The rise of India’s neo middle class

[Dungeness]

Good to see India is moving on the right track and picking up speed on nation building, but urbanization without industrialization would not bring modernization.

 

[boxer_B]

Mumbai provides 33% of income tax collections, 60% of customs duty collections, 20% of central excise tax collections, 40% of India's foreign trade and INR 4000 crore (US$630 million) in corporate taxes.

Its not Mumbai per se, rather HQ of various companies who operate nationwide and pay Income tax on earnings.

 

[ito]

Good to see India is moving on the right track and picking up speed on nation building, but urbanization without industrialization would not bring modernization.

Urbanization leads to demand, and demand in turn will bring in more industries. More industries means more jobs and more urbanization. This is a cycle.

 

[Dungeness]

Urbanization leads to demand, and demand in turn will bring in more industries. More industries means more jobs and more urbanization. This is a cycle.

Jobless urban population do not "lead to demand", they survive.

 

[farhan_9909]

Pata nahin logo k pass kahan se paisa aa raha hai.

Hum ghareeb aur log ameer hotey ja rahe hai

 

[ito]

Jobless urban population do not "lead to demand", they survive.

Read the OP again. The topic is about growing middle class in India. Middle class cannot grow with out jobs.

 

[Dungeness]

Read the OP again. The topic is about growing middle class in India. You cannot grow with out jobs.

Of course you can increase the number of "middle class" if you keep the same middle class threshold as 10 years ago.

 

[ito]

Of course you can increase the number of "middle class" if you keep the same middle class threshold as 10 years ago.

I am not able to understand what you want to say. You cannot increase consumption 3 folds in last 10 years without an proportionate rise in incomes.

 

[GS Zhou]

What is the definition of "Middle Class" in India? Thanks in advance!

 

[AndrewJin]

What is the definition of "Middle Class" in India? Thanks in advance!

Middle Class is very hard to be defined.
One definition used in Global Wealth Report 2015:

For a variety of reasons – including the iconic status of the middle class in North America – the United States is chosen as the benchmark country. Specif- ically, a middle-class adult in the United States is defined here as having wealth between USD 50,000 and USD 500,000 valued at mid-2015 prices.

Nowadays prices in the United States are often lower than in other advanced economies, so apply- ing the PPP adjustment sometimes produces lower bounds for middle-class wealth above USD 50,000 (see Figure 1). Among Nordic countries, for exam- ple, the cut-offs in 2015 range from USD 51,400 for Finland and USD 52,600 for Sweden to USD 57,300 for Denmark and USD 58,200 for Norway. Applying our methodology suggests that an adult

in Switzerland must own at least USD 72,900 in assets to belong to the middle class.

Countries with lower wealth per capita tend to have lower prices, so the middle-class threshold is correspondingly reduced for them, as Figure 1 shows. To be a member of the middle class in 2015 according to our methodology, an adult needs at least USD 28,000 in Brazil, Chile and China; USD 22,000 in South Africa and Turkey; USD 18,000 in Malaysia, Russia and Thailand; and just USD 13,700 in India.


Under this middle income definition measured by wealth, the number of major economies is,

If we lower the threshold according to Credit Suisse,

A case could be made for expanding the middle-class wealth band, reducing the lower bound down as far as USD 30,000, or raising the upper bound up to USD 1 million. We experimented with the broad middle-class band USD 30,000–USD 1 million and found no substantive qualitative differences with the findings documented above using the narrow USD 50,000 USD 500,000 band.

Overall, developing countries are still developing countries with a very low percentage of middle class!

 

[Joe Shearer]

You mean IGCSE? Thats what I did for my junior high in singapore. Senior high I did I.B. An excellent structure I have to say....enriching most if not all that go through it.

Yes. I did mean that. That would explain your perceptible broad foundations.


It still does not explain why you have to be periodically expelled from BD threads at the point of a pitchfork. I have read about sex addiction, but this is ridiculous.

Jobless urban population do not "lead to demand", they survive.

No, not so. Here there are some difficult paradigms to absorb. My figures are dated; please take them as illustrative.

The figures below are annual, incremental, not total.

13m. people enter the job market each year. 8m. DO NOT get jobs. They are very largely in the rural and tribal (forest) areas. There people subsist - or survive. 5m. do get jobs, of which in the region of 0.5m get regular salaried, pensionable jobs, more than half in the government. The private sector still does not employ as many people as the government and public sector undertakings.

