An Increasingly Affluent Middle India Is Harder to Ignore

Joseph Bornstein — Wed, 16 Jul 2008 09:32:17 -0400

July 16, 2008 - 09:00, Knowledge@Wharton

Story Link: http://www.mynews.in/fullstory.aspx?storyid=7517

Teaser:
C.K. Prahalad, professor of strategy at the University of Michigan's Stephen M. Ross School of Business, is looking for the fortune at the bottom of the pyramid. In his book by that name, he says that huge markets exist among the poor in countries such as India, and that multinationals should tailor their plans and products to these consumers. At the other end of the spectrum, luxury goods manufacturers are pouring into India. The International Herald Tribune will hold its annual global conference on luxury in New Delhi in December. It joins a crowded calendar of luxury events.

C.K. Prahalad, professor of strategy at the University of Michigan's Stephen M. Ross School of Business, is looking for the fortune at the bottom of the pyramid. In his book by that name, he says that huge markets exist among the poor in countries such as India, and that multinationals should tailor their plans and products to these consumers. At the other end of the spectrum, luxury goods manufacturers are pouring into India. The International Herald Tribune will hold its annual global conference on luxury in New Delhi in December. It joins a crowded calendar of luxury events.

Somewhere between these extremes is the real Indian market. It does not lie in the metros or the villages. "The Indian urban growth story until now has been driven largely by metros," says Ashok Rajgopal, a partner in the media and entertainment practice at Ernst & Young, a global assurance, tax, transaction and advisory-services firm. "This is now moving beyond metros into smaller towns."

Several recent studies bolster the case for the rise of Middle India. According to the 2008 edition of the RK Swamy BBDO Guide to Market Planning, 51 districts in India have at least one town with a population of more than 500,000. Together, they have twice the market potential of the four metros (Mumbai, Delhi, Chennai and Kolkata) combined.

According to a study this year by the Future Group, an Indian retailer, and the National Council of Applied Economic Research (NCAER), the ratio of spending to earning is higher in Tier II towns such as Nagpur, Jaipur, Surat and Coimbatore than it is in the metros. An earlier NCAER study, in 2004, had shown a higher percentage of the rich in Middle India than in some metros. For instance, the North Indian state of Haryana had a small-town crorepati density of 280. (Crorepati density is defined as the number of families who annually earn more than Rs1 crore -- about $250,000 -- per 1 million people.) The relative numbers for Kolkata, Hyderabad and Chennai were 180, 191 and 291, respectively. Anecdotal evidence suggests that the growth of the small-town rich continues.

Amid this data come two studies that attempt to look beyond the numbers: "The Bunty Syndrome," by advertising agency Euro RSCG India in October 2007, and "The Dhoni Effect: Rise of Small Town India," by Ernst & Young in March 2008.

The titles require some explanation. "Bunty and Babli are popular names for boys and girls in small-town India," says Suman Srivastava, CEO of Euro RSCG India. "Contrary to popular belief, it is not the urban Indian who drives trends, but the long-ignored Buntys and Bablis. They are on the move. There is a sense of urgency, excitement and confidence as they race ahead. Marketers and their agencies cannot afford to ignore them. They are the future market, not just of India, but the world." (The names Bunty and Babli draw their inspiration from the success of a 2005 Bollywood film titled Bunty Aur Babli. The movie follows the wild road trip of its two ambitious title characters, whose origins lie in small Indian towns.)

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An Increasingly Affluent Middle India Is Harder to Ignore