Orissa market

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Try this for a pop quiz. Where does biscuit major Britannia Industries plan to set up its lat

plants? Where did auto market leader Maruti Suzuki clock 40 per cent growth in sales - o

highest - in the nine months to December 2010? And in West Bengal, would the South 24

Parganas district, otherwise famous for the Sundarbans and the Royal Bengal Tiger, qual

consumption hot spot?

The answer to the first is Orissa and Bihar. The answer to the second, West Bengal and

And the third? An emphatic yes. Not exactly top-of-mind answers, these. So what explain

flurry of activity in areas often considered laggards in socioeconomic indicators?

Manpreet Singh Chadha, Director of multiplex company Wave, who plans to promote a 1

sq. feet, three-screen multiplex in what cynics may call back-of-beyond Uttar Pradesh - in

may be well-placed to provide an answer. Chadha, whose family has been in the real est

liquor business in the state, was encouraged to go to Bareilly on the back of a successful

he pulled off in Moradabad, to which he traces his family roots.

"The idea was to give something that Moradabad

have. Hence came the idea of a multiplex-cum-ma

followed by fashion brands like Globus and afforda

and beverage under a secure environment," says

The bottom line, of course, was the robust monthly

the tenants at his mall. That logic of bridging a demand-supply gap in regions with high

populations, just gaining a foothold on disposable income, which can act as ready consu

sustains just as well in Bareilly - and indeed other such regions.

For instance, Kishore Biyani's Future Group, whose Big Bazaars are regular features in smodern retail formats, ventured into Bhubaneshwar way back in 2003. Eight years on, Da

Mall, President, Director, Food Strategy, Future Group, simply calls it their "rockstar store

Entrepreneur Jagi Mangat Panda, who is the Managing Director of

broadband cable network operator Ortel Communications, believes she

has captured some of this upside. "Our advertising income has seen a

growth of over 50 per cent for the past two years and top line growth has

The new go-to marketsShalini S. Dagar and Shamni Pande February 21, 2011

States such as Bihar andJharkhand are now crossingthresholds of per capita incomeassociated with conspicuousconsumption

Page 1 of 5The new go-to markets : Business Today

24-02-2011http://businesstoday.intoday.in/bt/storyprint/13236


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been over 25 per cent annually for the past three years," she says.

Panda attributes this to the higher

spends by advertisers such as Nestle, Hindustan U

Godrej and Emami in Orissa. "The past five years h

exponential growth in the services sector. The num

banks, insurance, telecom, airline and IT companie

grown. The manufacturing sector, too, has seen gr

the setting up of several small-and-medium-size un

this has led to a higher per capita income in the citi

says.

Signs everywhere

Many of the cities where companies are planning investments are located in states which

recently were loosely called backward states. Characterised by large populations, poor

development indicators and almost non-existent infrastructure some of these states wereunder the near-pejorative term BIMARU (comprising Bihar, Madhya Pradesh, Rajasthan

Pradesh, and sounding very similar to the Hindi word for "sick") states.

That nomenclature no longer holds as states such as

Rajasthan and Madhya Pradesh have surged ahead, with

new constituents Orissa and West Bengal joining the ranks.

Yet, it is this assorted bunch which is now showing the

beginning of a ravenous binge - to consume more of

packaged food, bottled water, consumer durables, fast

moving consumer goods, telecom and financial services(See Demanding Their Share).

The auto industry, whose growth of 30 per cent has far

exceeded expert forecasts, provides a neat snapshot. In the

nine months to December 2010, market leader Maruti Suzuki clocked a 40 per cent growt

Bengal and Orissa over the same period the previous year, while Bihar, Chhattisgarh and

Jharkhand notched over 30 per cent growth. Rajasthan, too, chalked up 26 per cent more

than last year, while in Uttar Pradesh and Madhya Pradesh sales grew in a healthy 18 pe

range.

Consumer durables major Samsung has a similar story to tell. Its sales in states such as

Pradesh, Rajasthan, Bihar, Uttarakhand, Orissa, West Bengal and Madhya Pradesh are g

between 25 and 30 per cent over the previous year. To be sure, this growth is from a sma

but the pace of expansion has these states on the radar of most companies in India.

