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Consumers aspire to the high life

By CNN's Asia Business Editor Geoff Hiscock

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Recent GDP rates

1998-99: 6.5 percent
1999-00: 6.1 percent
2000-01: 4.4 percent
2001-02: 5.8 percent
2002-03: 4.0 percent
2003-04: 8.2 percent
2004-05: 6.4 percent (F)
India's financial year ends March 31

Source: Morgan Stanley
Consumer Goods
Personal Debt

MUMBAI, India (CNN) -- Plasma TV, air-conditioning, a spa bath at home, holidays abroad, a hideaway in the hills and maybe a C-class Mercedes in the garage: the high-end Indian consumer has the same aspirations as upwardly mobile buyers around the world.

For a small slice of India's 1 billion-plus population, those goals are now eminently reachable.

Don Cairns, Australian consul-general in Mumbai and head of the Austrade business promotion office there, recounts the story of a Perth-based spa maker selling 10 to an Indian customer over a videoconference link.

"The spa bath was an unknown concept in Mumbai a few years ago," he told CNN. "Now everyone wants one."

"There are no limits to business here," he said. "There's money to spend and a willingness to take trial orders."

At the other end of the spectrum, Indian businessman Adi Godrej is targeting the hundreds of millions of low-end consumers for whom the spa bath is still an alien concept.

His Godrej Group is one of India's biggest business houses, and has been active in consumer products, foodstuffs and household goods for decades.

"You have to realize that many people in rural India get paid on a daily basis. That means most of these consumers don't have a dollar in their pockets on any given day," he said.

That restricts consumption and cuts down on impulse buying. The response by companies such as Godrej is to improve affordability and availability by marketing goods in micro-packages -- enough soap or washing powder, say, for a day's use.

"Some of our products are sold for half a rupee -- the equivalent of one cent," he said.

Godrej is optimistic about India's economic prospects and says growth rates of 10 percent are possible with the right policy settings.

He believes India's success over the next few decades will depend on how well it markets suitable products to all of the country's 1 billion consumers.

"If we do that well, there are another 3 to 4 billion consumers like that in the rest of the world," he said.

Austrade's Cairns is well aware that incomes drop away rapidly outside the big cities such as New Delhi, Bangalore, Chennai, Mumbai, Kolkata and Hyderabad.

But he envisions a "supermarket revolution" hitting India that will lift demand for a whole new range of processed food products.

Juice, candy, chocolates, cereals, canned fruit, snack foods are all part of the urban consumer's mindset. And for those with incomes of $12,000 or more, wine is starting to make its presence felt.

Market watcher Russell Farmery, managing director of ACNielsen in Mumbai, agrees that the arrival of supermarkets, hypermarkets and shopping malls will speed change in what he calls the psyche of the Indian shopper.

"It is interesting to see the priorities of aspirational spending," he said.

Rather than more or better food, he said there is a leapfrog pattern where people will buy a mobile phone instead. That extends to rural areas, where people will aspire to buy a television or a scooter ahead of what be seen as more basic needs.

He says there is a "growth story" happening too in what are known as tier-2 towns with populations of 500,000. Shopping malls, complete with movie theater, pizza parlor, McDonald's and other food chains, are popping up, replicating what has already occurred in Mumbai.

Divya Gupta, president of media buying agency The Media Edge, says these are exciting times for marketers and consumers alike in India.

"There is more spending power and importantly, there is an increased will to spend," she told CNN.

That is being aided by the growing availability of consumer finance, which in turn is pushing up industrial growth as manufacturers lift output to meet demand.

Gupta said that in the past, rural consumers in particular were conservative and averse to debt. But now there was "no hesitancy" among people to take a loan to pay for a house or consumer durables.

Like Farmery she sees the leapfrog effect where new adopters of technology such as mobile phones, television sets or scooters are bypassing the entry level models and going to the next level up.

But in an intriguing aside to this, there is another trend where buyers are willing to downgrade some of their fast-moving consumer goods (FCMG) purchases -- typically products such as shampoo and soap -- so they can buy durables.

As Gupta says, India is "always a country of 'buts'" -- its geography and demography is so diverse that there is no one model or size that fits all of its 1 billion consumers.

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