What you are looking at, in the cities, is the 4.5m people who get jobs (=employment) in the unregulated market. They perform services, or are engaged in maintenance and repair, overlapping light engineering to the extent that sometimes light industrial processing is involved as well as mere replacement of parts. They earn a subsistence wage, but progressively earn enough for consumer goods purchases, entertainment and the occasional 'pilgrimage' holiday. Healthcare is a killer and cripples families when any individual is stricken, even with minor accidental problems or with illness.

It is more than survival but just a little more.

 

[Nilgiri]

It still does not explain why you have to be periodically expelled from BD threads at the point of a pitchfork. I have read about sex addiction, but this is ridiculous.

Must you keep saying this, why not look at the threads now and see who is actually posting there now.

BD intrigued me on this forum for a long while because I expected a different spread of opinions (based on interactions in real life with real people and the relative recent history of the region among other factors) then what ultimately ended up happening (a large number of them calling for the invasion and break up of my country repeatedly with next to no provocation and then insulting my culture and ethnicity to top it off). I would like to show you the progression of how this happened, thread by thread.....but I don't have the time or inclination for it. I have not seen this behaviour %-wise from any other nationality of people on this forum.

Suffice to say that intrigue is over now. Basically I have judged that too many of them in that subforum have a big chip on their shoulder from how they were created politically in 1971, and they are quite insecure about the sheer polarisation of their country into two distinct camps (some of them exclusively post outside that subforum because of it)....and these two issues are somewhat inter-related....and this all gets unleashed in various ways on the big bogeyman India. I finally get it now, hence I have nothing left to discuss with them pretty much and I have other topics to spend more time on.

I would appreciate it if you let this bygone be a bygone now. Thanks.

 

[Grevion]

http://www.livemint.com/Politics/HY9TzjQzljCZNRHb2ejC2H/The-rise-of-Indias-neo-middle-class.html

The rise of India’s neo middle class

The story of millions of Indians whose lives have improved from a generation ago—in areas like income and education—and who continue to aspire for a better standard of living

The consumption by Indians has increased more than threefold in the past 10 years and is poised for similar growth in the next decade—leading to a tenfold increase in 20 years—a feat at this scale that has happened very few times in human history. Photo: Pradeep Gaur/Mint

Kavita is a 35-year-old primary school teacher living in Nagpur. Her husband, Prakash, is an accountant working with a trading company. Together they earn about Rs90,000 per month. Their daughter Roshni, 8, attends an English-medium, ICSE (Indian Certificate of Secondary Education) school. They are all busy on weekdays, but go out for lunch, movies or shopping on Sundays—Roshni calls it their ‘funday’. The Rs90,000 income may not seem a lot, but it is a big jump for Kavita, whose parents belonged to the ‘lower middle class’. Kavita grew up in a joint family in Ramtek, a small town near Nagpur, Maharashtra. Her father was a clerk with a public sector bank, while her mother was a housewife. Kavita’s mother never went beyond primary school herself, but she made sure her daughter completed her graduation. She had to fight with the elders in the family for Kavita to do that. Roshni’s dream is to study at a premier medical school and become a doctor. Kavita is already saving up so that she can make her daughter’s dream a reality. This is not just Kavita’s story. This is the story of millions of Indians whose lives have improved from a generation ago—with respect to areas like income and education—and who continue to aspire to a better standard of living.

Most of the narrative on the Indian consumer focuses on how the Rs83 trillion consumption economy is poised to grow in double digits to become the third largest in the world in the next decade. No doubt, the numbers on the size of the consumer economy are mind-boggling: the consumption by Indians has increased more than threefold in the past 10 years and is poised for similar growth in the next decade—leading to a tenfold increase in 20 years—a feat at this scale that has happened very few times in human history.

We believe that the full discussion on this should not only look at the size of the opportunity, but also understand the shape of this opportunity and the underlying consumer trends.

The shape of the consumption function has changed and will continue to evolve in the coming decades. Some of these are secular trends from the past, increasing at a steady pace—and shall become noticeably significant in the next decade.

Rise of the ‘affluent middle class’: Historically, and even in 2015, the largest set of Indian consumers has been those belonging to the ‘next billion’ income segment, accounting for 45% of the population and 39% of total spends. The middle class—which was the promise for many companies since the mid-1990s—has been growing but has never been the largest segment. But by 2025, the ‘affluent’ consumer segment will become the largest, accounting for about 40% of all Indian consumption, up from about 26% in 2015). This ‘affluent’ segment resembles the global middle-class consumer, and would herald the rise of the middle class in its most literal sense for the first time.

