Middle Class Courses

7/30/2019 Middle Class Courses

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BCCAS INSTITUTE OF MANAGEMENT STUDIES

V

SEMESTER :______________________________________

NAME OF STUDENT :

CLASS : T.Y.B.M.S DIV : 000

SUBJECT : 0000000000

TOPIC : INDIAN MIDDLE CLASS FAVOURITE OF ALL

NAME OF PROFESSOR : 000000000

____________________________ _____________________________

SIGNATURE OF STUDENT SIGNATURE OF PROFFESSOR

________________________ _______________________

MAX. MARKS OBT. MARKS


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ABSTRACT

India has been a country with various social issues, such as dialect barriers,

gender inequality, levels of poverty rates, and trouble with severely polluted

areas to name a few. India has also faced some political problems, such as the

border conflicts with Pakistan, as well as clashes between Hindu nationalists and

secular political groups. However, internationally, it is currently being supported

by the worlds major powers, like the US and Japan. This is due to Indias

growing economy, stable government and its secure political relationships with

the rest of the world. As globally competitive IT firms and various services are

being praised upon, the countrys future is looking optimistic as it is being seen

as a strategically as well as thriving partner for international trade.

India is believed to be the worlds second fastest growing economy with an

average growth of 8 percent per year starting 2004. Indias comparative

advantage lies in its skilled labour force in IT at relatively low costs. The growth

of the economy of India in general is closely behind the US and the Republic of

China. However, while there is a lot of optimism around the growth itself, there

is also a calculated fear of major inflation in years to come.


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EXECUTIVE SUMMARY

TITLE : MARKETING STRATEGY OF NESTLE

AUTHOUR: SAMEER

ADVISORS: OOOOOOOO

COURSE:OOOOOOOOO

DATE:OPOOOOOOOO

PURPOSE:

METHOD:


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FINDINGS:


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ACKNOWLEDGEMENT

I am indebted to a number of individuals without whose assistance this research

could not have been completed in time. My first gratitude goes to 000000, Head Department

of commerce BCCAS INSTITUTE OF MANAGEMENT STUDIES.

I owe a great many thanks to a great many people who helped and supported me

during the writing of this book.My deepest thanks to Lecturer, [LECTURER NAME] the Guide

of the project for guiding and correcting various documents of mine with attention and care.

He has taken pain to go through the project and make necessary correction as and

when needed. I express my thanks to the Principal of, [UNIVERSITY NAME & PLACE],

for extending his support.My deep sense of gratitude to [RESPECTIVE NAME]

(DESIGNATION), [COMPANY NAME WHERE THE PROJECT WAS UNDERTAKEN] support and

guidance.

Thanks and appreciation to the helpful people at [COMPANY NAME WHERE THE

PROJECT WAS UNDERTAKEN], for their support.I would also thank my Institution and my

faculty members without whom this project would have been a distant reality. I also extend

my heartfelt thanks to my family and well wishers.


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NO CONTENTS PG-NO

01 INTRODUCTION.

Defining Indian Middle Class.

10 facts about Indian middle class..

02 ECONOMY OF INDIAN.

Income and consumption.

03 RISE OF STORM MILLIONS OF MIDDLE CLASS..

In-Between Class.

Future Projections.

04 MIDDLE CLASS BOOM TO BUSINESS COMMUNITY..

05 LIFE STYLE OF INDIAN MIDDLE CLASS

Consumer Products and Technology

Culture.

Transportation.

Public Health..

Media

Sports..

06 PURCHASING POWER OF MIDDLE CLASS

07 CREDIT FRIENDLY..

08 IMPACT OF INFLATION ON INDIAN MIDDLE CLASS

Inflation Jeopardizes Middle class

09 GAIN AND LOSSES OF INDIAN MIDDLE CLASS.


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10 INDIAN MIDDLE CLASS 2010

Poverty

Physical infrastructure

Regional imbalance11 THE MIDDLE CLASS IN INDIA

Issues and opportunities

12 BIG BAZAAR AND THE GREAT INDIAN MIDDLE CLASS

7P Analysis of Big Bazaar

Target customers

13 CASE STUDY..

Operations Management at Maruti Udyog..

Issu Issues

14 CONCLUSION..

15 REFERENCE


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INTRODUCTION

Whatever may be the source of the newly-acquired money power the middle class is no

longer of the same character as it was some years ago. Understandably the value system too has

undergone a rapid change having lost some of the rigidity of the earlier values. The values are

now more individual-centric than family or community-centric. Coupled with dilution in ethical

values there is this dramatic reduction in the obsession with the ritual. It is not that the middle

classes have become less religious or more materialistic. It is only that the structural rigidity of

the ritualistic behavior of the earlier generation has slowly disappeared giving rise to

'nominalism' or a token adherence. A case in point is the rituals still being followed in

marriages. These rituals are still a must for no parent would countenance a son's marriage

without the customary 'satphera'. Not that people understand and appreciate the significance of

the elaborate ritual prescribed in the shastras. But people still feel that the marriage is

incomplete without the Panditji chanting those sonorous mantras invoking the gods. Their faith

in the ritual is not one hundred percent but is merely an allowance for the tradition.

The attitude of the middle classes towards corruption is highly ambivalent. One suspects thatthey talk from the moral high ground whenever they themselves are victims of corruption in

public places. Their reluctance to bribe stems not out of altruism but out of their perception of

their own intellectual superiority. When it comes to grabbing or cornering a few of the benefits

they are not averse to bribing themselves, a fact which they conveniently forget .As a matter of


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fact in the initial phase of their ascent on the ladder of material prosperity they had indulged in

some palm-greasing themselves.

In the traditional Indian society there has always been a confusion between social

morality and what the religion sanctions. The manu smriti is nothing but a body of sociological

tenets dividing the social fabric on the basis of castes. We have seen how the caste system has

held sway for thousands of years .This has become possible because although the manu smriti is

a purely sociological document a sort of religious sanction has been given to the caste system

which has been enunciated therein. Through centuries the Indian society has been mixing up

religion with ethics. Unlike in religions like the Islam, Hinduism has been eclectic enough to

incorporate in itself the frequent changes in social morality taking place in the wake of social

upheavals. Nowhere is this more apparent than in the sociological behavior of the middle

classes. In the constant confusion that takes place between religion and ethics the middle classes

have through centuries been trying to reconcile changing social mores with immutable religious

tenets. The dilution of the ethical standards that one witnesses in the evolution of the modern

day middle classes is a result of this confusion. What is very apparent is the technical

compliance of the social tenets that one sees more particularly in the middle classes achieved

through implementation of the 'letter' and not the 'spirit' .

Lastly, the middle classes are of course becoming extinct. By the very definition the

middle classes are the middle-income groups who form the commonest denomination in any

civilized society. What we mean by the disappearance of the middle classes is the slow

vanishing of the earlier middle-income groups. It is of course a truism to say that in place of the

fast disappearing old middle classes a new group of people from the low-income groups will

take their places. The only difference would be in the speed with which the new middle classeswill graduate to the rich. Such a change may probably take place in the next generation .


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DEFINING INDIAN MIDDLE CLASS

Definitions are the most important things when one try to bring about an idea about

something. India was able to define herself when she was liberated thanks to a number of

thoughtful scholars she produced. Pakistan was not fortunate enough. He never had a definition

of his own. First, He needs to define India, and then He declares, I am what ever she is not.

That is his biggest misfortune. Sometime seems like He may commit suicide if India choose to

depart. In financial domain, this is a phenomenon which India is witnessing now. Its planner

always invokes China first to define its financial goals. China has defeat edus again. This time

rather badly and much deeply.

I am no anthropologist, sociologist or economist. I define Indian middle class as a

collection of citizens of India who have much more resources than most of the Indian

have. These resources which I am concerned here are capital or monetary. In a very simple way,

a citizenbelongs to this class if she earns more than 10 times of per capita income. Lets define

the other now. Who is not in middle class?


