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Laveesh Bhandari
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Wednesday, 13 August 2008 05:30 |
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My colleagues at Indicus have been painstakingly following the developments across every district’s rural and urban areas. They are already reporting the great churn in in-comes, consumption, savings and investment patterns across India - Outlook Money
Undoubtedly India’s economic reforms have changed the way we work, live, consume and invest. And in sync with this, aspirations and expectations have also changed dramatically for many of us. With changing aspirations and greater choice of employment, consumption and investment options, we have become a far more mature economy. No doubt large gaps remain: the large numbers of the unbanked, the lack of adequate microfinance options for the poor and the underprivileged, the inability of many to enter into the organised sector and find stable employment are all unfulfilled gaps.
Unlike in the past, however, today, both private and public sector initiatives are being taken to find the right mix of technology, access and costs that can fulfil the demands of the masses. It is only a matter of time till solutions to major hurdles are found and not just a few, but all Indians can benefit from the fruits of economic freedom.
Yes, I am an optimist, but that optimism is merely based on em-pirics. We have all seen the difference that mobile phones, credit cards and ATMs have made to our lives. This is all a result of two forces. The first undoubtedly is the emergence and maturing of electronic technologies. And the second is the staggered introduction of economic freedom. The latter enabled newer technologies to be introduced rapidly, and given the scale of operations possible in India, rapidly reduced the cost of provision. In many cases these are far below the international cost/price norms. Almost all new technologies tend to be costlier in the initial phases, and as they are used more and more, the costs begin to fall rapidly. This further incentivises companies to expand their offerings.
What was available only in Mumbai and Delhi a few years ago, is today commonly available in small towns and villages in India. ATMs are one example, credit cards another. Already mobile payment options have been introduced and are being further experimented with. Cash cards are also expanding rapidly. Good quality Internet access has already spread beyond the major metros and, with the introduction of broadband, will be available in every nook and corner of the country. Admittedly such advances in financial technologies have tended to benefit the better-off more than those at the base of the pyramid. The key problem is that most financial technologies in use today were developed in the West (and consequently are costly) and have been introduced into India almost as-is. It is difficult to profitably service the masses with those. But trials of new innovations are under way.
My colleagues at Indicus have been painstakingly following the developments across every district’s rural and urban areas. They are already reporting the great churn in in-comes, consumption, savings and investment patterns across India. A few years back, the metros were the only markets that were taken seriously by most companies. Today, even a mid-size company needs to have its presence in a minimum of 100 top cities spread across India. But a lot needs to be done.
Some basic figures reveal the great potential for companies to service the under-served. Figures as reported in the Financial Skyline of India show that the top 10 districts in terms of population out of a total 593 districts account for roughly 8 per cent of India’s population, whereas the next 20 districts account for 9 per cent. The total consumption expenditures for the top 10 are 16 per cent of India’s total as opposed to 11 per cent for the next 20. The savings potential for the top 10 are 12 per cent of India’s total as opposed to 11 per cent for the next 20. But the commercial bank deposits are 35 per cent of the India total in the Top 10 as opposed to merely 13 per cent in the next 20. The story is similar on the credit front. The top 10 districts account for 28 per cent of the personal loans, while the next 20 only manage 16 per cent. As we go down to even smaller districts and towns the difference between the potential and the actual becomes even more stark.
This data reveals that Indians with savings and consumption potential are highly underserved, and a great market is waiting to be serviced. When our financial institutions achieve this, as they will eventually, they would have overhauled India as we know it.
Author is director, Indicus Analytics and can be contacted at
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Source: http://www.outlookmoney.com/olmnew/article.aspx?sid=10&cid=75&articleid=7634
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