Purchasing Power in Consumer India

PURCHASING POWER
I N C O N S U M E R I N D I A
Sameer Mathur, PhD (http://smathur.com)

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These presentations are part of Sameer Mathur's teaching portfolio.
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Disclaimer: These teaching materials have been compiled from multiple, non-creditedsources for non-profit, academic use. Copyright is retained by the original content creators.
SameerMathur, Ph.D.
Assistant Professor (Marketing)
Web: www.smathur.com
Email:sameer.mathur@mcgill.ca
Twitter: @ProfessorMathur
Facebook:Click Here

India’s Purchasing Power
GDP per capita method is misleading -- makes India appear to have a low purchasing power for mainstream consumer goods
Future: Purchasing power will increase due to +6% real GDP growth each year

India’s Middle Class

Middle Class -- Definition
Varying definitions:
Based on income and socioeconomic class
Based on ownership of durables like cars and televisions
Those who participate in the consumer economy
Source: Guide to Indian Markets 2006

Indian Middle Class - Size
Uncertain – ranging from 100 million to 400 million
Through MNC definition:
Size < 100 million people
Through FMCG market perspective:
Size ~ 250-300 million people
Through consuming classes (Cost-benefit optimizers):
Size ~375 million people
Through income distribution
Size ~300 million people
Source: Guide to Indian Markets 2006

Poorer Indian Middle Class
Less affluent than the middle class in other countries
In terms of consuming power, middle class of other countries is comparable to top 10% of India’s population (~105 million people)

Truth Behind Indian Purchasing Power
Belief
‘Monolith’ mental model
Many people with equal purchasing power
Reality
Multi-layered cake model
Many layers of varying size and affluence

Layer division

Affluence layers based on income
Source: NCAER

Affluence layers based on income percentiles

Affluence layers based on consumption intensity

Verdict on Purchasing Power
70-75% of consumer India cannot be counted as healthy consumers
Consumer India:
50-60 million people (Top 30%) with high purchasing power
100 million people below, on the road to consumption
100-150 million people below, starting consumption

Verdict on Purchasing Power
Consumption growth happens quickly due to consumption confidence, which grows with an increase of penetration in a given layer -- accelerating consumption further

Affluence layers based on GDP

Summary of GDP distribution

Simplified GDP Distribution
Bottom of Pyramid: 650 million who earn less than a dollar a day; but, accounts for market opportunity of US$173.3 billion and requires innovative, low cost-benefit, value-right models for profitability

Summary

Background Reading

FREE TEACHING
RESOURCES
ON MARKETING
MANAGEMENTATWWW.SMATHUR.COM
OVER 130,000 VIEWS
FROM 96DIFFERENT COUNTRIES
These presentations are part of Sameer Mathur's teaching portfolio.
They are free to view or download for non-profit, academic use.
Disclaimer: These teaching materials have been compiled from multiple, non-creditedsources for non-profit, academic use. Copyright is retained by the original content creators.
SameerMathur, Ph.D.
Assistant Professor (Marketing)
Web: www.smathur.com
Email:sameer.mathur@mcgill.ca
Twitter: @ProfessorMathur
Facebook:Click Here

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Purchasing Power in Consumer India

by Sameer Mathur on Jul 22, 2011

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