"Governments in these states are running a lot

employment generation schemes that are encou

Jagi Mangat Pa

Broadcast entre

Orissa

Click here to Enlarge

Shailesh Pathak, Former bureau




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people to not leave the state and continue workin

This is having a positive impact on consumption,"

Zutshi, Deputy Managing Director, Samsung India.

Boom drivers

This consumption boom in the towns and cities dotting what was till now considered Lagg

is powered by sustained income growth. A look at the state gross domestic product or SD

an accelerating pace. Most of this growth in SDP is coming from the services sector - typi

estate, hotels and the transport sector.

"The income change story across India, propensity to spend, and confidence about the fu

very visible in these places, especially in contrast to their past. We are quite bullish about

Rajasthan, Orissa, Jharkhand, Chhattisgarh and Bihar," says Future Group's Mall. His ex

is that the aspiration levels are higher in some of these states such as Orissa - perhaps a

determined effort to break away from the past.

Agrees Hemant Mehta, Senior Vice President of marketing research company IMRB Inter

"Psychographically, the consumers in these towns are similar in their aspirations to peopl

larger, affluent cities and metros - the quantity and depth of demand may vary, but it is th

the same things." Add to this the phenomenal rise in connectivity - through improved road

as telecom.

"Connectivity, whether through roads or through telecom has a huge benefit," says Shaile

Pathak, a former bureaucrat and infrastructure expert who has intimate knowledge of

Chhattisgarh, Uttar Pradesh and Bihar. Pathak, however, reckons that this is not a case o

down effect but "plug-in effect"- as in the sheer availability of many more economic avenu

If satellite television has fuelled soaring

aspirations, then a stable political environment

has helped change things on the ground. Pathak

who has been on both sides, government and

private sector, believes that it is not surprising

that many of the parties ruling these "laggard"

states returned to power. "Finance follows

politics. Many of these states have repeated chief

ministers in the past decade. Continuity in

governance certainly helps in prosperity," says

Pathak who has been an infrastructure investor at

ICICI Venture and private equity Indian

Infrastructure Fund.

Agrees economist Bibek Debroy: "Purely

empirically, at least in state elections, it has been

Click here to Enlarge




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seen that voters react most to roads and

electricity." Whether it was improving infrastructure which led to a stable political econom

reverse, the net impact has been an all-pervasive rising prosperity - evident in higher disc

spending.

The bulging middle

As a result of this surge in consumption, one theme that is playing out in India is the integ

urban and rural areas. Villages are getting integrated and this has much to do with improv

connectivity.

"The big story is that of the 600,000 villages in India. While earlier only around 125,000 w

integrated with the rest of the nation, now barring 125,000 which are very remote or have

populations lower than 1,000, the rest are getting integrated," says Debroy.

Pathak quotes the famous theory of banking veteran K.V. Kamath while saying that luxur

conspicuous consumption comes in around a per capita income of around $1,000 (Rs 46,whereas demand for better governance kicks in at a per capita income of $1,500 (Rs 69,0

above.

Many of the "laggard states" are now crossing pre

these important thresholds of income. So, in a sen

chimerical middle class of the early 1990s when

liberalisation began is probably roaring to life now.

course, in the short term, inequality is growing. For

instance, for the purpose of financial inclusion, banks take cognisance only of villages wit

population of more than 2,500, leaving those with a smaller population unbanked.

Debroy worries about the increased marginalisation of such outposts, which also do not h

access to connectivity. There are large tracts in the mineral belt of Jharkhand, Orissa and

Chhattisgarh where such conditions prevail. That, perhaps, is where real deprivation lies

Maoists rule.

Much of the contours of this unfolding story will be provided by the census data and Natio

Sample Survey a few years down the line. Economist Debroy, for instance, says, "Our pe

will change completely when the new data which incorporates changes after 2003 is publi

But, if what consultancy firm McKinsey & Co. predicted in 2007 about India's consumption

quadrupling by 2025 holds true, then a large part of that growth will certainly emanate fro

laggards. Clearly, the party has begun only now.

While the initial consumptionboom after liberalisationhappened in the moreeconomically advanced states,the laggards are now catching up

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