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13% of Indians will be middle-class by 2010: Survey
By agencies
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Wednesday, 10 August 2005, 19:30 IST
NEW DELHI: The Indian middle-class will increase to 158 million, accounting for 13 percent of the country's population by 2010, with one-thirds of them living in villages, as per a study that forecasts an emergent powerful rural market.
Rural markets will show impressive growth in those products less dependent on electricity connection and roads, and its expected share in the demand of various consumer products goods is 55 percent, says the survey on 'The Great Indian Market' released by the National Council of Applied Economic Research (NCAER) in association with Business Standard.
"The overall expected growth in the demand of various consumer goods is estimated to be around 9 percent per annum," NCAER Director-General Suman Bery revealed during a presentation on the survey details.
However, the demand growth for consumables is projected to fall by the decade-end, as usage levels are not expected to increase significantly, the study says, while concluding that 80 percent of the demand would come from the upper-most income class.
An interesting finding was that after salary-earners, it is cultivators who form the next important demand constituent for products, accounting for a fifth in this respect.
A region-wise breakup shows that the North would continue to dominate demand for both low-cost items and vehicles like cars and motorcycles (despite state-wise classification showing Tamil Nadu having the highest demand of 17 percent for automobiles). At the same time, eastern India, despite lower income levels, 'emerges as paradise' due to the demand for life insurance policies. When it comes to medical insurance, east is second to the west.
The survey noted that per-capita income in rural areas grew faster (4.5 percent per annum) than in urban areas (2.2 percent), though the share of rural income in total GDP declined. Three-fourths of the rural household income came from cultivation and wage earning, while two-third of the urban house hold's major source of income was from salary or business.
Dr Bery noted that while urban households were in general richer than rural, the latter group outnumbered the former. "So the contribution of the rural households to the total demand or growth in demand can in some cases be just as significant as that of urban households."
The prominent areas that showed the potential of the rural market were bicycles and radio (75 percent), black-and-white televisions, ceiling fans and pressure cookers (50 to 75 percent), motorcycles, wrist-watches, color TV and scooters (40 to 50 percent) and refrigerators (25 to 30 percent).
Overall, major products that projected high demand growth were cars (20 percent), motorcycles (16 percent), CTVs and refrigerators (10 to 11 percent) and radio, electric irons, bicycles and wristwatches (7 to 9 percent). At the same time, there would be a fall in demand for articles like B&W TVs (10 to 12 percent), mopeds (6 percent) and scooters (2 percent), showing a shift in lifestyle.
"The projected demand is a combination of several factors, the most important among them being which category of household favors what sort of products, the existing levels of penetration and saturation and whether there are other products with preferred replacements for the existing products," Dr Bery said.
The study shows the percentage share of some products in the rural market as follows: radios (81), color TVs (68), motorcycles (48), scooters (40), refrigerators (33) and cars (11).
With the middle-class becoming a major player in the consumer market, they would, by this decade-end, own 60 percent of cars and air-conditioners, besides one-fourth of CTVs, refrigerators and motorcycles.
On second-hand goods, the survey noted that their market has a significant share in overall purchase of consumer goods. At the all-India level, 15 percent scooters purchased were second-hand, while it is 23 percent for mopeds, 11 percent for motorcycles and 14 percent for cars/jeeps.
The purchase of second-hand goods is high among rural areas and lower-income categories. Nearly a fourth of the second-hand cars bought were in the rural areas compared to just 6 percent in urban.
Over half the cars bought were financed, the survey added.