Financial Daily from THE HINDU group of publications
Wednesday, Feb 11, 2004
Financial Daily from THE HINDU group of publications Wednesday, Feb 11, 2004 |
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Opinion
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Consumerism Marketing - Insight India 500 Plus: The magic numbers G. Ramachandran
The total purchasing power of Indian households in 583 districts and 100 urban centres almost doubled from Rs 7,634.54 billion in September 1999 to Rs 14,862.11 billion in March 2003.
This significant leap in purchasing power represents an annual growth of 18 per cent in nominal terms and 13.40 per cent in real terms. A liberal approach to the management of the economy has yielded handsome benefits. The new forces that have been unleashed in housing and domestic trade have yielded widespread benefits. What is more, the purchasing power applied on luxury goods has grown at about 40 per cent in real terms, and Maharashtra accounts for almost 22 per cent of India's market for luxury goods.
The total purchasing power of India almost doubled from Rs 7,634.54 billion in September 1999 to Rs 14,862.11 billion in March 2003 representing a compounded annual growth rate (CAGR) of 18 per cent in nominal terms and 13.40 per cent in real terms (Figure 1 and Table 1).
More importantly, the market for luxury goods jumped by 45 per cent in this four-year period; the growth in the basic goods market was 9 per cent (Table 1).
Pattern of growth
This difference in growth rates in the four categories of goods has changed the composition of purchasing power. Purchasing power for basic goods to total purchasing power has fallen from 65 per cent to 48 per cent while the share of purchasing power for luxury goods has improved from 3 per cent to 7 per cent (Figure 2). The change in the composition of purchasing power reflects a movement along the strong, time-tested pattern of economic growth. A policy thrust aimed at reinforcing consumption at the basic level will push aggregate growth to over 10 per cent. The market corroborates the purchasing power growth computed in India 500 Plus. In the period 1999-2003, passenger cars (luxury category) market grew by 41 per cent, while the two-wheeler market (L2 category) grew by 48 per cent. Mobile phone subscriptions (another L2 category) grew by 1,163 per cent. The toilet soaps market (L1 category) grew at a relatively sedate 24 per cent, while milk consumption (basic category) grew only by 18 per cent during the period.
Top five States
Purchasing power has grown briskly in all the States. The top five States where purchasing power has grown briskly are given in the Table 2. India 500 Plus examines growth in the four regions.
The North leads with a 32 per cent share of the growth in purchasing power. Purchasing power has grown the least in the East (Figure 3).
Rural India rules!
Rural purchasing power accounts for 53.28 per cent of India's total purchasing power. Among the major States, Bihar has the highest percentage of purchasing power from rural consumers (80.30 per cent). Other major States where the purchasing power from rural consumers as proportion to total purchasing power is high (Table 3) are Assam (73.70 per cent), Chhattisgarh (66.30 per cent), Haryana (66.87 per cent) and Rajasthan (69.44 per cent).
Bihar has the highest percentage of purchasing power in the basic goods category (64.45 per cent); the percentage is only 37.59 per cent in Punjab and 38.90 per cent in Haryana (Table 4).
Maharashtra accounts for almost 22 per cent of India's market for luxury goods, while Chhattisgarh's share is just 0.65 per cent (Table 5).
The shining districts
Predictably, districts with the highest degree of urbanisation also show the greatest purchasing power. The top 10 districts are given in Table 6. Relative purchasing power per million households (RPP/MH) is a construct that removes the effect of the number of households on purchasing power. It facilitates unambiguous interpretations and inferences pertinent to the relative prosperity of households in each of the 583 districts.
This construct effectively captures the effect of annual household incomes on purchasing power. The top 10 districts in terms of RPP/MH are given in Table 7.
Index of Economic Activity
IEA is a powerful, new feature of India 500 Plus. It indicates the components of economic activity and intensity of economic activity in a district and its relative position among the 583 districts of India. Seven components constitute IEA: agriculture, industry, trade, finance, professional services, housing and transportation. The IEA of the top 10 districts is given in Table 8. Mumbai has the highest intensity of economic activity.
India 500 Plus provides evidence of a strong relationship between IEA and PP. Table 9 shows that housing starts spurred by housing finance at low and stable interest rates have a strong and positive impact on purchasing power. IEA-housing has a high correlation across the full spectrum of purchasing power, from basic purchasing power to luxury purchasing power. Encouraging housing activity could have very desirable effects for the economy and purchasing power at both rural and urban levels. Housing has the most attractive economic linkages with many sectors of industry.
Policy-making made easy
India has just begun to release itself from the grip of agriculture. There is a long way to go, but incomes from manufacturing and services have to be nurtured and reinforced assiduously. The relationship between IEA and purchasing power shows that minimum support prices for more agricultural produce, education, property rights, labour laws, policy devolution and local governance could make a vital difference.
How India 500 Plus could be used
India 500 Plus provides interactive inputs for policy-making and decision-making by economic planners, economists, infrastructure planners and services providers, marketers, media and communication planners, product and service designers, providers of financial services and products, retailers and warehousing and logistics companies. The break-up of purchasing power into rural and urban and consumers for each of the 583 districts is an extremely powerful and unique feature of India 500 Plus, which has enormous utility for users. Businesses marketing products such as fertilisers, seeds, pesticides and tractors need concern themselves with only the rural aspects of India 500 Plus.
Interactive, customised focus
India 500 Plus enables users to retrieve data for a set of contiguous districts of any selected district. Users can also construct customised corridors or clusters of districts of interest and retrieve data for the same. qA marketer, for instance, can use the contiguous districts or the cluster/corridor modules to estimate potential returns from better targeting of advertisements and marketing strategies. The `thematics module' helps users to obtain a geographical view of all queries, results and inputs to decision-making and policy-making.
Useful database
India 500 Plus provides the dispersion of purchasing power for nine income classes and consumption in four broad classes of goods and services.
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