Debarati Chakraborty (Mukherjee)
Abstract:
Liberalisation of the Indian economy in 1991 brought about a radical shift in
economic policies and possibilities. It was also marked with unprecedented economic
growth. There was a significant jump in the GDP growth rate and a spurt in national
income. Traditionally, the principal measure of a growing economy is its rising Gross
Domestic Product. India today is growing and is considered to be one of the largest
economies of the world. Over the past decade the Gross Domestic Product (GDP) has
grown at an average annual rate of seven percent. The gross domestic product (GDP)
jumped to nine percent in 2005-06, up from 5.56% in 1990-91 and to 8.5% in 2010-
11from 8% in 2009. In the year 2010, GDP in India was worth US dollar 1729.01billion;
according to a report published by the World Bank. According to a quarterly report
published by Technopak (volume 3, 2010); the annual household income is now almost
US$ 4,000, and if it is calculated on the basis of purchasing power parity, then it is over
US$ 12,000 per year. Further it is quite likely to double in the next ten years. As India's
economy has grown so has the spending power of its citizens. This in turn has led to the
growth in the retail sector. The Indian retail market currently stands at USD 396 billion
and is likely to grow further at 12% to increase to USD 574 billion by 2015 (Source:
Deloitte Retail POV “Indian Retail Report - Changing with the changing times”; IBEF
report). This sector is the second largest employer after agriculture, employing more
than 35 million people with wholesale trade generating an additional employment to
5.50 million more. The growing disposable income in the country is resulting in
increasing consumer spending habits.
INTRODUCTION
One of the key determinants of GDP is private consumption or consumer expenditure in a nation's
economy. The report of the 60th round of the National Sample Survey on 'Household Consumer
Expenditure in India' carried out by the NSSO for the period January to June 2004 records an all-India
monthly per-capita consumer expenditure (MPCE) as Rs. 565 for rural India and Rs. 1,060 for urban India
(i.e., average urban MPCE exceeded average rural MPCE by 88 per cent). Furthermore, for rural India,
average MPCE of Rs. 565 which could be split into Rs. 305 for food and Rs. 260 for non-food items.
Similarly, for urban India, the average MPCE of Rs. 1,060 could be split into Rs. 441 for food and Rs. 619
for non-food items. Interestingly, apart from the rise in consumption of other items, the percentage of
households with durable luxury goods have also increased. The total retail spending is going to double in
the next five years.
This scenario is also reflected in the state of Jharkhand. With per capita income of Rs.21,465 in
2008-09, Jharkhand has come a long way from its inception, when per capita income was just Rs.10,345.
The GSDP (Gross State Domestic Product (GSDP) at Current Prices) rose from Rs. 32,093crore at 2001-
2002 to Rs.119, 386 crore in 2011-2012 as per the Central Statistical Organisation under the Planning
Commission of India.
It has left behind its parent state Bihar whose per capita income in 2008-09 remains a mere Rs.
12,643. Though income growth has significant fluctuations on a year to year basis, the economy has moved
to a higher growth path since its conception in 2000, with an annual growth rate of 7.8 percent compared to
5.9 percent in the period 1993-94 to 1999-00. There has been a decline in the poverty levels as the
percentage of people living below the poverty line came down from 44 percent in 1999-00 to 33.15 percent
in 2004-05, but this is still a significant proportion of population whose needs need to be addressed. The
state has also emerged as the highest spenders of GDP much ahead of other progressive states. The share of
average monthly per capita expenditure on household goods and other services is 44% in food and 2.3% in
durable goods in the urban areas (Source: Household Consumer Expenditure in India, 2007-08 NSS 64th
Round).This has resulted in the growth in the retail sector.
The many factors that contribute to increase in consumption include the emergence of a young
population with increasing disposable income, changing lifestyles, mounting aspirations, penetration of
satellite TV, increasing appetite for western goods, international exposure, options for quality retail space,
and greater product choice and availability. The Indian population of one billion is growing and they have
the demand for, and the discretionary income to purchase, premium products and services. Many in
the growing "middle income" segment look for international quality products and this trend is likely to
continue for the next five years and beyond sustaining the demand growth.
HIGHER DISPOSABLE INCOME AND ECONOMIC PROSPERITY
Disposable income of Indian consumers has increased steadily. During 2003-04, India's total
personal disposable income was Rs. 23,585 billion and 24.6% of this income was directed into savings by
the household sector. By 2008-09, our estimates show that India's total annual personal disposable income
has grown to Rs 36,059 billion (about 52% being urban) and the annual savings have grown to Rs 9,239
billion, at present (Source: www.indicus.com, “Consumer Market Trends for India-Incomes and Savings”
by A. Sinha). High growth has contributed to greater incomes for Indian households, which in turn has
enabled Indian households to both save and spend more. We have in the past few years observed that
household sector savings have in fact grown by far more than any of the other macro-indicators. This is of
course a desirable outcome. Greater incomes do imply greater expenditures in the short term, but greater
savings (if translated into good quality investments) ensure long term growth of the economy, employment
opportunities, and household incomes.