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The 'middle class' is an over-used expression and difficult to pin down, since it is defined

not just in terms of income, but also as values, cultural affinities, lifestyles, educational

attainments and service sector employment. Using income, one way of defining middle class is

in terms of how much of income is left over for discretionary expenditure, after paying for food

and shelter. If more than one-third is left, that qualifies one for inclusion in the 'middle class'.

This is the way the Economist recently defined middle class, and quoted Surjit Bhallas

forthcoming work (The Middle Class Kingdoms of India and China) to the effect that a third

wave of middle-class emergence is currently under way globally. The first was in nineteenth

century Western Europe, the second was in the baby boomer (1950-80) generation in developed

countries, and the third is the consequence of income growth in countries like India and China.

10 Facts about Indian middle class

1. An average family of 4.3 people lives typically in a 900sf apartment; 71% ownproperties, but only 9% have a mortgage.

2. 19% own cars, 100% of households have TVs, 91% have mobile phones and 20% havecredit cards.

3. Household savings are low at 13% of annual income; mainly to meet emergency needs,healthcare and education costs.

4. Risk aversion is high: 84% have not taken loans, only 11% have invested in equities (thisis changing fast)

5. Land and properties account for 51% of wealth, with 30% in cash and deposits.6. Half of households have seen their income rise in the past 12 months, of which one third

saw income rise more than 20%.


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7. 63% of respondents expect their income to increase in the next 12 months.8. Slightly more than half say governance has worsened in the past 10 years; improving the

economy and reducing corruption are seen as top priorities for the government.

9. Childrens future and education a key concern and priority; other major concerns arerising prices and medical costs.

10.Very high aspirations for children with 43% wanting their kids to get a masters degreeand 29% a doctorate.


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ECONOMY OF INDIAN

The economy of India is the eleventh largest economy in the world by nominal GDP and

the fourth largest by purchasing power parity (PPP). Following strong economic reforms from

the socialist inspired economy of a post-independence Indian nation, the country began to

develop a fast-paced economic growth, as free market principles were initiated in 1990 for

international competition and foreign investment. India is an emerging economic power with a

very large pool of human and natural resources, and a growing large pool of skilled

professionals. According to the book 'Contours of the World Economy, 1-2030AD' by Angus

Maddison, India was the largest economy from the year 1 AD until the colonial period

whereupon it was taken over by other countries such as China and the U.K. Economists predict

that by 2020, India will be among the leading economies of the world. According to the BRIC

report, published by Goldman Sachs, India will be the second largest economy after china by

2043.


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India was under social democratic-based policies from 1947 to 1991. The economy was

characterized by extensive regulation, protectionism, public ownership, pervasive corruption

and slow growth. Since 1991, continuing economic liberalisation has moved the country

toward a market-based economy. A revival of economic reforms and better economic policy in

first decade of the 21st century accelerated India's economic growth rate. In recent years, Indian

cities have continued to liberalize business regulations. By 2008, India had established itself as

the world's second-fastest growing major economy. However, the year 2009 saw a significant

slowdown in India's GDP growth rate to 6.8% as well as the return of a large projected fiscal

deficit of 6.8% of GDP which would be among the highest in the world.

India's large service industry accounts for 55% of the country's Gross Domestic Product

(GDP) while the industrial and agricultural sector contribute 28% and 17% respectively.

Agriculture is the predominant occupation in India, accounting for about 52% of employment.

The service sector makes up a further 34%, and industrial sector around 14%. The labor force

totals half a billion workers. Major agricultural products include rice, wheat, oilseed, cotton,


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jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major

industries include telecommunications, textiles, chemicals, food processing, steel, transportation

equipment, cement, mining, petroleum, machinery, information technology enabled services

and pharmaceuticals.

India's per capita income (nominal) is $1,030, ranked 139th in the world, while its per

capita (PPP) of US$2,940 is ranked 128th. Previously a closed economy, India's trade has

grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO.

According to the World Trade Statistics of the WTO in 2006, India's total merchandise trade

(counting exports and imports) was valued at $294 billion in 2006 and India's services trade

inclusive of export and import was $143 billion. Thus, India's global economic engagement in

2006 covering both merchandise and services trade was of the order of $437 billion, up by a

record 72% from a level of $253 billion in 2004. India's trade has reached a still relatively

moderate share 24% of GDP in 2006, up from 6% in 1985.

The introduction of open market economy and globalization created lots of hues and cries

in various countries and among them India was an active participant. But after the passing of a

decade or more, thanks to these two aspects of economy, India is regarded as one of the fastest

and rising economies in the world. However, in the initial years of 90s the Indian market was

quite worried over the stiff contest in the international scenario and for that reason there was a

slow and gradual process of development. But in this new millennium the Indian market is

matured than ever before and therefore has started to attain the booming condition. This can be

evident from the way the multi-national corporations are establishing their branches in the

Indian cities and others are getting interested to follow this approach. On the other hand the

opportunity of working overseas to the present young generation has come like never before.Even a section of them are getting acquainted with this consumerist culture by working in 24x7

environments and are spending good many bucks for shopping from their massive

remunerations. To the estimation of internationally acclaimed journals and magazines this is the

new face of India and the perfect representation of a burgeoning economy.


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However, the greatest strength of the Indian economy has been its wide-ranging middle class.

This is comprised of 17 million households or 90 million people with an earning between $

4,500 and $22,000. This has come out in the latest study report of the National Council for

Applied Economic Research. To the expectation of this organization another 287 million

individuals are almost ready to get attached with this group of middle class. There is an

expectation that by 2010 an army of 561 million middle class individuals will create a great

influence on the increasing Indian economy.

Estimates of the per capita income of India (18571900) as per 194849 prices


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Income and consumption

85.7% of the population lives on less than $2.50 (PPP) a day, down from 92.5% in 1981.This is much higher than the 80.5% in Sub-Saharan Africa.

75.6% of the population lives on less than $2 a day (PPP), which is around 20 rupees or$0.5 a day in nominal terms. It was down from 86.6%, but is still even more than the

73.0% in Sub-Saharan Africa.

24.3% of the population earned less than $1 (PPP, around $0.25 in nominal terms) a dayin 2005, down from 42.1% in 1981.

41.6% of its population is living below the new international poverty line of $1.25 (PPP)per day, down from 59.8% in 1981. The World Bank further estimates that a third of the

global poor now reside in India.

Housing is modest. According to Times of India, "a majority of Indians have per capita

space equivalent to or less than a 10 feet x 10 feet room for their living, sleeping, cooking,

washing and toilet needs." and "one in every three urban Indians lives in homes too cramped to

exceed even the minimum requirements of a prison cell in the US." The average is 103 sq ft

(9.6 m2) per person in rural areas and 117 sq ft (10.9 m2) per person in urban areas.


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Around half of Indian children are malnourished. The proportion of underweight children is

nearly double that of Sub-Saharan Africa. However, India has not had famines since the Green

Revolution in the early 1970s. While poverty in India has reduced significantly, official figures

estimate that 27.5% of Indians still lived below the national poverty line of $1 (PPP, around 10

rupees in nominal terms) a day in 2004-2005. A 2007 report by the state-run National

Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians, or

750 million people, lived on less than 20 rupees per day with most working in "informal labour

sector with no job or social security, living in abject poverty."

Since the early 1950s, successive governments have implemented various schemes, under

planning, to alleviate poverty, that have met with partial success. All these programmes have

relied upon the strategies of the Food for work programme and National Rural Employment

Programme of the 1980s, which attempted to use the unemployed to generate productive assets

and build rural infrastructure.[140] In August 2005, the Indian parliament passed the Rural

Employment Guarantee Bill, the largest programme of this type in terms of cost and coverage,

which promises 100 days of minimum wage employment to every rural household in all the

India's 600 districts. The question of whether economic reforms have reduced poverty or not

has fuelled debates without generating any clear cut answers and has also put political pressureon further economic reforms, especially those involving the downsizing of labour and cutting

agricultural subsidies. Recent statistics in 2010 point out that the number of high income

households has crossed lower income households.


