Middle-Class Demand : Consumer in India at Last Gets a Break

The prosperously plump woman in the expensive sari was practically giddy with excitement.

For the last several years, she had lived in West Germany with her husband. Now she was back in New Delhi, her family home, and what she saw on the shelves of the modern bazaar supermarket in the affluent suburb of Vasant Vihar made her shake her head in disbelief.

“If I told my friends in Germany that we had these things in India,” she told store owner Vishwant Kumar, “they wouldn’t believe me.”

Arrayed among the thousands of items in the two-story, air-conditioned store were deodorants and fluoride tooth gels; big jars of instant orange drink; soft drinks in gaily colored plastic bottles; foil-wrapped chocolates; cartons of disposable diapers, and no fewer than 30 brands of hand soap, including one marked for “Men Only.”

44 Kinds of Cheese

In addition, there was a video cassette counter, a photo-supply nook and a cheese cooler with 44 varieties of cheese, including “Mussoorie Cheddar” from the Himalayan foothills and something called “Bombay Gruyere” at $7 a pound. In the toy department were Barbie dolls, authentic-looking toy M-16 assault rifles and the whole series of the American “Masters of the Universe” characters, including “He-Man,” “Beast Man,” “Zodac” and “Ram Man.”

All the goods, although perhaps not dazzling by Western standards, were notable in two important respects: All were manufactured in India, and none was available to shoppers four years ago.

Their presence on the shelves of a modern bazaar reflected an amazing proliferation of consumer goods that has occurred in India during the last few years. They are the result of a liberalization of the Indian economy begun under the late Prime Minister Indira Gandhi and that has continued under her son and successor, Rajiv Gandhi.

Middle-Class Emergence

The demand for consumer goods, spurred by the emergence of television as a primary advertising medium, parallels what many see as the rise of India’s middle class to a dominant role in political and economic life.

“I have no doubt that the political clout that the middle class has developed is the one that is giving directions to the new economic policy,” said V.A. Pai Panandiker, director of the Center for Policy Research here. “Their clout has really grown. They are the ones who dictate the kind of consumer goods we see today.”

The growth in consumer goods would not have occurred without a fundamental shift in Indian economic policy.

After independence in 1947, Indian leaders concentrated on making the country economically self-reliant. For 30 years, government spending was concentrated on building up the “core” industries--giant steel mills, heavy equipment factories, refineries, coal mines and the like.

Leaders such as India’s first prime minister, Jawaharlal Nehru, did not want the economy distracted by the growth of a competitive consumer market. As a result, only one or two manufacturers were given licenses to produce each line of consumer products.

There were only two automobile makers, for example. One company had a monopoly on heavy trucks and buses. To protect these industries and prevent a negative balance of payments, imports were restricted by huge tariffs.

Little Incentive to Improve

The system became known in Indian business circles as the “license and permit Raj .” Since manufacturers had virtual monopolies and a guaranteed market for everything they produced, there was little incentive to improve their products.

Until the Maruti, a Japanese-design compact automobile made in collaboration with Suzuki, was introduced into the Indian market in 1983, the dominant Indian car was the Hindustan Motors Ambassador. The Ambassador was, and still is, nothing more than a 1953 Morris Oxford that was made from the discarded molds for the outdated British car. But since there was no real competition, Hindustan Motors, owned by the wealthy Birla family, felt no need to change the design. Indian highways looked like a movie-set for the 1950s.

The same sort of thing was true in virtually all Indian consumer industries. Manufacturers were guaranteed to sell everything they produced, with no regard for quality or the consumer. The “license and permit Raj “ was a license to print money.

The stagnation that this produced in the Indian economy finally came to the attention of Indira Gandhi after her reelection in 1980.

But the most enthusiastic patrons of the consumer revolution were her sons--Sanjay, killed in a 1980 airplane accident, and Rajiv. Both were essentially upper middle-class youths. Both had traveled extensively abroad and knew first-hand the inferiority of most Indian products.

