamber of Commerce

» 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

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

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 crorepatis and other categories of rich people

(2001-02)
Class Rs. ('000) per annum
US$ ('000) per annum (approx.
@Rs.48/$)
Deprived
Aspirers
< 90
90-200
Middle class 200- 1,000
Rich > 1,000
< 2
2 - 4
4 - 21
> 21

Ownership pattern of major durables in 2001-02
Annual household
Income ('000)
Deprived <90
Aspirers 90-200
Seekers 200-500
Strivers 500-1,000
Near Rich 1,000-2,000
Clear Rich 2,000-5,000
Sheer Rich 5,000-10,000
Super Rich >10,000
Total
Households
(%)
Two
Wheeler
71.9
21.9
4.80
0.91
0.29
0.11
0.02
0.01
100.0
CTV Ref AC Car
0.07
0.05
0.04
0.00
0.00
0.47
0.40
0.34
0.02
0.04
0.70
0.74
0.62
0.13
0.29
0.75
0.69
0.64
0.28
0.54
0.66
0.89
0.68
0.32
0.66
0.77
1.13
0.81
0.40
0.69
0.91
1.17
1.00
0.38
0.77
0.92
1.19
1.08
1.15
2.96
0.20
0.17
0.14
0.01
0.03

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

Rural demand is large in many products
60
50
40
10
0
30
20
Moped Motor Cycle Scooter Refrigerator CTV
1985-86 1992-93 1997-98 2001-02
WM

Small towns are where the action is
Four-wheelers
Category Volumes Growth in 2003-04
Top 10 towns
11-20 towns
21-40 towns
41-60 towns
61+
391,306
105,216
102,708
55,686
103,173
(Maruti sells a fifth of its volumes in 61+ towns and 2003-04 growth was 33 percent.
That for Hyundai was 56 percent)
Refrigerators
Market Size: Rs 3,500 crore
5-10 lakh towns: Rs 365 crore
Colour TVs
Market Size: Rs 9,000 crore
5-10 lakh towns: Rs 1,000 crore
Car Loans
Market Size: Rs 21,000 crore
Outside top 20 cities: Rs 5,250 crore
23
32
29
22
36
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
Haryana
Urban
Below 5 lakh town
Rural
Punjab
Urban
Below 5 lakh town
Rural
Maharashtra
Urban
Below 5 lakh town
Rural
Gujarat
Urban
Below 5 lakh town
Rural
Kolkata
Bangalore
Hyderabad
Number of households
340
241
482
726
218
501
7023
914
295
912
270
187
525
137
226
Density
323
280
199
498
256
183
890
350
27
248
203
32
180
113
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?

PARAMETERS USED FOR
PROJECTION
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)