The proportion of major consuming class (with income above Rs 90,000 per annum) is expected to
reach 48% by 2009-10 from 20% in 1995-96. (Source: NCAER Demographic Changes).These changes are
also visible in the state of Jharkhand where per capita income rose from US$ 281.4 in 1999-2000 to US$
540.7 in 2008-09 (Source:www.ibef.org)
HIGHER LEVEL OF WORKING WOMEN
According to census 2001, working women population has increased to 26% in 2001 as compared
to 22% in 1991. This would lead to a higher retail spending as the buying behaviour of working women
differs from that of housewives because of low availability of time. Also, working women's propensity for
spending is higher by 1.3 times as compared to Indian housewives. Income of women living and working in
cities increased to Rs 9,457 a month in 2010, up from Rs 4,492 in 2001, according to a recent IMRB survey
of about 9,000 urban Indian women giving them more freedom to choose the things that they will buy. In the
state of Jharkhand, there is a spurt in the population working women, bringing in about a rise in the retail
sector.
URBANISATION
Urbanization, in developing countries has a positive effect on economic development and the
efficient management of cities. Over the last 10 years (1990-2000), urbanization has increased at a rate of
2.7 percent. Around urban centres, huge sub-urban agglomerates are developing and expanding at a huge
scale. This trend is expected to continue and urbanization is likely to grow at 2.4 percent between 2000 and
2015. Over the next 10 years, growth in organized retailing is likely to be concentrated in urban and semiurban
areas. Jharkhand has at present (as per census 2001) 152 small and medium towns with an urban
population of 22.24%. The Urban population is growing at the rate of 2.3% per annum. As per India
Urbanisation Econometric model-McKinsey Global Institute Analysis conducted in 2008, the urban
population of Jharkhand consisted of 7.6 million people which will go up to 12.1 million by the turn of theCommission of India.
It has left behind its parent state Bihar whose per capita income in 2008-09 remains a mere Rs.
12,643. Though income growth has significant fluctuations on a year to year basis, the economy has moved
to a higher growth path since its conception in 2000, with an annual growth rate of 7.8 percent compared to
5.9 percent in the period 1993-94 to 1999-00. There has been a decline in the poverty levels as the
percentage of people living below the poverty line came down from 44 percent in 1999-00 to 33.15 percent
in 2004-05, but this is still a significant proportion of population whose needs need to be addressed. The
state has also emerged as the highest spenders of GDP much ahead of other progressive states. The share of
average monthly per capita expenditure on household goods and other services is 44% in food and 2.3% in
durable goods in the urban areas (Source: Household Consumer Expenditure in India, 2007-08 NSS 64th
Round).This has resulted in the growth in the retail sector.
The many factors that contribute to increase in consumption include the emergence of a young
population with increasing disposable income, changing lifestyles, mounting aspirations, penetration of
satellite TV, increasing appetite for western goods, international exposure, options for quality retail space,
and greater product choice and availability. The Indian population of one billion is growing and they have
the demand for, and the discretionary income to purchase, premium products and services. Many in
the growing "middle income" segment look for international quality products and this trend is likely to
continue for the next five years and beyond sustaining the demand growth.
HIGHER DISPOSABLE INCOME AND ECONOMIC PROSPERITY
Disposable income of Indian consumers has increased steadily. During 2003-04, India's total
personal disposable income was Rs. 23,585 billion and 24.6% of this income was directed into savings by
the household sector. By 2008-09, our estimates show that India's total annual personal disposable income
has grown to Rs 36,059 billion (about 52% being urban) and the annual savings have grown to Rs 9,239
billion, at present (Source: www.indicus.com, “Consumer Market Trends for India-Incomes and Savings”
by A. Sinha). High growth has contributed to greater incomes for Indian households, which in turn has
enabled Indian households to both save and spend more. We have in the past few years observed that
household sector savings have in fact grown by far more than any of the other macro-indicators. This is of
course a desirable outcome. Greater incomes do imply greater expenditures in the short term, but greater
savings (if translated into good quality investments) ensure long term growth of the economy, employment
opportunities, and household incomes.
