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To: craig crawford who wrote (325)	6/25/2001 1:41:58 PM
From: craig crawford	Read Replies (2) \| Respond to of 1643

Monday June 25, 3:13 am Eastern Time FEATURE-India's giant middle class tantalises goods makers biz.yahoo.com BOMBAY, June 25 (Reuters) - How large is India's middle class? By one reckoning, it is nearly 300 million people, or more than the population of the United States. Any wonder multinationals focus on such a large number when eyeing India as a potential market for their goods. The middle class has grown tremendously in the decade since the world's second most populous nation began to liberalise its economy and open its markets to foreign goods, offering great potential to companies selling food, personal healthcare products and other low-price consumer goods. Multinationals such as Unilever (quote from Yahoo! UK & Ireland: ULVR.L), Procter & Gamble (NYSE:PG - news), Coca-Cola (NYSE:KO - news), PepsiCo (NYSE:PEP - news) and Kellogg (NYSE:K - news) are fighting over this growing sector of a nation of one billion people. ``India is one of the fastest-growing markets for Coke worldwide and we've set ourselves a target of 14 percent sales growth per annum, against 4-5 percent in developed markets,'' said a Coca-Cola spokesman. Estimates of the size of the middle class influences not only the decision about whether to enter the market, but also matters such as product pricing and locating factories. CONSUMING CLASS India's National Council for Applied Economic Research (NCAER) estimates the ``consuming class'' -- households with an annual income of 45,000-215,000 Indian rupees a year ($957-$4,574) at 1994-5 prices -- now totals 53.4 million. Given an average 5.56 people per household, that indicates about 297 million middle-class consumers. About 27.5 million of those middle-income households are in urban areas, and just marginally fewer -- 25.9 million -- live in rural India. The data compiled by NCAER -- a widely respected, partly government funded, Delhi-based research organisation -- shows the middle class has grown tremendously in the decade since India abandoned almost a half century-long dedication to socialism. From 14 percent of households in 1989-90, the consuming class as a proportion of the population is estimated to have doubled to 30 percent now. That figure is forecast to rise to 40 percent by 2006-07, when NCAER estimates there will be 80 million middle-class households containing 445 million people. Meanwhile, the percentage of very poor households is shrinking. The percentage has dropped by half in the past decade -- from almost a quarter of households in 1989-90 to 13.2 percent now. And the figure is expected to fall by almost half again, to 7.7 percent, by 2006/07. At the other end of the income spectrum, the very rich are projected to account for 2.6 percent of all households in 2006/07, up from 1.61 percent now and 0.32 percent in 1989-90. R.K. Shukla, a senior statistician at NCAER, says Indian market demographics have steadily moved from a ``conical'' to a ``diamond'' shape, with a large middle class segment and relatively small numbers of very rich and very poor. SELLER BEWARE But analysts view these numbers with some scepticism. ``These numbers are all very well, but how does one explain the slow growth in sales of many consumer goods companies?'' asked an analyst with a foreign brokerage. For example, January-March sales at India's largest consumer goods firm HLL rose just 1.1 percent from the same period a year earlier -- and by only 4.55 in the preceding year. And even if the middle class grows as projected, say analysts, that does not necessarily mean demand from the ``consuming class'' will expand in proportion to its size. ``Few would dispute that the consuming segment is growing, but consumption habits are an entirely different matter,'' says Shalini Gupta, analyst at Indian brokerage Motilal Oswal. ``Indians are very rigid consumers with fixed habits who tend to underconsume in order to save money.'' Adds BNP Paribas analyst Sujay Mishra: ``Many multinationals have interpreted these numbers wrong ... The Indian middle class may be larger than the U.S. population, but they are far behind in terms of purchasing power.'' To add to complications, there is also a booming grey market in counterfeit and smuggled goods, which depresses demand for brand-name goods and skews sales statistics, analysts say. This means multinationals and investors in general should take greater caution when looking at the Indian market and try to better identify with their customers, the analysts say. (To read companion feature, "Indian reforms mean more