It was Sanjay who conceived of the idea of a new Indian automobile to be called the Maruti, although his original idea was for it to be of Indian design as well.

Also an Avid Consumer

Rajiv, who succeeded his mother after her assassination in 1984, became India’s first leader who was also an avid consumer. Rajiv loves fine automobiles and spoke disdainfully of the lumbering, boxy Ambassador. And he had expensive cameras and a collection of jazz records and a foreign stereo.

It was his first budget, in 1985, that opened up the Indian economy to competition in consumer products by granting new licenses, encouraging limited foreign collaborations--except for a few high-technology items no foreign company can control more than 40% of an Indian company--and welcoming highly educated Indians living abroad back into the country with their acquired technological expertise.

The liberalization has its limits. The Indian bureaucracy is a formidable impediment to change. Subsequent budgets have scaled back the new freedoms.

But the consumer revolution in the Indian economy has taken hold, invigorating the nation’s cities where it thrives while emphasizing the vast gulf that still exists in this country between the Maruti culture and the bullock-cart culture of the villages, where 70% of all Indians live.

Greatest Test

In all the world, India is perhaps the place where the so-called “trickle-down” theory of an open economy faces its greatest test.

The changes in the economy have generally been applauded by the World Bank and other international lending agencies.

“In the ‘70s and early ‘80s, India spent a lot of money building up heavy industries, some of which they did not need,” said one international economist. “Now there is a different concentration on growth to consumer-oriented products.”

In just four years, roughly the same time as Rajiv Gandhi has been prime minister, India’s economy has been transformed from one of the world’s dreariest, most restricted marketplaces, at least for manufactured consumer goods, into a relatively open one where just about anything is available if the buyer can pay the price.

“If you can afford it, now you can get it,” said shop owner Kumar. “Previously, even if you could afford it, you couldn’t get it.”

Kumar said that when he opened his store in 1977, he had only 150 items of merchandise to offer. Now he has more than 5,000.

“We had only one kind of cooking oil--now we have 10. We had only one chocolate--now we have 20,” he said.

2-Year Waiting List

Five years ago, for example, there was only one Indian manufacturer of motor scooters. There was a 2-year waiting list of would-be customers. Buyers had to pay dealers a premium. Today, there are half a dozen manufacturers, including several joint ventures with Japanese companies. Annual production of scooters has quadrupled since 1982, and most scooters are available immediately, with no premium required.

Similar expansion has been experienced in the automobile, air-conditioning and refrigeration industries. Perhaps the most rapid growth has been in the television industry, where there are now more than 80 companies making television receivers.

TV the Main Vehicle

The medium of television, which aims nearly all of its programs at India’s emerging middle class, has become the main vehicle for drumming up sales for such consumer goods.

“Five years ago,” said New Delhi advertising executive Sunil Gupta, 31, “television came and revolutionized the country, accessing a lot of new consumers to new consumer fields.”

In 1980, there was virtually no television outside urban centers. After Indira Gandhi ordered a speed-up in the construction of satellite television towers, the medium could reach about 70% of population.

A 10-second advertising spot during the most popular prime-time show, an evening program featuring famous Hindi movie songs, now costs an advertiser about $7,000.

“Today in India, we have really shifted from a seller’s market to a buyer’s market for the first time in history,’ said Bombay industrialist Dilip Piramal, 38, whose companies produce toys, luggage, marble tile, magnets and, in collaboration with Hawthorne, Calif.-based Mattel Corp., Barbie dolls.

Some Criticism

Not everyone believes that the changes are all to the good. Panandiker, the director of the Center for Policy Research, and other social scientists also see a potential dark side to the consumer boom. The divide between the relatively affluent and the poor has become more distinct, they say. The new consumer mentality, said Panandiker, has bred an insensitivity to the plight of the poor, the majority of whom will probably never be able to afford the simplest items sold in a modern bazaar.

“The worrisome characteristic of this new class,” said Panandiker, “is its lack of concern, empathy and feeling for the bottom 40% of our population, who constitute the poor of this country.”