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RISE OF STORM MILLIONS OF MIDDLE CLASS

Even a decade after the onset of liberal, pro-middle-class economic reforms in 1991, the

expansion of the middle classes was negligible in a country where 35% to 42% of

population lived below the international poverty line. However, a study published by the

National Council for Applied Economic Research (NCAER) in August claims a

remarkable rise of the Indian middle class, or households with an annual income of at

least $4,000, during the last decade:

Increasing prosperity. Whereas in 2001-'02 just 13.8 million households had incomes inexcess of $4,000 per year, by 2009-'10, the number at constant prices--has risen to 46.7

million, representing a population of about 200 million individuals.

Decreasing poverty. During the same period, the proportion of very low incomehouseholds those earning less than $1,000 has fallen sharply from 65.2 million in 2001-

'02 to 41 million by 2009-'10.

The NCAER has used a relatively low income threshold for defining middle-class status, as

opposed to the World Bank, which assumes a yearly income of between $4,500 and $22,000. If

the World Bank's definition were applied, the rise in prosperity would appear less dramatic: The


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number of middle-class households in India would then seem to have risen from some 10.7

million in 2001-'02 to only 28.4 million in 2009-'10, in a population of more than 1.2 billion.

In-Between Class

Moreover, a closer examination of the report shows that the economy may be better

characterized in relation to households that are neither middle class nor very poor:

The largest proportion of households 140.7 million in 2009-'10--had incomes between$1,000 and $4,000.

In 2001, 109.2 million households were already in this category. However, during theglobal downturn (2007-'09), while the proportion of high-income households continued

to rise from 16.8% to 20.5% and low-income households to fall from 21.7% to 17.9%,

the in-between class remained stagnant at around 62%.

This stagnation is likely to continue because the government has focused on withdrawingits control over business and increasing public support for the poor since 1991, leaving

the in-between class out of its policy purview.

Middle-class expansion is economically important for its impact on patterns ofconsumption, which has the potential to fuel domestic growth and to aid global economic

recovery:

Private consumption is becoming an increasingly crucial component of the country'seconomy, currently accounting for 60% of GDP (vs. 39% in China).

In 2009 the demand for typical middle-class consumer goods, such as automobiles,surged by 33% and for other durables by over 40%, as low interest rates propelled theexpansion of consumer credit. However, the adoption of a monetary tightening cycle is

imminent.


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Future Projections

Extrapolating from the current trends in middle-class consumption--two-thirds of which

takes place in urban areas--a McKinsey study published in August has estimated that

domestic demand could grow by a compound rate of 9.2% a year between 2010-2030, andthat urban populations will rise from 35% to nearly 45% of the population. However,

such estimates rest on several assumptions that could hamper urban consumption and

urbanization in the long term:

Sustainability issues. The economy will have to sustain the current growth rate of about7% to 9% of GDP each year.

Surging savings. A sharp rise in saving rates over the last few years--currently touching36% of GDP--suggests that a higher proportion of income among surplus income-holders

is being withdrawn from consumption.


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Land prices. A direct consequence of urbanization is an escalation of land values andproperty prices. As in developed economies, property booms can divert consumption

away from commodities toward unproductive, and potentially dangerous, asset bubbles.

Outlook. The expansion of the middle class will allow it to shape the growth ofhousehold consumption and set the pace for urbanization in the country over the next two

decades.


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MIDDLE CLASS BOOM TO BUSINESS COMMUNITY

Innovative, cheaply priced products targeted at Indias booming middle class are helping

to spur domestic consumption and growth but the sector remains vulnerable to economic shocksand carefully calibrated policy measures will be needed to sustain income gains in the longer

term, says a new Asian Development Bank (ADB) report.

In a special chapter of Key Indicators for Asia and the Pacific 2010, its flagship annual

statistical publication, ADB says the ranks of Indias middle class, defined as those consuming

between $2 and $20 per day (based on survey data in 2005 purchasing power parity dollars),

grew by around 205 million between 1990 and 2008, second only to the Peoples Republic ofChina.

The surge in numbers has seen additional annual sector spending of $256 million andspawned low-cost, locally produced products and services such as Tata Motors $2200 Nano

Car, the Godrej Groups $70 battery-operated refrigerator, and cheap mobile phone rates.


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The special chapter, titled The Rise of Asias Middle Class, also notes that the

emergence of a substantial middle class in India has created new avenues for employment and

entrepreneurship, and a louder voice for improved public infrastructure and services.

At the same time, more than 75% of the countrys middle class remain in the $2$4 daily

consumption bracket, the lower end of a range of $2 to $20, leaving them at risk of falling back

into poverty in the event of a major economic shock, such as the global financial crisis.

Infrastructure constraints, like unreliable power supplies may also hamper consumption of

durable goods.

To help unlock the full potential of the Indian middle class as consumers and drivers of

growth, the report says the government must continue to remove structural and policy

impediments to the sectors development and improve income distribution across the

population. Actions should include infrastructure improvements and social safety nets that

encourage spending, while providing a buffer during hard times. The government should also

put in place policies that stimulate the creation of stable, well-paid jobs, and encourage

entrepreneurship and education.


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Policies that bolster the middle class may have benefits not only for economic growth,

but may be more cost-effective at long-term poverty reduction than policies that focus solely on

the poor, said Jong-Wha Lee, ADB Chief Economist.

The report notes that while a strong middle class is necessary for sustainable economic

growth, higher incomes are resulting in environmental pressures and a rise in diseases of

affluence such as obesity, which policy makers will increasingly need to address.

The Indian industry has undergone distinct changes during 1990-91 to 2000-01, roughly

the reforms decade. The Index of Industrial Production (IIP) has been wobbly in the latter half

of the nineties and lately, there has been a distinct deceleration. The Indian industry shows

painful signs of adjustment to new era of liberalisation, lowering of tariffs and competition from

imported products. Yet, some product groups have shown vigorous growth during this period in

terms of sales and competitive strength. The Centre for Monitoring the Indian Economy

(CMIE) has brought out changing profile of industrial products in terms of market share and

sizes of different products during 1990-91 to 2000-01 in its August 2002 issue of Industry:

Market Size and Shares.

The changing market for different industrial products and particularly for consumer

durables owes to a number of social and economic changes. But the most fundamental change

relates to the growing clout of the Indian middle class, however defined, on the shape and size

of market for products. This is because the post-1991 reforms have marked a distinct change in

the lifestyles of the Indian people. There is no doubt that more and more people are becoming

richer than they were in 1990-91. This inegalitarian income pattern has given rise to a skewed

demand structure. The rising middle class has served to accentuate it. Technology and

competition have brought out new products to the doorstep of middle classes. The rise of mass

communications and IT has made access to information a lot quicker and easier for the

consuming classes. For sellers, it has meant more competition and better monitoring of price,


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quality and cost. Growing competition from imported goods also means domestic producers

have to innovate constantly to stay in competition.

A new middle class is developing in emerging market economies as significant

proportions of the population rise up from poverty in line with rapid economic growth. The

expansion of this middle class not only provides competition for labour and resources, but also

enormous potential for global consumer markets. As a result, there will be a gradual shift in the

dominance of global consumer markets from advanced economies to emerging market

economies.

India is considered as one of the poorest and backward countries in the world. Only 52%

of its population is literate. Its per capita income is about $350. Less than 50% of the houses

have electricity, less than 23% of the houses have sanitation facilities. With these figures it

might seem that India isn't a good market for business. But if these figures are broken up in

different factors like Indian states or into numbers, one might find that India could be a good

lucrative market for business.

In the educational field, after every ten years the literate population of India goes up by

about 10%. During its independence, there were only 12% literate Indians and according to

1991 census there were 52% literate Indians, meaning that over half a billion people are literate.


