1. The Great Indian Middle Class NCAER-Business Standard New Delhi July 30, 2004 Presentation to American Chamber of Commerce

2. About National Council of Applied Economic Research (NCAER) »National Council of Applied Economic Research - independent body »Activities of NCAER include : - developing policy reports - macroeconomic monitoring & forecasting - human development - agriculture & rural development - industry & infrastructure - survey & general economics

3. Market Information Survey of Households (MISH) Only survey to be done annually since 1985-86, so time-line available »MISH holds a unique position because of its massive sample size – 3 lakh urban and rural households »MISH provides income distribution separate for rural and urban areas »MISH classifies consumers by – chief earner, highest education level attained by any household member, number of earners »Growth of income based on MISH surveys is similar to that of the official NAS data »NSS surveys, and all those based on them, capture less and less of GDP with each passing year

4. BS Contribution »BS has done editorial analysis of the numbers »BS has published GIMC and will market the book on behalf of NCAER

5. What’s new about this year’s MISH? This report has been put together by NCAER and BS, as will several other reports that will be generated out of the MISH survey »Data for past years, like 1995-96 and 1998-99, have been inflated to bring them to 2001-02 prices, to make all time-lines strictly comparable and relevant »Number of cities covered in The Great Indian Middle Class has been increased from 24 the last time around to 67 this time. This means cities with a population of over 5 lakh have been covered as opposed to one million in earlier surveys »Income categories have been extended upwards to Rs 1 crore a year per household for the first time »Projections have been made till 2009-10 on an all-India level

6. Consumer spending on most items continues to explode …

7. … But there’s the tricky issue of ‘category collide‘ (or how consumer spending in one area affects spending in other areas)

8. Crowing over crorepatis and other categories of rich people

10. Ownership pattern of major durables in 2001-02

11. Income demographics changing, from an inverted pyramid to a rudimentary diamond (the number of non-deprived is slowing becoming bigger)

12. The change is starker in select cities

13. And it’s not just the big cities that matter

14. Rural demand is large in many products

15. Small towns are where the action is Four-wheelers Category Volumes Growth in 2003-04 Top 10 towns 391,30623 11-20 towns 105,21632 21-40 towns 102,70829 41-60 towns 55,68622 61+ 103,17336 (Maruti sells a fifth of its volumes in 61+ towns and 2003-04 growth was 33 percent. That for Hyundai was 56 percent) Refrigerators Market Size: Rs 3,500 crore 5-10 lakh towns: Rs 365 crore Colour TVs Market Size: Rs 9,000 crore 5-10 lakh towns: Rs 1,000 crore Car Loans Market Size: Rs 21,000 crore Outside top 20 cities: Rs 5,250 crore Source: Business Standard, Business Today

16. Choosing which rural areas/small towns is important (number of crorepati households per million households in state/city, or density) AreaNumber of householdsDensity Haryana Urban340 323 Below 5 lakh town241 280 Rural482 199 Punjab Urban726 498 Below 5 lakh town218 256 Rural501 183 Maharashtra Urban7023 890 Below 5 lakh town914 350 Rural295 27 Gujarat Urban912 248 Below 5 lakh town270 203 Rural187 32 Kolkata525 180 Bangalore137 113 Hyderabad226 191

17. From Capital to Capitalism

18. Big boom in small towns

19. Rurban consumers A third of population in top 67 cities are ‘deprived’ 23 per cent of Mumbai’s population is ‘deprived’

20. What if GDP growth slips? MISH numbers based on 8 per cent growth till 2009-10. What if growth is 7 per cent? Will number of rich decline dramatically?

21. Income Projection  Population growth (Census 1991, 2001, RGI)  Sectoral income growth (NCAER)  Income distribution (MISH 1985-2001) Demand Projection for specific product  Ownership (MISH)  Penetration (MISH)  Structural change in the market  Production/Purchase (MISH and Secondary data)  Scrap rate (MISH) PARAMETERS USED FOR PROJECTION

22. Thank You!