Shift in spending from basics to more: Roti, kapda and makaan have historically represented the largest expenditure for Indians. Over the past few years, however, there have been two notable changes in consumer spending patterns. The first is a rise in the total amount spent on education, leisure and telecommunications, driven by both greater demand, as well a change on the supply side. The second is the shift towards better, higher-priced sub-segments in the same historical categories ranging from food to consumer durables.

Continuing rise of the urban segment: India’s rate of urbanization has been very different from most other countries—it is not concentrated in a few cities, like in Indonesia or Thailand; not as fast as in China; and it is not as dispersed as in the US. It has been uniquely Indian. We estimate that about 40% of India’s population will live in urban areas by 2025, accounting for more than 60% of the total consumption. Interestingly, it will be the rise of the many cities #50 to 500 and not the megacities that will account for a large part of this growth.

Rise in the nuclear family set-up: The great Indian joint family may be the focus of Hindi cinema, but in reality the rise of the nuclear family has been a slow and steady phenomenon. It has been driven by multiple factors. Today, nearly 70% of Indian households have a nuclear construct, representing a 13% increase over the past two decades. While this has many social implications, from a pure consumption point of view, it presents a unique opportunity—for the same income level, nuclear families spend 20-30% higher per person than joint families.

The rise of the ‘digital Indian’ is going to be the third certainty after death and taxes

The trends mentioned above have been steadily increasing over the past 20 years, but there is one big discontinuity that is a more recent phenomena. Two decades earlier or even 10 years ago, no one could have imagined the impact of digital technologies on the average Indian. For starters, the numbers are mind-boggling. The total number of Indians with access to a cellphone is already close to a billion. The number of people in the country today with Internet access is already 300+ million—the size of the US population. Over the next decade, this number is expected to rise to 800+ million.

This dramatic increase is going to be accompanied by a change in the profile of the average user. The first 100 million ‘digital Indians’ were largely men, urban, educated, earning higher incomes, and typically, young. The 400 to 500 millionth ‘digital Indians’ are going to be the opposite—rural, mid-income, older, with more women included. This digital democratization will have a profound impact on how Indians see, select, study, spend, save, socialize and sell. Digital technologies will fundamentally change the nature of these interactions due to the following three reasons:

Two-way, real-time, superior information: Digital channels are not only providing consumers with access to more information, but also bringing about a change in the nature of retail interactions. The content available today is better—whether on Wikipedia or customized ‘webtainments’—with channels additionally facilitating near-real-time dialogue between retailers and consumers. In recent times, policymakers have also increasingly started tapping the Internet to directly connect with citizens—a case in point being the Telecom Regulatory Authority of India’s call for Net neutrality, or tweets solicited by the railway ministry.

Broader access to products and services: Geography is now truly history. E-commerce websites generate a surprisingly high share of their sales from Tier-II and Tier-III towns, due to the access they provide to consumers in these locations. The Internet is also enabling Indians to gain access to global education and healthcare. In Ajab, Gujarat, students take mathematics classes online from a teacher sitting hundreds of miles away, while villagers in Tamil Nadu now have remote access to professional advice on cataract problems.

Platform to enhance livelihood: Sufiyan Khatri, an artisan from Ajrakhpur in Kutch, has expanded his business manifold through his Facebook page. Milaap, an online crowd-funding platform, has raised Rs80 crore to fund several poor working Indians. Such digital platforms are thus empowering several entrepreneurs and artisans to enhance their selling, marketing and financing functions. The potential for these platforms lies much beyond the usual ‘buy and sell’ construct.

We believe that while the digital tsunami will have a significant impact on Indians as consumers, it has transformational potential for Indians as citizens across the framework described above. We have seen early signs of this in the way government-citizen interactions are changing, whether in the form of online redressal platforms or railway ministry tweets. At a fundamental level, the digital wave has changed the country’s administration model from a pure ‘supplicant and provider’ system to one that resembles a true democracy.

Green shoots of new trends—currently at the surface—but with potential to explode

Pride in being Indian: A couple of decades ago, many Indians looked forward to relatives visiting from abroad, bearing gifts like foreign chocolates, perfumes and even shoes. How times have changed! Today around 60% of Indians are willing to pay extra for products made in India. The ‘Generation I’, whose formative years began after 1991, has never experienced an era of rationing. They are more confident about their country’s as well as their own capabilities.