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Among the literates, about one-third of them (according to researches made in the 1980s) study

or studied in schools which have English as language of instruction. For these people, English is

in many senses their first language and it is easier for them to read and write and even

communicate in English than in their Indian languages. This makes India the second largest

English speaking country in the world after USA.

In 1995 there were over 5 million students in Indian universities. In general, less then 3%

of India's population has academic education, which is very low compared to world standard.

But numerically India has almost 24 million university graduates. India is also among the few

countries in the world to launch satellite and has proven its nuclear capability. Because of this

high number of academicians and their good knowledge of English, many technology

companies (especially in the computer field) from around the world have arrived in India.

The per capita income of India is low at $350. From this figure one can conclude that the

salaries are low in India and therefore it is cheap to produce in India. But one might also

conclude that India isn't a good market for marketing quality and costly products. But, even

though the per capita income in India is low, India is a huge market, even for costly products. In

general, India has a potential of almost a billion buyers. About 10% of Indian households have

an income of just over $1400. Numerically that is about 100 million people, which is about the

population of Germany. Less them 5% of Indian households have an income of over $30000,

but numerically that is over 40 million people. Some estimated that by the year 2000, the


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number of Indian households to have this level of income would surpass that of USA. Beyond

these figures, when the Indian income is measured by purchasing power parity - PPP -

calculations, the Indian economy and income gives better figures. In this sense India is the fifth

largest economy in the world. The middle class of India is estimated at 180 million people. For

these reasons, many international companies and names in different fields, from shoes to cars,

have arrived in India and they manufacture and sell their goods in India.

True to 1994, Indians had more than 40 million televisions; 10 million telephones; 60

million radios; 10 million refrigerators; 16 million two-wheel vehicles; 2 million cars and

according to 1997 figures almost a million cellular phones. Some estimate that by the year

2002, about 25 million Indians can be potential buyers of cellular phones. There are many

business fields which are new in India and have huge potentials like credit cards. According to

1995 figures there were less than a million credit card holders, while the potential is estimated

at about 10 million by the year 2000. Another potential market that involves millions of people

is tourism. In general India has about 2 million foreign tourists per year, which is low

considering India's potential as a cultural country. But India also has over 130 million Indians

travelling around India.


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The standard of living, like education figures is different from state to state. Punjab in

north India has the highest income per capita in India, while Bihar in east India has the lowest.

Punjab, Haryana, Maharashtra and Gujarat are considered as the more prosperous states of

India. Bihar, Orissa, Madya Pradesh, Uttar Pradesh and Rajasthan are considered as the less

prosperous states of India. Goa which was created in 1987 also has a high per capita income.

The prosperity of states finds its expression in electricity used by the states. In prosperous states

all the villages are electrified, while in the less prosperous states not all villages are electrified.

But the electric figures can be misleading because some states, like Kerala, where all villages

are electrified there are hours in the day when there are electricity problems. Because of these

electricity problems, many houses and businesses use private generators.

According to the 1991 census about a quarter of India's population live in cities. The

standard of living is higher in cities than in villages. The urban people are more aware to

modernization than villagers. Less than one third of the villages are electrified while almost

75% of the urban dwellers have electrified homes. Less than 10% of the village households

have sanitation facilities while 60% of the urban households have sanitation facilities. Its not

rare in Indian villages to find satellite dishes on house roofs, while in the whole village there

isn't a single toilet. Drinking water is more secure in cities than in villages. In many villages,water is even today pumped from wells or from water streams. Most of the urban houses don't

have 24 hours water facilities, but instead these houses and buildings have big water tanks

which get filled during those hours when there is water in order to secure 24 hours water

facilities for the houses. These problems mentioned above, have good business opportunities for

development planners. As mentioned above people who live in cities are more aware of

modernization than villagers. About a quarter of India's population (numerically that is about

the whole population of USA) is urban. At least 23 Indian cities have over million residents.

Delhi, Calcutta, Mumbai and Chennai are the four main cities of India. The first three cities

have over 10 million residents each.


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The first impression a foreigner gets of Mumbai is poverty. But Mumbai for Indians is

like New York and Los Angles together. In many fields it is the center of India. Mumbai is the

commercial, financial and entertainment center of India. Of the 23 stock exchanges in India, the

stock exchanges of Mumbai are the most important. In general there are over 7000 companies

registered in Indian stock exchanges, second after USA. India produces the largest number of

movies in the world. Until the mid-90s it had over 800 movies a year. In this field Bollywood

(like Hollywood) in Mumbai is the entertainment center, even though some other cities of India,

like Chennai in south India produces more movies than Mumbai.

The Mumbai cinema is perhaps the only culture common to Indians all over India. The

Hindi movies produced in Mumbai (before the boom of cable TV) were the most popular

entertainment of India. In Indian movies, except in a few cases, there are always a few dances

and songs. But almost all of these songs are sung by professional singers called playback

singers and the actors only move their lips in the film. One such playback singer, Lata

Mangeshkar, sung over 50000 songs for different actresses in different Indian languages. These

Indian films and their dances, songs, singers, and actors are very popular in India and with

Indians all around the world. Many non-Indian companies that sell Indian music almost never

sell music from Indian movies, only classical, missing a huge market.

In the last few years Hyderabad, capital of Andra Pradesh, is competing with Chenai as

the movie center of India. Hyderabad is also competing with Bangalore as the 'silicon valley' of

India. Bangalore is considered today as the technology center of India. Most of the high

technology companies that operate in India are centered in Bangalore. Bangalore is called

'garden city'. It is very clean compared to other Indian cities. It is also seen as the most

westernized city in India because of the pubs and western style shopping centers.

Until the early 1990s, the Indian governments were very conservative in their approach

towards west. They were very suspicious of the capitalist system. One of the reasons for this

fear of western capitalist system was the fact that a British trading company, East India


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Company, came to India as a trading company and turned up to be rulers of India. During Indira

Gandhi's reign as Prime Minister, many new laws were enforced which prohibited foreign

companies from holding more than 49% of the companies shares operating in India. For this

reason many foreign companies left India and came back again in the 1990s. Many other

companies, from shoes to cars, who foresaw the potential of Indian market also arrived in India.

For the last few years, the 'hot' field in Indian business is computers. Many international

computer companies have subsidiaries in India. A combination of low salaries, good English

knowledge of Indians, big number of academicians and the government's desire to make India a

high technology country has made India to transform into one of the computer centers in the

world. The Indian government has established many software parks in different places in India

where foreign companies can also establish software companies.


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LIFE STYLE OF INDIAN MIDDLE CLASS

Consumer Products and Technology

Consumer technology advances are quite evident. For example, Tivo like home devices

are being advertised more regularly and visible on busy roadway billboards and television ads.

Satellite and cable television have been a staple for many years, but the number of channels,

and western channels, continues to increase.

This time I noticed some more mainstream American shows available on the Indian

channels. Programs like House, Friends, Seinfeld, Brothers & Sisters, Sex in the City, Boston

Legal and some British shows. A better sampling of programs than what I noticed in Mumbai

last trip, which was highlighted by the Jerry Springer show. Thankfully, didnt see that show

flipping through the channels-dont need the worst of American television exported around the

world, although WWE wrestling was available in prime time.


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While it seems that most all economic classes have access to television, television

commercials are clearly targeted to the middle/upper middle class and portray idealized middle

class life. Cell phones are ubiquitous. One aspect that seemed different was the use of ring

tones seem to be more prevalent than in the US. Much more of a personalization factor than in

the US.

Broadband offers in a large city like Hyderabad are very common. One for a leading

telephone company was advertising for 500 rupees a month landline plus broadband ($10 per

month) (clearly an introductory offerongoing pricing would be more expensive). My in-laws

flat had very reliable and speedy broadband that was at the very hi-end of broadband choices in

India which I would say was comparable to the broadband speed I have at home in the Bay

Area.

When I was trying to connect to the wireless network in the flat, I noticed an available

free wireless network called Free Wi-Fi. Not sure if that network was being managed by the

city of Hyderabad but if so, a pretty accelerated timeline for municipal broadband.