“I perceive the benefits of competition in our economy,” said Gupta, the advertising executive, “but I worry that will contribute to a greater divide between the haves and the have-nots. The vast majority of Indians cannot even buy packaged goods.”

Determining the Size

That purchasing power to buy goods packaged by machine has been offered by some economic analysts as the dividing line between the middle class and poor India. In fact, defining the size of the Indian middle class is difficult.

According to the World Bank Development Report for 1987, the upper 20% of India’s population controls 50% of the wealth. This segment--about 150 million people, or more than the combined populations of Britain and France--is the Indian middle class.

Panandiker contends that these Indians are members of families with annual incomes of more than $4,000. While this is still small by Western standards, it is large enough to permit the purchase of some mid-range consumer products, such as motor scooters, refrigerators and televisions.

“I was surprised by the makeup of the Indian economy,” U.S. Undersecretary of Commerce Bruce Smart said after a recent visit here. “At the top of the economic pyramid in India are between 100 million and 150 million people of varying degrees of affluence. In the aggregate they are not dissimilar in their purchasing power from a country such as, say, Brazil.”

In many ways, India’s economy remains a Malthusian nightmare that the new consumer economy does little to change.

Most Are Very Poor

There are 780 million Indians. Most are very poor. The majority will never touch a bar of hand soap or plug in an electric popcorn maker or even see the blond tresses of a Barbie doll.

Most Indians have little need for the synthetic sugar capsules and diet sodas and “slimming studios” that the consumer revolution has produced. In rural India, where few people are able to eat the minimum caloric intake recommended by the World Health Organization, such products are a cruel joke.

However, Indian economists argue that the consumer economy should not be discounted as an agent of positive social change, particularly in the areas of caste and women’s liberation.

For example, many of the products now available are geared to families in which both spouses work outside the home.

Cooking a Laborious Task

In a traditional Indian family, however, a wife is supposed to be ready to cook for male members of the family at any time that they are ready to eat. Cooking can be a laborious task, with the woman grinding mixed spices-- masala --in stone bowls and kneading dough to make flat Indian breads. Now plastic packs of masala are available everywhere, as well as instant frozen dinners, both vegetarian and non-vegetarian. In addition, there is an impressive array of kitchen gadgets, including blenders, juicers and mixers that never before graced an Indian kitchen.

Supplementing this are hundreds of new “carry-out” food shops in all of the cities, where tired workers can stop to bring home Indian barbecue or thalis (an assortment of vegetarian dishes) in plastic bowls.

Fewer Servants Available

Previously, such fast-food aids were unnecessary in India, where all but the poorest families had servants to do the kitchen chores. In the last decade, however, especially in the cities, fewer people were willing to work as domestic servants, preferring the higher-paying jobs in industry.

Also, land prices in most Indian cities have risen so rapidly that few families can afford to provide housing for servants. In Bombay and New Delhi, living space is so scarce that the servants’ quarters in large homes now fetch high rents from middle-class families.

“It is not easy to get someone to come and work for you anymore,” said Idrak-Ul-Zaman Bhatty, director general of the National Council of Applied Economic Research in New Delhi, a quasi-governmental research institution that has done several studies of Indian buying habits. “Now, even at the top level, you are damn lucky if you have servants. People don’t want to work any more as domestic servants if they can get another job.”

Bhatty, one of the more enthusiastic supporters of the consumer economy, contends that it has also begun to break down some barriers in the Indian caste system--the multilayered, Hindu religion-based system, that segregates Indians into different social classes ranging from the highest, Brahmins, to the so-called Untouchables.

“In India,” Bhatty said, “we already have a caste system that differentiates very strictly. On top of that is a class structure. There is some evidence from our research to show that those who are discriminated against on the basis of caste can nevertheless move up in class as they acquire possessions from the consumer market.”

In Bhatty’s mind, a culture in which people are judged by what they have been able to buy, as crass as that may be, is an improvement on one in which people are pigeon-holed at birth.