There are different ways in which this national pride has started manifesting itself. Across categories, there is an increased curiosity and excitement around exploring local roots, as evidenced by growing consumer interest in natural products in personal care, local flavours in packaged food, and hand-woven fabrics in clothing. The bundi (Nehru jacket) is back in vogue—it has been listed among the top 10 all-time global political fashion statements by Time. Forest Essentials has grown to be a premium personal care brand, and is now going international after a stake purchase by Estée Lauder. FabIndia is potentially the single largest and most profitable retail apparel brand in the country.

Half the sky—gaining its rightful share: Sakshi Malik and P.V. Sindhu and their performance at the Rio Olympics is the best exemplar of the changing role of women in India. Women in India, across urban and rural areas, are exercising greater influence. Several forces are driving this shift—changing family structure, electoral reservation for panchayats, improved healthcare, and greater media reach and focus. We believe the most important factor is a change in women’s educational levels, which has changed dramatically. The enrolment rate for girls in secondary education has increased from 45.3% to 73.7% between 2005 and 2014 and is now higher than the 73.5% for boys. Even in higher education, girls have bridged the gender gap, with the enrolment level now at 19.8%, as against 22.3% for boys. Traditionally, the school dropout rate (for Classes I to X) used to be much higher for girls, but now it is lower than that for boys. The academic performance of girls has anyway always been better than that of boys.

Apart from greater literacy levels, this trend will have a much wider impact, ranging from changed workforce demographics to greater economic independence for women and other social changes. This is not going to be a sudden change, but more like a steady, tectonic shift.

The (almost) I, me, myself generation: While the nuclear family may seem to be the new normal, the future could see a further shift in how one thinks about family. We believe that India could see a second wave of transformation—from nuclear households to singles. There has been a steady increase in the number of people in the workforce who are still single. The average age of getting married went up from 22.6 to 28 for boys and 18.3 to 22.2 for girls between 2001 and 2011. The number of single women above 20 has increased by 40% over the same period. While this is largely a metropolitan phenomena so far, it has started percolating to Tier-II cities as well.

This change has implications not only for household sizes, demographics and the economics of income and expenses, but also for the very definition of family. Anecdotal evidence and parallels from other countries indicate that these singles, who are at one level, more individualistic, also think of communities (physical and virtual) and causes (social or political) as proxies for families.

A new reality—reinvent or fall behind

That India is poised to become the third largest consuming economy is clear. It is understanding the shape of this growth that will be crucial. As we described earlier, while some elements of the past will continue, there are big shifts that cannot be ignored. These raise fundamental questions that organizations need to address.

• Cater to different price tier segments: For the first time for most Indian categories, there would be scale markets across the price tier. How should organizations think of their business models/organizations to cater to these opportunities ?

• Address the changing societal changes: There are many societal/sociological changes happening in India—the changing role of women, increased individualism, differing role of family, national pride, etc. It is clear that these need to be addressed beyond just changing the image or punchline in the advertisement. How should organizations capitalize on these changes?

• Rethink notion of market and competition: The digital world has created a paradigm where the conventional view of market access and traditional competition is being truly disrupted by differing offers and new players. How should organizations think about market/segment/competition definition?

• Rebalance of the power equation: The nature of relationship between the consumer and the company, the state and the citizen is changing. Greater transparency, reduced information asymmetry and increased voice of the individual (magnified via the digital-social medium) has resulted in a situation where the balance of power is tipping away from the large organization. How should companies and governments engage with the new consumer/citizen in a truly democratic context?

As we look ahead, one thing is clear—the New Indian is different. Who they are, what they believe, why they choose, where they shop and how they buy. Companies and governments alike will need to fundamentally reinvent themselves and create new rules of engagement to truly win in this new reality.

Abheek Singhi is senior partner and director, consumer and retail practice head—Asia Pacific, the Boston Consulting Group. Nimisha Jain is partner and director, the Boston Consulting Group.

Twenty-five years after liberalization, and 20 years after it entered India, The Boston Consulting Group collaborates with Mint on a series of articles on what lies ahead for the country over the next 20 years.

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A very nice read but why i am unable to find my name on the tag list.

 

[Nilgiri]

A very nice read but why i am unable to find my name on the tag list.

Sorry man, I type them up each time instead of copy and paste. I have found theres better luck of the tags actually working if I do it this way.

So whoever pops up in my head and I briefly look at who's active post wise in the relevant subforum I am posting in.

But you are a big name for me, I dunno why I missed it in my head. Apologies

 

[Joe Shearer]

A very nice read but why i am unable to find my name on the tag list.

Don't worry, he never/rarely tags me. Join the club.