Culture

Life in India for middle class in India still seems more flexible than in the US. We were

able to throw a party at a restaurant and get 50 relatives to attend on one days notice. In the

US, I doubt we could have pulled that off. While work life and lifestyle may becoming more

western in many ways, I think there are still many parts of Indian culture that havent changed

much such as a greater emphasis on social aspects of life.

India has always been known for its religious diversity and tolerance (with some notable

exceptions during its history). Every morning around 4:30 AM- 5 AM near my in-laws flat,

the call for morning prayer from the muezzin for muslims could be heard for blocks and blocks.

In the US, there is acceptance of other religions as well, but Im not sure the neighbors of


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mosques in the US would be as tolerant. However, with continued tensions and terrorist

attacks throughout India, the level of tolerance is declining.

The emergence of western style housing complexes that primarily house hi-tech industry

families and couples has also led to a commuting culture as well. With rising housing prices

over the last several years, complexes further away from Hi-tech city are more affordable. With

the influx of automobiles, many more residents of a large city like Hyderabad are commuting

longer distances, often by automobile. Given the roads werent designed for the amount of cars

on the roads today, traffic can be brutal. Also in Hyderabad, a public inter-city transportation

train system isnt widely available like it is in other large cities in India. The commuting

culture and the increased frustration of commuting in India should continue to help spur

investment in more roads and better inter-city public train transportation.

With all of the traffic on the roads, one thing I feared was the reaction of people to traffic

accidents; accidents between cars and other cars, cars and motorcycles, cars and pedestrians,

even cars with animals. I was hoping that there wouldnt be any real road rage. During my

trip, I saw the aftermath of three accidents, although with the chaos of the roadways, I expected

to see more. The most notable scene involved an accident between a motorcycle and a small


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automobile, with the driver of the motorcycle being a young man and the passenger or driver of

the automobile being an older gentleman. I didnt actually see the accident but did see the

ensuing argument. The older man was likely in his sixties and the younger man from the

motorcycle was probably in his twenties. But in typical Indian style hierarchy (class and age),

the older man was yelling at the younger man and was trying to hit him, basically slapping at

him. Also, a crowd of people (pedestrians, other motorcyclists) gathered around the

motorcyclist to support him and the potential for a mob situation looked possible. Our car

continued on so I didnt see the actual end of the episode, but I think this may be common-an

accident where passersby quickly gather and shouting and maybe some mild physical violence

occurs, hopefully avoiding real wide-scale mob scenes which you sometimes read about.

I witnessed one scene at the Hyderabad Airport which I think is also one hierarchical

aspect of Indian society. A man from our domestic flight from Chennai to Hyderabad was

retrieving his luggage from the baggage claim. Upon securing his bags, he noticed one of his

bags had some substance on the outside of it. Im not sure what it was-it may have been some

liquid, or some slimy substance, or even animal excrement- I wasnt close enough to see

exactly. The man summoned over an airport worker and proceeded to loudly berate him.

Often in Indian society, the hierarchy expectations create similar scenes between perceivedclass differencesa service worker being clearly in a different class than a business air traveler.

One general theme in India is everything is louder, it always has been- the streets are

louder, the vendors are louder, the police is louder, the early mornings are louder; just a routine

wonderful fact of life. With the large population and greater emphasis on family and social

aspects of life, I would also suspect that loneliness isnt as prevalent as in the west.

Transportation

Ground


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The chaos of the roadways in India is always one of the most memorable aspects

remembered by visitors to India. After enough times on the roads, the chaos becomes more

understandable and aspects of it clearly are organized.

For example, Indian motorists are very good at making a 2 lane road, with each lane

heading in opposite directions, an organized 3 lane road and sometimes 4 lane road. Auto

rickshaws and motorcycles typically drive on the edge of the lanes leaving the middle section of

the two lanes as a passing lane or lanes. It appears every type of vehicle , in this order of

hierarchy- trucks, buses, (maybe trucks and buses are reversed) automobiles, motorcycles, auto

rickshaws, (motorcycles and auto rickshaws may be reversed as well) bicyclists, pedestrians,

have a role that they understand.

The honking in India is legendary but essential-honking designates time for passing,

check your blind spot, move to the edge of the lane, reinforcement of each type of vehicles role

in the hierarchy of the road.

In terms of safety, I did notice that most drivers wore seat belts, which was a surprise to

me. However, most passengers in the front and back seats did not wear seat belts, and the

vehicle I was in didnt even have seat belts in the back. There are signs on the road that

emphasize that wearing seat belts is the law. For motorcycle drivers, most drivers wear

helmets and likewise, signs do emphasize that wearing helmets is the law. But again,

passengers on motorcycles did not typically wear helmets and you will often see two or three

people on a motorcycle. One interesting aspect of motorcycle driving is it seemed that the

responsibility of signaling a left or right turn often fell to the passenger rather than the driver.

Motorcycle riders generally wearing helmets

With the additional influx and variety of vehicles, I think more traffic protocols will

naturally emerge. Right of way at intersections, designated cross walk areas for pedestrians,


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enforced lane markers I believe will all become more accepted and naturally evolve over the

coming years.

The street labeling and numbering system hasnt fully evolved. Many locations still have

an address that includes near library or near hospital, not an exact number and street location.

With the number of vehicles on the road increasing, it still seems more difficult to find locations

than needed adding to the traffic.

Air

Domestic air travel in India continues to prove to be very efficient and comfortable.

Traveling on Jet Airways and Kingfisher Airlines between Hyderabad and Kochi was very

smooth; plus they had in-flight meals even on 1-2 hour flights. I was pleasantly surprised and

impressed with logistics when my connecting flight in Chennai to Hyderabad arrived late, yet

while on the tarmac, they arranged for me to go directly to the awaiting flight elsewhere on the

tarmac. Domestic travel in India is much more hassle free than traveling in the United States.

The new international airport in Hyderabad is very modern, comparable to airports

around the world. Significantly nicer than the previous Hyderabad airport and airport

conditions that I remember in New Delhi and Mumbai during previous stops there.

Public Health

One very interesting consumer safety tidbit I noticed was on a can of Diet Coke, a clearly

visible warning is listed that Diet Coke may be harmful to children. This warning wasnt listed

on Pepsi, Thums up, or regular Coke, nor have I seen this warning on Diet Coke in other

countries. It must be related to the sugar substitute used; I wonder if the government pushed forthat warning or if Coca-Cola placed that warning themselves fearing for some sort of

government or lawsuit action from Indian consumers.

Media


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In terms of the media, the story of the day while I was there was the aftermath of the

Mumbai terror attacks and the looming threat of war between India and Pakistan. I found the

media, specifically the 24 hour news channels, to be a bit sensational in how they presented the

stories. Their use of music to dramatize the stories was overdramatic. However, the programs

offering opinions and feelings of residents after the attacks were quite good. The raw emotion

of many Indians is quite evident and you get a sense that Indians are simply tired of these types

of attacks which have happened too often over the past couple of years and are frustrated with

the government and police forces ability to respond to these types of attacks. Also, there is a

sense that Pakistans government is becoming powerless to handle these terrorist groups but

nonetheless, has to be held accountable. Greater international pressure towards Pakistan from

the US and British governments are clearly desired from the Indian media.

Sports

During my stay in India, a test series between India and England was ongoing. While I

didnt see the series in person, I did see much of it on television. Much like the baseball World

Series after the 9/11 attacks in the US, cricket helped serve as a unifying force for the country

after the Mumbai attacks. This clearly was the hope when it was decided to continue with the

test matches.

In some of the 2008 year in review recaps, India is clearly proud of its national success in

the Beijing Olympics, a gold medal and two bronze medals. While prospects for the cricket

team are quite promising, India seems to have renewed hope in other success; and build off the

success in cricket, chess, and even recently in golf and tennis.


