India on Right Way, But To Go Long Distances: NRI

The Indian Consumer Market Begins to Undergo Structural Change
By Shusuke WATANABE, Hiroko KIHARA, Wataru KADOBAYASHI and Muskan SONI
Nomura Research Institute
India's consumer market is undergoing continuous change. The number of middle- and high-income households (with minimum annual income of around 180,000 Indian rupees) is increasing rapidly, not only in metropolitan cities with populations in excess of four million, but also in cities with populations of only one million.
Even looking from an Asia-wide view, the scale of the middle- and high-income Indian markets as well as its growth potential is large as compared to the same in ASEAN countries. Thus, targeting only high-income households limits the overall scale of this market. However, taking an approach in which only low-income households are targeted by business providing solutions to social problems is more like an investment in the future rather than a generally adopted business strategy. Such an approach would take a long time to ensure a sufficiently large business scale and profitability. Thus, gaining access to the middle- and high-income markets that are already large in scale and have a high growth potential is essential for establishing a company's business in India's consumer market.
In this paper, home appliances is used as a representative consumer market. The following key points are required to access the middle-and high-income markets: ability to develop low-cost, high-performance products in which lifestyle characteristics are taken into consideration, ability to enable local procurement and production, and establishing strength in logistics, sales and distribution channels to ensure maximum penetration spreading over wide areas including rural India.
In order to break into the low-income market, it is essential to clearly narrow down the target consumers. If a company's sole purpose for entering this market is to generate profits, then it should target the "Next-MoP" (future middle of the economic pyramid) market that will grow rapidly as a result of the expansion of urban infrastructure.
For developing business not only in the Indian middle- and high-income markets but also in the Next-MoP market, the strategies for all these three markets should be integrated. In addition, consideration should also be given to positioning India as an export base for serving demand from South Asia, the Middle East and Africa.

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