Demographics of India:Life Style Changesby Udit Jain on June 17, 2007
Life Style Changes
Huge population base of 1.08 billion, growing at about 1.6 percent per annum, provides a large and growing domestic market for food products. While food accounts for only 9.7 percent of the total private consumption expenditure for an average American, 15 percent for the Japanese & British, for the Indian it is the principal component of their consumption expenditure, accounting for as much as 53 percent. Further, rising per capita incomes, changing life-styles and a growing younger population with preference for convenience food are the driving factors for this sector. Moreover, with liberalization of trade in the post-WTO regime, India has the opportunity to export agricultural and food products to the world. Over the last decade or so food processing has grown at a rate of 7.1 percent per annum.
According to recent data from India’s Marketing White book by Business world, India has around 208 million households. Of these only a little over six million are ‘affluent’ – that is, with household income in excess of Rs 215,000. Another 75 million households are in the category of ‘well off’ immediately below the affluent, earning between Rs 45,000 and Rs 215,000. The challenge for organized retailers, distributors and consumer goods manufacturers is to capture more consumers in the large category of ‘well off’, as well as increasing consumer goods penetration and returns in the small category of ‘affluent’. There are considerable opportunities for organized retailers in the kind of rural territories that many companies have failed to address. If infrastructure allows the businesses to reach the new markets at reasonable cost, then retail growth will be absolutely explosive.
A traditional bottom-heavy triangle with most people in the lower income group and a few in the top indicates that the centre of gravity of market consumption and of the reference group, which defines aspirations, is very small. As the shape of income distribution starts bulging in the centre, both the centre of gravity of what is consumed, and of whom the majority that defines aspirations should be, shifts. The main reason for this is India’s demographic advantage: India’s working age population will continue to grow at least for the next two decades at least, unlike most emerging economies which will see their working-age populations decline as a proportion of the total. Young working population drives the personal consumption and brings efficiency and innovation to retail markets.