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PURCHASING POWER OF MIDDLE CLASS

Major factors influencing the increase in spending categories include rise in disposable

incomes, increasing number of dual-income nuclear families and changing attitudes toward

consumption. The attitude of people toward shopping has changed from it being a regular chore

to one that provides an enriching experience. According to Ravi Raheja, MD, Raheja Group,

Consumers don't want to experience shopping, they want to shop for experience. Consumer

spending has played a vital role in the economic development of India. According to a report

published by the Bank of Baroda in 2006, consumer expenditure is fueling economic growth in

India.

Sometimes I am really surprised when I hear or read in the news that there is some strong

300 million, middle class consumer base in India who has almost same or comparable

purchasing power as middle classes income group people in USA or in Europe. Well to put it

straight, I completely disagree and would like to say that there is no such 300 million, middle

class consumer base in India who has purchasing power comparable to that in the middle

income group of Europe or America at least till year 2008. Also the spending power of middle

and high income group Indians is highly overestimated by experts from eminent consulting

organizations. The reason for this is that people who make these reports sit in their five star


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offices without ever actually going out to the Indian marketplace. They never tried to look into

the Indian consumer mind about their spending habits.

In India till now the total number of people who pay income tax is about only 31.5

million that is only about 3 % of the total Indian population. India has 31.5 million taxpayers; In

a country of over a billion people, only 31.5 million people pay taxes, and this is after the

number of taxpayers has grown by nearly 11 percent between March 2002 and March 2006.

Now in India people start paying tax only when their income goes above Rs 1,00,000 or 1250

per year ( 1 = 80 Rupee approx) ( this is the person income tax exemption limit till 2007 in

India for men).

So as per Indian Govt Tax official estimate only about 3 % of Indians earn more than

1250 per year or about 100 per month. Now100 per month is nowhere close to European or

American middle class earning standard, than assumption that India have 30 % or 300 million

middle class populations who have similar purchasing power as people in the USA or

Europe??? At least I cant understand. In fact according to a latest National Sample Survey,

60.5% of the Indian population was capable of spending only Rs 20 a day (0.25 pence

approximately). So it is obvious that all the big Multi National Companies that enter into Indian

retail market by looking at the sheer numbers of population face huge disappointment.


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CREDIT FRIENDLY

Every one of us has a dream to own a house in life time. Although home loans are given

by almost all the Banks of India, purchasing the home of our dreams is not an easy task. As the

salaried population living in India is in larger percentage, like any other country, when one

decide to own a house, one can not afford to pay the entire amount in lump sum. So, the Banks

in India are offering housing finance with easy installment schemes with relevant interest rates

to the buyers, which reduces their burden and allow them to decide to own a house without any

hesitant mind.

Providing Home Loans in India came to its full boom in the recent years and now it is

spread on a huge scale as many banks are coming to offer the Home loans in different special

schemes to attract more number of buyers. There are numerous nationalized as well as private

banks that offer Real Estate mortgage Home Loans in a hassle free manner in India these days.

The process of availing a home is made very easy that almost any middle class; especially

salaried class population of India dreams to achieve their own house in their life time.

Though lots of attractive and cheap home loans are available in India, one must be very

cautious to choose the right one. There are numerous factors one must take into consideration

while applying for the right Home loan. For example, one must first see for the first and

foremost factor that which top finance companies or Banks offer cheap home loans or loan at a


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low interest rate? This is too important, since there are number of Banks and finance companies

flooded in the market to disturb the good ideas of the buyers, by their attractive marketing or

complementary offers.

There are two ways of looking at the ongoing boom in consumer credit disbursements by

commercial banks in India. At one level it has brought about a number of benefits to consumers,

many of whom (especially from the growing middle class) have gone on to buy cars,

motorbikes or consumer durables such as refrigerators by pledging their future savings. The

traditional conservative mindset has been broken and borrowing against future income is now a

widespread phenomenon in India, releasing the pent up demand for various types of consumer

goods. Commercial banks have joined non-banking finance companies in dispensing consumer

finance. The Indian consumer can choose from a mind-boggling array of financing schemes

offered by a large number of banks and other financial institutions. The explosive growth in the

availability of consumer finance has matched the supply of products in India. Nowhere else is

this in greater evidence than in the Indian passenger car industry. Late to mature in India, the

fast-growing automobile industry has, since the mid-1990s, been giving Indian consumers a

meaningful choice of cars across different price points and models. No one disputes the fact that

an exponential growth in the availability of car loans has made it more likely for a middle classconsumer to graduate from a scooter to a car. The automobile industry's experience has been

replicated in other industries such as television and even personal computers.

Economists perceive other benefits from the increased availability of retail loans. The

demand side stimulus to the economy has created jobsthe automobile industry is again a

case in pointand has added significantly to recent economic growth. For the financial sector,

there have been several gains. Retail lending has become the most spectacular innovation in thecommercial banking sector in recent years. As commercial banks shifted their focus from

traditional need-based lending to a broad-based portfolio, retail lending has become a

mainstream business and an important contributor to their profitability. On March 31, 2004 the

retail portfolio of commercial banks constituted 21.5 per cent of their total outstanding


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advances, sharply higher than the 12.5 per cent in the previous year. Including loans to the

housing sector, banks had lent more than Rs.1,89,000 crore by way of consumer loans up to the

end of last year. The rapid absorption of technology by banks has reduced their transaction costs

and helped them deliver a wide range of retail loan products efficiently.

The flip side is that the retail loan surge will accentuate the indebtedness of households.

Various studies show that this might have already happened. Credit card defaults are on the

increase. Over the medium to long term, this could have negative implications for thesustainability of private consumption and domestic savings. For banks, the newfound

preference for the retail sector might mean a shift away from their more traditional lending

activities that create productive assets. That in turn has major implications for economic

growth. Being essentially confined to the urban and metropolitan areas, retail lending can hardly

be considered a suitable conduit for broad-based economic development. Moreover, banks

might have expanded too fast into sectors where they have little experience. Although their

track record so far is good, there are signs that their asset quality has begun to deteriorate in the

wake of macro-economic developments such as an interest rate increase.


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IMPACT OF INFLATION ON INDIAN MIDDLE CLASS

However the expansion of the Indian middle class is now under threat because of a steep

rise in inflation, which could hold back the enlargement of the key social group both in the short

and longer term.In early June, the country's inflation rate rose to 11.05%, up from 4.3% in mid-2007. With the impetus coming mainly from higher oil prices and soaring prices for imported

food, inflation is now at its highest for 13 years and double the target level set by the Reserve

Bank of India, the central bank.

Double-digit inflation is unusual in the Indian economy, with the rate going above 10% only in

the early 1990s and in 1994-95. Now, economists predict, it will remain in double figures for

the rest of the year. The sharp increase in prices, together with higher interest rates, is hitting

lower income groups hardest but there will also be an immediate impact on the spending power

of the middle class, which has provided the foundation for the boom in the consumer market.

"The prices of basic commodities like fuel, food, education and the interest rates on loans

for durables are going up," says Anushree Singh, associate analyst at the country analysis

practice of UK-based Datamonitor. "The average Indian is now paying more on their loans as


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the interest rates on home loans, for example, have gone up by 300 points in the past few

months.

INFLATION JEOPARDIZES MIDDLE CLASS EDUCATION

REQUIREMENTS

In the longer term, high inflation could also weaken the private education sector that has

been playing a crucial role in raising the quality of India's workforce. More significantly, it has

been the route for people to achieve middle class status. Inflation will jack up the expense of

private education for which fees are already taking up a large proportion of household income

because of the inability of supply to keep up with demand in the private sector.

Some experts have been predicting a relentless rise in the size of India's middle class.

Management consultancy McKinsey & Co. has forecast that by 2025, it will amount to 583m.

With China's middle class, together with China's own middle class, this will have an enormous

influence on the world economy. At the moment, the core 50m-60m of Indians, whose earnings

fund the expenditure of the country's middle-class households, account for only some 5% of the

country's population.


