The New Middle Class in India

It is now official. First time in the history of modern India, high income households will outnumber lower income households. According to latest NCAER estimates India will have 46.7 Million households in high income category and 41 Million households in lower income category.

Households earning up to Rs 45000 per annum are dubbed as lower income households, and those earning over Rs 1.8L per annum are classified as high income households. But the real story lies in the number of households that are between Rs 45000 to 1.8 L per annum. This number has now reached estimated 141Mn households, out of a total of 228Mn households in the country. This is what is called the middle class in India. This middle class now is over 60% of the entire country. This is a stupendous turnaround that we are seeing happen to our country.

We often assume that the entire middle class is ‘one class’ and we can try and paint them in one go. The truth is that the middle class in India is a constantly evolving mix of audience. The current decade has seen a very strong growth in middle class. The economic growth, the rising prosperity, more and more people moving up ladder has created a new class of customers. These are the new members of middle class of India.

What is fuelling this new middle class? What are the trends that they will trigger? After all they are a very potent group of consumers

The new middle class has been powered by women. Just look at the long term literacy data of India and the impact women are having will be clear. The female literacy rate has risen from 8.6% in 1951 to 54% in 2001 census. The 2011 census I am sure will show that the number may have crossed 60%. Interestingly the growth of female literacy rate was 15% between 91 and 2001, as against just 11% of male literacy growth. Clearly the women are catching up with males, and this too is triggering a set of new trends.

Here’s a look at some of the new truths about the new middle class

The growth of the new middle class is powered by women. With better education they are joining the work force in a greater number. With this they are taking control of their future, having a greater say in their wedding, deciding on when to have kids and how many. Apart from the demographic impact they are also driving their partners with a greater zeal to improve their future. They are making the most of change in their demographic and social status.

The new middle class will impact the travel choices in a big way. The new found economic freedom will translate into a greater desire to explore the world. They will pack their bags and take vacations at a greater frequency than ever before. And they will not always be looking at visiting their relatives only when they do so.

The new middle class is very serious about securing their future. One of the first serious buying decision they will take will involve buying a house. They will look at buying their own house even before they decide to buy a car. There is no better way to announce the transition than by buying a house. This means that the small home segment will boom in a much bigger way in coming decade

The new middle class is truly driven by dynamism of its own members. They are literally writing their own destiny and crafting their future. They are hardworking, optimist, smart and not driven by the rules of past. They will impact the world of marketing and branding in a big way.

The new emerging reality will be very exciting

Indian Population bane or boon?

We have heard this many times: India has about 17 percent of the world’s population and just 2 percent of the world’s land area. This imbalance between the number of people and the resources available is the basic reason for India’s woes. Pretty simple argument to find fault with!

 

But is reality as simple?

 

Often looking at issues too closely makes you lose the sight of the bigger picture. So let’s look at some basic facts. The world in 2015 will be populated by some 7.2 billion people, up from 6.1 billion in the year 2000. The rate of world population growth will, have diminished 1.3% in 2005, to approximately 1% in 2015. The financial value of world according to World Bank stood at US$ 28.5 trillion in 2003. This will rise to over US$ 50 trillion by 2015 growing at well over 8% annually. Clearly the world economy is growing at a much faster pace than world’s population. May be there is no correlation between population and economy

 

 

In reality India’s real problem is not population, but its economic policies that over regulated labor and product markets, blocked domestic investments that made India insular

 

So is India’s population really the curse India is carrying? Or will this population itself become India’s new weapon in a rapidly globalizing world? There are three realities that we need to focus on.

 

We will become the youngest nation in the world: Indian population will continue to grow at over 10-12% per annum. Only countries that will keep pace with India are Malaysia, Egypt, Vietnam, Turkey, Indonesia, Brazil and South Africa. Even among these countries India would be uniquely placed. It will be the only country by 2012, which will have more earning population than those who are dependent. India will see sharpest growth in 15-60 year age group. This age group will grow at over 30% from 600 million in 2003 to 800 million by 2016. The young India will pose a serious challenge to growth of China, whose population growth would have slowed down, and whose potential work force would start to stagnate.

 

We will get Richer: India’s 1.1 billion people could see the nation’s wealth per capita doubled. It is estimated that 61,000 individuals now have assets exceeding US$1 million and will double by 20015. India will become the world’s third richest economy by 2020. So not only will we be in top 3 in the world in terms of people power, but also in top three in terms of earning power.  India will remain an open economy and an open society, benefiting from a brain gain rather than losing talent in a brain drain of well-educated young Indian professionals going abroad to seek their fortunes.

 

The over 60 population will be both a challenge and opportunity: The over 60 year population will rise from 90 million in 2003 to over 100 million in 2016. At one end they will put pressure on health care system because of lifestyle diseases and greater life expectancy. At the other they are a new opportunity, as they will also enrich the demographics of the country. As the first generation of post liberalized economy they will bring in their experience into play and remain a part of growing economy.

 

By focusing on these three factors I am not trying to take the focus away from some of our demographic challenges. We need to reduce our infant mortality rates. We need to bring more and more population into the health care fold. We need to ensure that our literacy rates keep on increasing. We need to ensure that rapid increase in urbanization does not speed up decay of an already busting at seams infrastructure. We need to ensure that rural infrastructure continues to develop. All these are real problems, but are not the problems of only population. Most of these actually need optimum utilization of India’s abundant resources. After all we have abundant food grain reserves, forex reserves, natural resources and whatever else is needed. And above all the political will to make it happen.

 

I believe that larger population of India will become an asset rather than a liability to economic growth. To make this happen we have to invest more education and training, and leverage new technologies. In the modern environment, a larger population raises productivity by inducing greater specialization in skills and occupations. And with the world’s developed world struggling to cope with diminishing population, we will for once have the genuine advantage.

 

People of any country are never a bane.

Published in DNA Mumbai, January 9th, 2007