Survey of India's Consumer Market

McKinsey's Global Institute has just released a report on India's consumer market. There is an executive summary as well as the full report, available for free download (although you may need to register yourself to access these). The study projects the growth and changes in the composition of India's consumer markets from today through 2025. The highlights include the following projections about the market in 2025:

• India will be the fifth biggest consumer market. If India continues on its current high-growth path over the next two decades, income levels will triple, and India will climb from its position as the twelfth-largest consumer market today to become the world's fifth-largest consumer market by 2025.

• The middle class will increase tenfold. As Indian incomes rise, the shape of the country's income pyramid will also change dramatically. Over 291 million people will move from desperate poverty to a more sustainable life, and India's middle class will swell by more than ten times from its current size of 50 million to 583 million people.
  

• Marked shift away from basics towards discretionary spending. Indian spending patterns will evolve, with basic necessities such as food and apparel declining in relative importance and categories such as communications and health care growing rapidly.
  

The full report has a wealth of data that will be a useful reference for anyone interested in the Indian consumer market.

The 2007 e-Readiness Rankings

The Economist, along with IBM, has published this year's assessment of the state of information and communications technology in 70 different countries. The rankings, which have been published since 2000, measures a wide range of factors that collectively aim to measure the ability of a country to benefit from investments in information technology and communications infrastructure. The complete report is available here (it's free and you don't need a subscription to the Economist). It's an interesting read.

A couple of facts from the rankings:

• Denmark is the highest ranked, while the US and Sweden are tied for second place.
  
• The highest ranked developing countries are Estonia and Slovenia, at 28 and 29, respectively.
• Among the large developing countries, South Africa is the highest ranked at 35, followed by Turkey at 42 and Brazil at 43.
• Among the BRIC countries of Brazil, Russia, India and China, Brazil is the stand-out at 43. India, China and Russia are grouped more or less together at 54, 56 and 57 respectively.

The methodology used the generate the ranking is interesting and illustrative into what drives adoption of technology at a macro level. The rankings used the following six criteria, listed below along with their weight in the overall calculation:

• Consumer and business adoption (25%). Per capita spending on IT, levels of e-commerce activity.
• Connectivity and technological infrastructre (20%). Access, availability and cost of internet access.
• Business Environment (15%). General business climate, including political stability, taxation, labor policies and opennes to investment.
• Social and cultural environment. (15%). Literacy, training, and more generally, the "capacity" to ulitize the technology if it is available.
• Government policy and vision (15%). Government adoption of information technology, online procurement, public services online.
• Legal environment (10%). Ease of new business creation, intellectual property protection.

Interestingly, India ranks higher than China or Russia despite having a significantly poorer score for connectivity and infrastructure. It scores much higher in the legal environment and government policy and vision criteria, pushing up its overall rank.

Coda

Now that I'm moving to India in a few weeks, I find myself reflecting on the fifteen or so years I have spent in the US. When I left India in 1991, it was a country that bears little resemblance to the country I will return to next month.

The most apparent changes are the superficial ones: glitzy shopping malls (there were none in 1991) and the profusion of cable TV networks (there was no cable TV in 1991), among others. There are deeper changes too. The one that strikes me more than anything else is the sense of possibility and confidence I see in today's high school and college students. When I was in high school, the limitless possibilities that follow from rapid economic expansion was not something we really conceived of in any meaningful manner.

A nice little illustration of all this can be found in the foreign exchange situation then, and now. In 1991, right was I was getting ready to leave for the US, India's balance of payments weaknesses suddenly caused a crisis. The government was close to defaulting on its debt, and foreign exchange reserves had dropped to about three weeks worth of imports - about $6 billion. As part of a package of reforms, India moved from a fixed to a floating exchange rate, which immediately caused a severe devaluation. I remember my father being quite upset, as my education in the US suddenly became 50% more expensive than it had been a month before!
(If you're interested, you can read more about the 1991 currency crisis in this IMF paper).

Contrast that to today. For those of you who deal in India-US cross border issues, you're probably already aware of the rupee's appreciation against the dollar over the last six months. In fact, the rupee is at an at an 8-year high against the dollar.

Take a look at this exchange rate chart from Oct 06 to today:

The rupee has appreciated from 45.7 per USD in October last year, to 42.6 per USD currently. Foreign exchange reserves have ballooned to almost $200 billion today. It's a world away from 1991.

Long Lived by Design

Picking up where my last post left off, the issue of data longevity is specially important to developing economies where the process of digitizing government records and making government services available online is just beginning. The lessons to be learned from data loss from the early adopters in more developed economies should be taken to heart.

There's no question that this is a well-understood problem and many projects are tackling different aspects of it. For example, open standards such as ODF reduce the risk of unreadable data. Digitization and hosting of content by service providers offloads the problem from individual consumers to service providers who are, presumably, better suited to deal with it. At the cutting edge, there's even talk of using bacteria for long-term data storage!

My point is not that adequate steps are not being taken. My point is that product design should incorporate principles with longevity in mind. What might these principles look like? A great place to start is by looking at the Clock of the Long Now, conceived by Danny Hillis (of Thinking Machines fame). As he explains the genesis of the project:

I want to build a clock that ticks once a year. The century hand advances once every one hundred years, and the cuckoo comes out on the millennium. I want the cuckoo to come out every millennium for the next 10,000 years. If I hurry I should finish the clock in time to see the cuckoo come out for the first time.

This seemingly quirky endeavor is actually a deeply insightful way to examine our notion of time and its impact on technological progress. Hillis lays out a list of design principles for his 10,000 year clock.

• Longevity: The clock should be accurate even after 10,000 years, and must not contain valuable parts (such as jewels, expensive metals, or special alloys) that might be looted.

• Maintainability: Future generations should be able to keep the clock working, if necessary, with nothing more advanced than Bronze Age tools and materials.

• Transparency: The clock should be understandable without stopping or disassembling it; no functionality should be opaque.

• Evolvability: It should be possible to improve the clock over time.

• Scalability: To ensure that the final, large, clock will work properly, smaller prototypes must be built and tested.

These principles seem to me to be broadly applicable. If your product, software or hardware, may be used for any duration longer than five years, you would do well to consider each of these issues (adapted for your specific situation) and how you plan to address them in your product.