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Middle class incomes are predominantly at levels well above those of average annual

earnings of rupees (Rs) 70,000 ($1,630). According to recent figures from IIMS Dataworks,

middle class earners typically include shopkeepers with average incomes of around Rs100,000,

public and private sector salaried employees on Rs105,000-140,000, self-employed

professionals on Rs320,000 and businessmen on Rs480,000. The top 1-2% of earners are the

wealthy, some of them with incomes as high as their Western counterparts.

Finance minister Pranab Mukherjee said: "Inflationary pressure is still there because food

prices have gone up because of the erratic monsoon, but I do hope annualised inflation would

be much lower in the new series." Year-on-year, food articles became dearer by 14.64%, while

prices of non-food articles likes fibres and oilseeds soared by 16.04%. Minerals became 23.82%

more expensive.

Fuel and power, including LPG and petrol, registered an annual inflation of 12.55%.

Manufactured products -- foods products, beverages, tobacco, cotton textiles, wood, paper, etc. -

- saw an average price rise of 4.78% on an annual basis. However, sugar became cheaper by

0.63% year-on-year and leather and leather products also witnessed a fall of 0.08%.


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Consumer items widely used by the middle class, like ice-cream, mineral water,

microwave ovens, washing machines, gold and silver are reflected in the new series of WPI

inflation. Multilateral lending agency Asian Development Bank on Thursday said it is likely to

revise upwards by the September-end Indias growth and inflation forecast, which is 8.2% and

5% respectively for the current fiscal.

Lee said inflation in India is coming primarily from the supply side and the double-digit

food inflation is impacting the lower middle class the maximum as their share of income on

food and beverages is high. The economist was speaking to reporters after the launch of ADBs

flagship annual statistical publication, Key Indicators: For Asia and the Pacific 2010, with a

special chapter on The Rise of Asias Middle Class. Without hinting at the direction Indias

growth outlook will be revised, Lee said India was doing well in reducing poverty and nurturing

middle class for sustainable growth, and must focus on providing quality education and

infrastructure.

On the Reserve Banks stance on checking inflation, he said that tight monetary policy

is the right step butwarned of excessive hike in rates as raising rates would also attract more

capital inflows and related problems. Besides, he said growth should also be a concern for RBI

while trying to contain inflation. He contested the view that high inflation is unavoidable during

high growth, which was recently ascribed to by Finance Minister Pranab Mukherjee.


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GAIN AND LOSSES OF INDIAN MIDDLE CLASS

Innovative, cheaply priced products targeted at Indias booming middle class are helping

to spur domestic consumption and growth but the sector remains vulnerable to economic shocks

and carefully calibrated policy measures will be needed to sustain income gains in the longerterm, said Asian Development Bank (ADB). The ranks of Indias middle class, defined as those

consuming between $2 and $20 per day (based on survey data in 2005 purchasing power parity

dollars), grew by around 205 million between 1990 and 2008, second only to the Peoples

Republic of China, said ADB.

Asias consumers spent an estimated $4.3 trillion (in 2005 purchasing power parity

dollars), or about one-third of OECD consumption expenditure, in 2008 and by 2030 will likely

spend $32 trillion, comprising about 43% of the worldwide consumption, said another report.

The increase in numbers has seen additional annual sector spending of $256 million and

spawned low-cost, locally produced products and services such as Tata Motors $2200 Nano

Car, the Godrej Groups $70 battery-operated refrigerator, and cheap mobile phone rates.

The special chapter, titled The rise of Asias middle class, also notes that the

emergence of a substantial middle class in India has created new avenues for employment and

entrepreneurship, and a louder voice for improved public infrastructure and services. At the

same time, more than 75% of the countrys middle class remain in the $2$4 daily consumption

bracket, the lower end of a range of $2 to $20, leaving them at risk of falling back into poverty

in the event of a major economic shock, such as the global financial crisis. Infrastructure

constraints, like unreliable power supplies may also hamper consumption of durable goods.

To help unlock the full potential of the Indian middle class as consumers and drivers of

growth, the report says the government must continue to remove structural and policy

impediments to the sectors development and improve income distribution across the

population. Actions should include infrastructure improvements and social safety nets that

encourage spending, while providing a buffer during hard times. The government should also


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put in place policies that stimulate the creation of stable, well-paid jobs, and encourage

entrepreneurship and education, report said.

Policies that bolster the middle class may have benefits not only for economic growth,

but may be more cost-effective at long-term poverty reduction than policies that focus solely on

the poor, said Jong-Wha Lee, ADB Chief Economist. The report notes that while a strong

middle class is necessary for sustainable economic growth, higher incomes are resulting in

environmental pressures and a rise in diseases of affluence such as obesity, which policy

makers will increasingly need to address.


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INDIAN MIDDLE CLASS 2010

With one of the fastest growing economies in the world, clocked at an average growth

rate of 8% between 20042005, India is fast on its way to becoming a large and globally

important consumer economy. The Indian middle class, estimated to be 300 million people byIndian standard (but much lower by European or North American standard), is fast becoming

used to Western culture. If current trends continue, Indian per capita purchasing power parity

will significantly increase from 4.7 to 6.1 percent of the world share by 2015. . In 2006, 22

percent of Indians lived under the poverty line. India aims to eradicate poverty by 2020.

The standard of living in India shows large disparity. For example, rural areas of India exist

with very basic (or even non-existent) medical facilities, while cities boast of world class

medical establishments. Similarly, the very latest machinery may be used in some construction

projects, but many construction workers work without mechanisation in most projects.


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Poverty

A 24.3% of the population earned less than $1 (PPP, around $0.25 in nominal terms) a

day in 2005, down from 42.1% in 1981. 41.6% of its population is living below the new

international poverty line of $1.25 (PPP) per day, down from 59.8% in 1981. The World Bank

further estimates that a third of the global poor now reside in India.On the other hand, the

Planning Commission of India uses its own criteria and has estimated that 27.5% of the

population was living below the poverty line in 20042005, down from 51.3% in 19771978,

and 36% in 1993-1994. The source for this was the 61st round of the National Sample Survey

(NSS) and the criterion used was monthly per capita consumption expenditure below Rs.

356.35 for rural areas and Rs. 538.60 for urban areas. 75% of the poor are in rural areas, most of

them are daily wagers, self-employed householders and landless labourers.

Although Indian economy has grown steadily over the last two decades, its growth has been

uneven when comparing different social groups, economic groups, geographic regions, and

rural and urban areas. Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%),

Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh


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(4.4%), or Madhya Pradesh (3.5%). Poverty rates in rural Orissa (43%) and rural Bihar (41%)

are higher than in the world's poorest countries such as Malawi. India has a higher rate of

malnutrition among children under the age of three (46% in year 2007) than any other country

in the world.

Despite significant economic progress, 1/4 of the nation's population earns less than the

government-specified poverty threshold of $0.40/day. Official figures estimate that 27.5% of

Indians lived below the national poverty line in 2004-2005. A 2007 report by the state-run

National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 25% of

Indians, or 236 million people, lived on less than 20 rupees per day with most working in

"informal labour sector with no job or social security, living in abject poverty."

Since the early 1950s, successive governments have implemented various schemes, under

planning, to alleviate poverty, that have met with partial success. Programmes like Food for

work and National Rural Employment Programme have attempted to use the unemployed to

generate productive assets and build rural infrastructure. In August 2005, the Indian parliament

passed the Rural Employment Guarantee Bill, the largest programme of this type, in terms of

cost and coverage, which promises 100 days of minimum wage employment to every rural

household in 200 of India's 600 districts. The question of whether economic reforms have

reduced poverty or not has fuelled debates without generating any clear cut answers and has

also put political pressure on further economic reforms, especially those involving downsizing

of labour and cutting down agricultural subsidiary

Physical infrastructure

Transport in India and Water supply and sanitation in India Cheap and environmentfriendly public transport is seen as a necessity for India's crowded and polluted metros. Pictured

here, is the New Delhi Metro, operational since 2002 and seen as a model for other metros.