The proportion of major consuming class (with income above Rs 90,000 per annum) is expected to
reach 48% by 2009-10 from 20% in 1995-96. (Source: NCAER Demographic Changes).These changes are
also visible in the state of Jharkhand where per capita income rose from US$ 281.4 in 1999-2000 to US$
540.7 in 2008-09 (Source:www.ibef.org)
HIGHER LEVEL OF WORKING WOMEN
According to census 2001, working women population has increased to 26% in 2001 as compared
to 22% in 1991. This would lead to a higher retail spending as the buying behaviour of working women
differs from that of housewives because of low availability of time. Also, working women's propensity for
spending is higher by 1.3 times as compared to Indian housewives. Income of women living and working in
cities increased to Rs 9,457 a month in 2010, up from Rs 4,492 in 2001, according to a recent IMRB survey
of about 9,000 urban Indian women giving them more freedom to choose the things that they will buy. In the
state of Jharkhand, there is a spurt in the population working women, bringing in about a rise in the retail
sector.
URBANISATION
Urbanization, in developing countries has a positive effect on economic development and the
efficient management of cities. Over the last 10 years (1990-2000), urbanization has increased at a rate of
2.7 percent. Around urban centres, huge sub-urban agglomerates are developing and expanding at a huge
scale. This trend is expected to continue and urbanization is likely to grow at 2.4 percent between 2000 and
2015. Over the next 10 years, growth in organized retailing is likely to be concentrated in urban and semiurban
areas. Jharkhand has at present (as per census 2001) 152 small and medium towns with an urban
population of 22.24%. The Urban population is growing at the rate of 2.3% per annum. As per India
Urbanisation Econometric model-McKinsey Global Institute Analysis conducted in 2008, the urban
population of Jharkhand consisted of 7.6 million people which will go up to 12.1 million by the turn of the decade. The urban centers will be the seat of economic development which in turn will fuel retail
development.
BABY BOOMER EFFECT
Demographic change in India is opening up new economic opportunities. As in many countries,
declining infant and child mortality helped to spark lower fertility, effectively resulting in a temporary baby
boom. As this cohort moves into working ages, India finds itself with a potentially higher share of workers
as compared with dependents. India has the lowest median age of 24 as compared to developed countries
like USA, UK, Japan etc. The composition of the Indian population is shifting towards the age group of 20-
49 i.e. the working population with purchasing power. Approximately 60% of the Indian population is
below 30 years of age. Thus, India has the largest young population in terms of sheer size and this young
segment is the major driver of consumption as they have the ability (disposable income) and willingness to
spend. The population of Jharkhand also recorded an increase from 26.946 million in 2001 to 32.966
million as recorded in the Census of 2011.
CHANGES IN CONSUMER NEEDS, ATTITUDES AND BEHAVIOUR:
The growth of modern retail is linked to consumer needs, attitudes and behaviour. Rising income
levels, education and global exposure have contributed to the evolution of the Indian middle class. As a
result, purchasing and shopping habits have been inculcated and are increasing day by day. Today, Indians
are willing to try new things and look different, which has increased spending on health and beauty products
apart from apparels, food and grocery items. Also, in the last 4-5 years, Indian markets have witnessed a
strong shift towards branded products. The brands consumer wears, eats, drives, uses or experiences are
connected to his/her status. Consumers are finding increasingly diverse ways to acquire their status fix. For
the consumer who values individuality, owning or experiencing something no one else has, is the ultimate
status fix. Products and symbols which were seen as status enhancers previously have taken a back seat.
India today is changing. The obvious signs of challenges in the field of retailing are quite evident
by the nature of the innovations and changes that occurred in the last decade in the global markets. It seems
future will witness the spread of these changes to cross –sections of product class, customer segments and
creative forms of retailing business. Every society has to undergo change and neither consumer nor
society in general is spared from the effect of the phenomenon of changing demographics and income
levels, which leads to their new and revamped lifestyle. In the recent times, India has been facing a sea of
alteration in every sphere. While the family structure is modifying and shrinking from joint to nuclear,
income has heightened, leaving consumers with increased disposable income.
Consequently, the wish list and aspirations of consumers is not inert but is ever changing. What
they want to use and experience alters with progress in time since they always tend to seek novelty.
Subsequent to which, there has been a drift in their consumption attitude and pattern as well as a difference
in the way they buy, leading to a wide range of alterations in their standard of living. Thus, with changing
consumer trends retail scenario in the country and in the state of Jharkhand will also undergo a sea change.
Unorganised retail will give way to organized retail. The economic liberalization of the country has not only
facilitated the entry of international retailers but also provided Indian retailers the opportunity to adopt the
best practices and formats from some of them. There is no doubt that traditional retail has been performing a
vital function in the economy and is a significant source of employment. However, it suffers from huge
inefficiencies as a result of which consumers do not get what they want, and farmers often get prices for
their produce much below what is considered fair. In contrast, organized retail provides consumers with a
wider choice of products, lower prices, and a pleasant shopping environment.
As in other countries, government policy can and should play an important role in modernizing
the unorganized sector and improve its competitiveness. On the other hand, a policy of protection of
traditional retailers by restricting organized retail will harm the growth prospects of the country by
foregoing the enormous benefits that are generated by organized retail.
