Large numbers boggle the imagination and the first reaction is to reject it. The rapid growth of a large underdeveloped economy will through up numbers that will boggle most minds.
The other day, we met a gentleman who laughed out loud at a firm’s prediction  of the Indian middle class reaching 583 million from the current (2005) 50 million by 2025. This is not a “pie in the sky” figure. It still says that even in 2025 the middle class will be only 1/3rd of the population, in spite of about 13% increase per annum.
We estimate income profiles in our product “Market Skyline of India”.  Our estimates show that the population living in households earning between Rs 300,000 and Rs 1,000,000 per annum (which is broadly the Middle Class) was 102 million in 2008-09 and 75 million in 2006-07, a growth of 16.6% per annum during the two year period. The point to note is that since more than 80% are below this level, it will not take much for them to move to the middle class. In fact, it will be a colossal failure of the state if the numbers are less than the one indicated for 2025, by the said firm.
There is a problem of comprehension here. Since the multiple is 10 times, the human mind’s first reaction is to reject it outright, never mind that the period is also fairly long (20 years).
I remember around 1995, when the Indian cement consumption was just above 50 million tpa (and India had consumed under 200 million tons since independence), we had forecast consumption reaching 150 million tpa in 10 years. The numbers were met with disbelief. But we now know that for 3 consecutive years the cement consumption has been above that figure.
In both cases, the rejection was due to the limitations of the human mind itself in dealing with geometric progression and compound interest.

Last 5 posts by Amit Sinha

• The incentives for people to join politics needs to change - March 3rd, 2010
• Reducing Specific emission by 25% over 15 years - December 4th, 2009
• The big impact of NREGA - September 7th, 2009
• Big numbers boggle the mind - August 31st, 2009
• Monsoon has eluded north India - July 24th, 2009

Tags: Demography, market size, middle class

This entry was posted on Monday, August 31st, 2009 at 12:28 pm and is filed under Consumer Markets, Indian Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.