Sucheta Dalal :India 2006: Leap year prospects
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » What's New » India 2006: Leap year prospects
                       Previous           Next

India 2006: Leap year prospects  

January 4, 2006

Despite the vast human tragedy and widespread destruction caused by the Tsunami (at the end of last year) and the earthquake in Kashmir last month, 2005 remained a year of aggressive growth and development.  With the economic growth touching 8 per cent, India’s growth is attracting global attention as the last remaining ‘big’ market for products and services and as a powerhouse of Information Technology. And that is giving new confidence to Indians everywhere.


Until 2005, however, the big change was visible only in the cities.  It started with the richest 10 per cent of society enjoying the benefits of economic liberalisation, in terms of an array of choices in products and services.  However, since it benefited only a small sliver of the population, the Bharatiya Janata Party’s (BJP) India Shining campaign was such a flop and they lost the general elections. A year later, things are very different. Competition and market forces have forced product and service companies to move down the value chain to look for new consumers. Since these consumers are more cost conscious, they had to drop prices and their upmarket attitudes.


Consider this. Mobile phones in the six big cities have already reached the chaiwallah and sabziwallah… and phone companies are desperately wooing this market through targeted advertisements offering a  “chhota recharge” (Hutch) or a lifetime of free incoming calls (MTNL). Telephone companies know that they will have to keep up this growth momentum not merely by moving down the consumer pyramid but also expanding the market by finding more customers in smaller towns and cities.


Their task is made easier by the fact that the average Indian not only has a large network of family and friends, but is also hooked on to participating in all kinds of contests (on radio and television) or voicing opinions through premium priced SMS messages. This tendency is successfully exploited by anyone who has a product or service to sell.


For instance, I chanced a segment of the Ms.World contest while channel surfing on television. It required viewers to help choose the last 16 contestants through an SMS poll and it suddenly occurred to me that pretty soon, an Indian and a Chinese contestant will be a standard fixture in this category. After all, one out of four persons on earth will either be Chinese or India and they love to vote.


Another significant trend of 2005 that will spill over and grow in 2006 is the travel habit. Although train travel seems to have become less safe, the near completion of the golden quadrilateral and simultaneous increase in ownership of cars and two-wheelers has seen a jump in domestic travel. The entry of budget airlines allowed thousands of Indians to travel for the first time ever in 2005. International travel by Indians also boomed, mainly to affordable destinations such as the Gulf, South East Asia and Turkey. I hear that there are more Indians travelling to Bangkok these days than total number of foreign tourists coming to India.


Thanks to a combination of crumbling tourism infrastructure, poor service culture and exorbitantly priced hotels, even middle-class Indians, especially those in the metros prefer affordable foreign destinations. I believe that the hotel and tourism industry will wake up to this realisation in 2006, provided the Tourism Ministry is proactive.


A third change in 2005 was the increasing geographical spread of the BPO business (or call centres).  These companies have been forced to reach out to large towns and second-tier cities in order to find employable people at a reasonable price. Cities such as Bangalore, Pune, Hyderabad and Chennai and Delhi’s extended suburbs (Gurgaon, Noida and Ghaziabad) have already seen a consumption and retailing boom, fuelled by the increased spending power of young BPO employees. Apart from spending more on food, clothes and movies (leading to the entry of massive shopping mall, multiplex theatres and food courts) this generation is also the target market for consumer and housing finance companies, credit card issuers, brokerage firms and insurance companies.  


To my mind, this entire circus of employers, employees and their service providers will move into the hometowns of India’s Buntys' and Bubblies', making it less attractive for them to travel to Mumbai and Delhi to make their fortunes. Kishore Biyani, CEO of Pantaloon Retail, the man who is racing to establish his footprint all over India before giant retailers such as Wal-Mart are allowed into the country has identified 83 towns and cities to set up what he calls ‘Market cities”. These will be massive Malls, which he hopes, will turn into a city centre, with cinemas, food, shopping and games – complete with modern amenities and easy access. 


Biyani, who has leadership status in the retail business today, wants people to consume more goods and services, because it helps spread prosperity and creates new employment.


The one thing common to all the new business trends that one expects in 2006 is their employment potential. You would notice that tourism, aviation, malls and BPOs are all employment generators, which will provide jobs to a wide swathe of people starting at the high school level and going up to the technology whiz kids who have built India’s reputation as an Information Technology powerhouse. For instance, Biyani says that 92% of the people he employs in Big Bazar, Food Bazar, Pantaloon, Central and other franchises that he holds have only studied up to the 10+2 level.  The company trains them and teaches them how to deal with customers and handle the check-out counters.  Employment of this kind is scarce in the smaller towns and has the added advantage of improving confidence levels and interpersonal skills and increase aspiration levels.


All these trends are part of an increasingly confident India, which does not need political patronage to march towards a better future. But let us not underestimate the ability of government to spoil things for us. Corruption, bureaucracy, irrational taxes and other stumbling blocks can always be created to delay progress.


This article appeared in the Hindustan (in hindi) on January 1, 2006

-- Sucheta Dalal