India’s booming economy

India is one of the fastest growing economies in the world. After a slow gradual process of opening up its markets to foreign competition, India is beginning to grow. With MNCs (multinational companies) opening an increasing number of offices to outsource work, the youth of India now have opportunities that their parents never had. These youngsters, along with their parents, boost the Indian economy by buying foreign brands and spending on other luxury items.

Many of these young people are in their twenties and still living. They have few or no bills to pay and, in most cases, spend 60-70% of their income on purchases (Source Wall Street Journal, Wallets crack open in India, January 3, 2006). Most of these young people are working for call centers or other technology companies, and more and more are living a more Western consumer lifestyle.

India currently has about 17 million households or 90 million people belonging to the country’s middle class, earning between $4,500 and $22,000 according to the National Council for Applied Economic Research. The same organization has classified an additional 287 million people as “wannabes,” those hoping to join the middle class. These applicants earn between $2,000 and $4,000. It is forecast that by the year 2010 these individuals will join the ranks of the middle class for a total of 561 million according to the economic council.

Despite the bright prospects, many foreign companies are still struggling to enter the Indian market. Stores like Wall-Mart have been prevented from investing in operating their own stores in India. Many of the foreign brands have now entered India through franchise agreements, which require companies to cede a lot of control to local operators.

Whatever the case, the Indian economy is growing in size at a rapid rate, and the year 2006 will bring new consumers to the market at an increasing rate. The challenge most companies face is how to sell products to brand conscious consumers at a price they can afford and how to keep up with the growth rate which in most cases is about 30%-50% per year compared to 3%-5% on average in the developed world.

For more information visit http://www.eco-wise.info and sign up for my newsletter.

Greetings