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Since independence, India has allocated nearly half of the total outlay of the five-year plans for

infrastructural development. Much of the total outlay was spent on large projects in the area of

irrigation, energy, transport, communications and social overheads. Development of

infrastructure was completely in the hands of the public sector and was plagued by corruption,

bureaucratic inefficiencies, urban-bias and an inability to scale investment. Calcutta city was the

first city in India to boast of a metro-system.Today the calcutta metro is considered among the

world's best in terms of service and infrastructure. India's low spending on power, construction,

transportation, telecommunications and real estate, at $31 billion or 6% of GDP in 2002 has

prevented India from sustaining a growth rate of around 8%. This has prompted the government

to partially open up infrastructure to the private sector allowing foreign investment. India holds

second position in the world in roadways' construction.

As of 31 December 2005, there were an estimated 835,000 broadband lines in India.

Low tele-density is the major hurdle for slow pickup in broadband services. Over 76% of the

broadband lines were via DSL and the rest via cable modems. A 2007 study by the Asian

Development Bank showed that in 20 cities the average duration of water supply was only 4.3

hours per day. No city had a continuous water supply. The longest duration of supply was 12


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hours per day in Chandigarh, and the lowest was 0.3 hours per day in Rajkot.Some 400 million

Indians do not have access to a proper toilet.

Regional imbalance

One of the critical problems facing India's economy is the sharp and growing regional

variations among India's different states and territories in terms of per capita income, poverty,

availability of infrastructure and socio-economic development. For instance, the difference in

growth rate between the forward and backward states was 0.3% (5.2% & 4.9%) during 198081

to 199091, but had grown to 3.3% (6.3% & 3.0%) during 199091 to 199798.

The five-year plans have attempted to reduce regional disparities by encouraging

industrial development in the interior regions, but industries still tend to concentrate around

urban areas and port cities. Even the industrial townships in the interiors, Bhilai for instance,

resulted in very little development in the surrounding areas.After liberalisation, the disparities

have grown despite the efforts of the union government in reducing them. Part of the reason

being that manufacturing and services and not agriculture are the engines of growth. The more

advanced states are better placed to benefit from them, with infrastructure like well developed

ports, urbanisation and an educated and skilled workforce which attract manufacturing andservice sectors. The union and state governments of backward regions are trying to reduce the

disparities by offering tax holidays, cheap land, etc., and focusing more on sectors like tourism,

which although being geographically and historically determined, can become a source of

growth and is faster to develop than other sectors.


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THE MIDDLE CLASS IN INDIA

Issues and opportunities

The middle class is not (yet) the biggest segment of Indias overall population. Given all

the attention focused on Indias middle class in recent years, it is important to keep a proper

perspective on its size and potential purchasing power. While there is no official definition of

the middle class, estimates range from 30 million to approximately 300 million people. Even

using the most generous estimates of the groups size, the middle class comprises less than 30

percent of the population. Thus, the rich and the poor combined far outweigh the Indian middle

class. The importance of the middle class lies in the fact that it is the fastest growing segment of

the population.

The middle class is a growing consumer market. Going by one of the few estimates

available, India's middle class consumption is roughly equivalent to Ireland's total private

consumption and is forecast to triple as a share of India's total consumption over the next 15

years. Evidence shows that as income increases, the amount of discretionary spending and

variety of this discretionary spending increases. For corporations, the middle class in India thus

presents significant business opportunities. The sales growth of consumer goods such as

televisions and mobile phones to the middle class has already been established, but a new range

of products such as financial services is increasingly being geared towards this group as well.

Education improvements are needed to match the needs of the growing middle class and

the growing Indian economy. In order to ensure that the growing middle class is absorbed into

the economy and can contribute to growth, the right education is crucial. Currently, private

education and tuition are seen as essential to gain the necessary skills to be competitive. The

challenge is to increase the quality of public education (particularly universities) and foster

more competition between private and public players. Evidence on middle class apathy toward


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politics is vague. Although the middle class is often criticised by the media and politicians for

its supposedlylow voter turnout, the evidence remains mostly anecdotal.

The financial crisis has hit the middle class, but optimism about the future reigns. Over

the past two years of the crisis, middle class households have been hit by job losses and wealth

erosion from the fall in the value of investment portfolios and property prices. Difficulties in

repaying credit cards and other personal loans have been on the rise and many households have

cut back on discretionary expenditures. Despite this, the middle class remains optimisticabout

their own future as well as the future of the Indian economy.Various definitions of the middle

class lead to divergent size estimates There is no official definition of the middle class in India.

The middle class not only categorises an income group, but also a political and social class and

a consumer market. Thus, quantifying this demographic group can yield varying results.1 A

McKinsey Global

Institute study using National Council of Applied Economic Research (NCAER) data

said 50 million people belonged to this group in 2005 if using the definition of real annual

household disposable incomes between 200,000 and 1 million rupees.2 At the other end of the

spectrum, a study by the World Bank estimated the group at 264 million in 2005 using the

median poverty line in 70 countries as a lower bound and the United States poverty line as an

upper bound.3 Another method employed by CNN-IBN in its middle class survey utilised a

consumption-based criterion. The survey looked at whether a household owned a car or scooter,

colour television, or a telephone, and estimated that the middle class equaled approximately

20% of the population or slightly over 200 millionpeople.

The middle class is a growing consumer market The Indian middle class as a growing

consumer market has beenwidely covered. McKinsey estimates for how the middle class will

change consumption distribution. There is a negative correlation between aggregate poverty and

average consumption in India, whereby the decrease in poverty is associated with an increase in

consumption.8 Studies have also shown that as income increases, a smaller percentage of it is


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spent on necessities such as food and more is spent on optional items.9 Thus, it is evident that in

comparison with lower-income households, the middle class in India has a greater amount of

discretionary income (i.e. income available after taxes and essentials such as food and shelter

are taken care of) to use and it will be more diversified in its consumption choices. Findings

from the government s national surveys (see chart 4 below) verify this trend in India. The

surveys show that at the higher classes (12 is the highest class as categorised by mean per capita

expenditures), the percentage of expenditure on food declines and the percentage of expenditure

on discretionary items such as entertainment increases.

The middle class should drive growth in India The growth of the middle class and the

economic growth of India are in a virtuous cycle. Rising incomes lead to more consumption,

which in turn leads to higher economic growth, then more employment opportunities and

subsequently higher wages and the circle starts again. Thus, as the middle class grows and

continues to increase domestic demand, the economy will also continue to grow. In terms of

consumption, real private consumption (including both households and private companies)

accounts for approximately 55% of GDP. As highlighted in the previous section, the growth of

the middle class will continue to increase household consumption in the country. The middle

class also demands better healthcare and education. In addition to the benefit of strengtheninghuman capital stocks10 and thus productivity, this also leads to more private expenditure on

healthcare and education and thus improvements in existing infrastructure.

Matching middle class skills with the demands of the growing economy One benefit of

Indias strong economic growth is that the economy has the potential to provide employment for

the growing middle class. The boom in call centres and other outsourcing industries helped

many households to achieve higher incomes over this past decade. However, one challenge is tocontinue increasing skills at all levels of the income pyramid to ensure that the newly emerging

middle class (or those on the fringe of the middle class) are viable employees. The second

challenge, of a more general nature, is to increase the number of skilled professionals in the

workplace to change the structure of the economy to a higher-skilled economy. Graduates often


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do not have the necessary skills to be effective in the marketplace. For instance, the World Bank

estimates that a threefold increase in civil engineering graduates would be necessary to meet

Indias large infrastructure needs.

The political economy of the middle class From international newspapers such as the

Times in the UK to local blogs, the middle class in India is often criticised for being apathetic

towards politics.14 However, definitive statistics are difficult to find. Many analysts point to the

low voter turnout in urban areas such as Delhi and Mumbai (where assumingly more middle

class families live). However, using a more narrow definition of the middle class such as that

from the

Middle Class Courses

Documents

Transcript of Middle Class Courses