Business Today
Less secure, yet more confident

Consumer spending in India has surpassed records by a mile this decade. As a younger, more confident India hits its stride, watch out for that needle move really fast.

Someone born in July 1991, the month the government of P.V. Narasimha Rao ushered in what has turned out to be an epochal set of economic reforms, would have missed voting in this year's general elections by at least two months. But has that child of New India not been influential in the way the country dramatically changed in the last decade?

Think again.

India of the last decade, when the country's youth swelled like never before, has also been the years of a clear march towards self assuredness. Years that coincided with record economic growth and a death of distance through a pervasive reach of mobile phones and electronic media.

Author Gurcharan Das, a former Chief Executive of Procter and Gamble, says he first articulated this latent confidence in his book, India Unbound. As early as the turn of the century, he recalls conversing with a 14-year-old working in a tea shop. Raju, Das says, was learning computers at night and had visions of becoming "Bilgay" (a reference to Bill Gates).

In the decade gone by, India managed to make good on opportunities that liberalisation unlocked in 1991. A boom in sectors like information technology, business process outsourcing (BPO), telecom, financial services, construction, entertainment and infrastructure, and the consequent explosion of jobs and salaries in the private sector gave the white- and bluecollar Indians an income to afford a plethora of products and services. The trend was aided by big jumps in government and public sector salaries.

A consumer cannot be confident on an empty stomach. Earning the daily bread is no longer the big challenge for millions of Indian workers. Average private sector salary hikes during the 2002-2009 period have ranged from 6-15 per cent a year, which means salaries would have doubled in those years. The wages of public sector employees, on an average, too, nearly doubled to Rs 4,10,000 a year in fiscal 2008, the latest year for which data is available, from 2000-01. Government worker salaries are estimated to have expanded likewise, with a big jump coming from the Sixth Pay Commission implementation in 2008.

Prosperity for majority of middle class urban Indians wasn't only a function of what they earned as salary, but what they owned as wealth. Self assuredness tracked salaries, but the bigger effect on confidence was the wealth effect of the decade. The 2000-09 years saw a record jump in prices of all asset classes—gold, real estate, equity markets and commodity futures. Between 2005 and 2008, real estate created more millionaires than any other asset class.

Gold prices surged four times from 2000 to Rs 18,200 per 10 gram now, while the Bombay Stock Exchange's Sensex jumped five-fold attracting millions, who diverted their savings to equities. Realty prices, driven by speculation and demand from buyers who suddenly had spare cash and access to easy credit, shot up making it easy for developers to sell flats in cities at Rs 40 lakh to Rs 1 crore plus each.

It was also the first time that many had a high disposable income. Gaurav Mishra, a social media and analytics expert, for instance, spent his first few working years while with the Tata Group "in avid consumption and not saving a penny" after graduating from Indian Institute of Management, Bangalore. In Chennai, S. Chitra, who works in a consumer durables factory, saved from her less than Rs 1 lakh a year income to buy a TV and now wants to buy a washing machine. Such spending by millions of others aggregated into some of the best years for consumer electronics companies such as Samsung, LG and Sony in India.

Contradictory as it may sound, as prosperity was growing, so was economic insecurity. "Just as its true that we are more confident than ever before, it is also true that we are more anxious than ever before," says Santosh Desai, Managing Director and CEO, Future Brands. A trend that started in the '90s of people junking the concept of lifetime employment accelerated in the 2000-09 years, with workers realising job mobility was important to a rewarding career in the long run. The spread of the "join today, leave tomorrow" culture among workers gave employers the legitimacy to hire and fire. It was clear that they would reward performing workers and let go of the laggards.

So, how did consumer confidence grow in the times when job insecurity was rising? Because as job security declined, employment security grew—i.e., loss of a job did not mean loss of employment opportunities. In fact, often the next job was higher paying than the previous one, thus fuelling consumption even further.

The other new dimension in the consumer population is the increasing affluence and influence of women. Social anthropologist Shiv Visvanathan says: "The real change is among women and marginal groups as they are forced to look for innovative solutions within the domain that they operate in."

A fatter wallet in the hands of a population that is growing younger holds forth grand changes in the way India will consume in the coming years (see Land of 800 Million Confident Consumers by 2020, Arvind Singhal's column on page 30). India is home to almost 450 million people below 21 years.

Middle class India, which has been the key protagonist in this ride last decade, global consultancy McKinsey and Company has predicted, will increase its presence in the country's population from just 5 per cent in 2005 to 41 per cent in 2025. India would then become the world's fifth-largest consumer market with aggregate consumption rising to $1.5 trillion—a quadrupling from 2005 levels—by overtaking Germany.

By then, 18-year-old New Delhi resident, Divye Sharma, expects to be a crack lawyer, specialising in a lucrative corporate or litigation practice. The National Law University student—born July 20, 1991, four days before then Finance Minister Manmohan Singh's presented his first Union Budget—says with an air of understated confidence that his aim of a "good job, house and family look pretty good from where he is at present". Millions and millions like him dream the same. Confidently.

Additional reporting by Nitya Varadarajan

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