Nielsen: The thin layer of Indian affluence

Companies planning on selling luxury goods in India should consider Nielsen’s August 2009 survey. For some, it will be a reality check.

When I read the press release from Nielsen’s survey of Upper Middle-class and Rich (UMAR) households in India, I thought they’d made a mistake… maybe lost a decimal point or so. They figured India had 2.5 million Upper middle-class households, defined as those that both owned a car and a computer. I thought it must be understated; after all, India is reportedly making 2.8 million cars each year. (Income is considered to be widely under-reported in India, so surrogate indicators are used in surveys like this one.)

nielsen venn 3Nope. I checked with Nielsen, and they stand by their survey, which covered the 35 largest cities in India.

India has perhaps 220 million households in total; 65 million in urban areas; of which these 35 cities have about 26 million households. Around 10% of the households of these 35 cities are affluent.

Nielsen note that India has a stock of 14.5 million cars on the road, and 7 million computers on people’s desks. The intersection of those two sets, they estimate, is 2.5 million.

From this 2.5 million, they break out two further segments:

  • The 200 thousand households of the Upper Upper middle class, which not only own a car and a computer, but also an LCD television; and
  • the 100 thousand Rich families, which own all those things and have taken at least one holiday overseas.

For companies seeking to attack India’s luxury goods markets, this is a reality check. While the magic of large numbers – the 1.2 billion population – certainly exists, for many international consumer goods companies, their markets will be here: In the top 35 (or even just the top 5) cities; with consumers numbering in the hundreds of thousands rather than in the millions.

According to the survey, the top ten cities were: Delhi, Bangalore, Mumbai (Bombay), Chennai (Madras), Hyderabad, Kolkata (Calcutta), Kochi (Cochin), Pune (Poona), Jaipur and Ahmedabad.

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I'm an international Business Consultant; author of a book called India Business Checklists, and working on a book on doing business in Burma.
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8 Responses to Nielsen: The thin layer of Indian affluence

  1. Been trying to convey this to every foreigner who dreams of the Indian market. Unfortunately, they are shown the five star part of Delhi or Mumbai and take back impressions. Often they do not realise that the meal they had at Taj or Oberoi has cost them the equivalent of a year’s income to an average Indian.
    Any premium brand need not look beyond Bombay, Delhi and maybe Bangalore. And that too not more than one shop.
    Another problem with the rich Indian is that often, if a global brand is available in India, then he avoids it. The younger generation is less susceptible to this behaviour.
    Ludhiana, Guntur, Kolhapur & Coimbatore are other rich cities, but not very big in size.

  2. You have captured our discussion well.

    Many Thanks,

    Biswarup

  3. Bala Dharan says:

    I think Nielsen’s ownership criteria are not a true measure of affluence in India. I would use Refrigerator + TV ownership as a better measure of upper middle class affluence than car and PC/laptop ownership. In India, cell phones serve many of the common functions of a laptop. Also, many rich people in the world don’t own cars either. Nielsen’s definition would miss most of New York’s Upper East Side population, for example! Same goes for many rich, elderly people who generally don’t own PCs or laptops. On the other hand, working class Americans often are forced to own a car because they can’t get to work without one, and so car ownership in the US would not really be a good measure of affluence.

  4. Rupa Bose says:

    Bala, that’s an interesting insight. I’ve also been wondering whether they included company cars that are technically owned by the employer, but in fact parked at the residence.

  5. Yes. I think that is a possibility. Also, in some cases, especially when Nielsen or any one interviews a housewife (sorry for the very Indian term) there is a strong possibility that the distinction between a company-owned and a self-owned car does not exist.
    Any way, I would use the number given by Nielsen as a good indicator.
    Tax payer base is small. If you go to Kalbadevi, where almost 75% of business even today is done in hard cash, the number of ‘rich’ individuals would be very high. Another good base would be to check how many families actually take a ‘foreign’ holiday. Any ways, the fact is that the top of the pyramid is really narrow.

  6. Nav says:

    Maybe tax rules explain lopsided company car registrations? Company owned cars can be depreciated, drivers considered company employees, maintenance considered company expense, all tax deductible. In USA, this is offset by litigation cost: a company car would be likely sued to the last corporate penny in case of an accident.

  7. Rupa Bose says:

    I checked with Nielsen. They only considered personally-owned cars, not company-provided cars. So it’s possible that the number of affluent – even by their own criteria – are somewhat understated.

  8. Pingback: Versace and Video-games » Rupa Bose’s Weblog

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