Small Town Consumers are Shifting India’s Economy

The growth of India’s company is decelerating. As compared to the previous, it has only expanded by 5.3% this year, in the quarter of January to March, the slowest so far for the last seven years. Consumers are skimping. According to various business executives, the product sales of durable dropped by 10 to 15 per cent in March this year. Official data showed the Indian companies today used about 15% less color television and 30% less air conditioners today.

However, there is a spark of hope. Shoppers from small towns are beginning to splurge.

A family-owned corporation, Godrej, have witnessed the product sales of its white merchandises drop by more than a tenth during the previous fiscal year in the big cities. But, product sales in small towns with a population of not more than 100,000 increased by about 19% while in the villages above 40%.

Another corporation, Bajaj, said that to a portion of its business of home-appliances, rural and small-town sales have increased handily during the recent years. Product sales of mopeds and motorbikes considered as urban luxuries have slowed down more gradually as compared to cars.

According to C.S. Gurubaran, an owner of a home-appliances shop at Chengalpattu, during an interview while he was plying his customers with fruity drinks, the slowdown of economic growth does not have any effect.

A couple of years ago, Mr. Gurubaran was able to sell at most a dozen of washing machines every month in this small town located in southern India with a population of about 64,000. Now, he is able to sell as much in just a week. Fans, fridges and food processors are as well shifting more rapidly. The parents of brides would usually purchase an entire set of white products to be given as dowry.

The low dependence on credit, high land costs, good monsoons and government subsidies have so far protected these consumers. Many of the shoppers of Chengalpattu are farmers who profit from floor prices fixed by the government for crops. Some of these farmers have as well earned enormous lump sum of money through selling their fields to various developers.

Poorer consumers for the neighboring village make money through a government project that assures 100 working days a year.

As said by broker named Kotak Institutional Equities, such project and subsidies significantly increased incomes in the rural area by about 12% the previous year. The incomes in rural areas have significantly grown more quickly than that of in urban areas since 2008.

Indian businesses as well as the foreign ones are taking advantage of the increase in the incomes of people in the rural areas. As an instance, Mahesh Krishnan, the head of Samsung Home Appliances Department in India, hopes to escalate their company’s presence in shops located in the rural areas by about a fifth just in time for the enormous shopping season marked by the Diwali Festival in November.

Although foreign firms usually have distribution networks that are skimpier than the local firms, their products tend to be more famous where they get to be available. Often times, a foreign brand is a symbol of status.

Source: The Economist

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