India Transformed

by Rakesh Mohan

  What has driven such high aspiration? And what have been the things Indian consumers have aspired for? Anthropologist Arjun Appadurai has written extensively on a cultural process that he calls the ‘social imaginary’, explaining that imagination was not an individual escape into a private world but a collective activity—no longer mere fantasy (opium for the masses whose real work is somewhere else), no longer simple escape (from a world defined principally by more concrete purposes and structures), no longer elite pastime (thus not relevant to the lives of ordinary people), no longer mere contemplation—it is a form of negotiation between individuals and ‘globally defined … possibility’.2 Imagination uses informational resources to build the story of a better life. The Indian consumer has seen an explosion of information of all kinds, notably through television, with its ever-increasing range of programmes in all languages and watched several hours a day given the absence of other avenues of entertainment and a sea of new products available on the streets, in shops and through advertising. Rich or poor, they have used this information to imagine a better future, with products and services as a very important part of the story. As prices of almost everything have tumbled (cell phones, talk time, clothes, air travel), many aspirations have got realized too, paving the way for more. The increased variety and improved quality of supply at different price points and benefit levels, as compared to earlier times, has also helped balance consumer budgets better and make their consumption dreams come true faster.

  Totally Digital: Nowhere else in the world have so many modest-income people been touched by so much technology, and embraced it so readily. The Indian consumers’ digital quotient (DQ) is remarkably high, and will only increase as the millennials come of age. They also blast the paradigm that is implicit in many people’s heads—that high technology is for the rich and the low for the poor. In fact, interestingly, many poor Indians will be served with digital products only as they enter the financial-services space, because physical services are too expensive and the ticket size of their transactions too low for the conventional physical methods of serving them. India’s welfare state may soon become entirely digital to fight corruption. Well before Aadhaar became ubiquitous, the Indian Railways made their ticketing totally online through a network of bricks (authorized agents) and clicks, making it the world’s largest e-commerce entity in terms of the number of customers served. Indian consumers have far fewer problems with technology than we would imagine—in fact, they embrace it. Wouldn’t you, if you didn’t have to stand in a queue at the crack of dawn in a railway station, not sure till later if tickets were available, worried about black marketeers muscling in and hoarding tickets? Now, with a PNR number given to you by your agent or by the computer, you can send an SMS and check the status of a waitlisted ticket; you know that everyone gets an equal shot at travelling, especially during the holiday season’s rush when demand for seats is far greater than their supply.

  Modest-income consumers also say that they prefer transacting on the phone or email or with a ATM machine because they don’t get discriminated against because of what they wear or the quantity they buy or the language they speak (or don’t, as in the case of English).

  The entire airline ticketing and travel process is a good way to see how much the consumer and consumption environment has evolved. It’s e-ticketing all the way. Now, at last, security staff at the airport gates are ready to look at your phone screen and not demand a physical printout before letting you in.

  Prices of phones and telecom have trended downwards and the ‘sachetization’ of data buying has happened too. So Indian consumers can pay per song or for a week of WhatsApp during a wedding, when group conversations are at a peak. Prepaid cards, the dominant mode of consumption, make for discipline in expenditure too.

  The digital Indian is here and ready to do more and more the e-way. Several government services have gone phone+Internet. In order to manage the costs of serving a scattered market with lots of people buying a little bit each, companies too have actively made their customer interface digital.

  And for those who hoped that a digital society would forge a more homogeneous, more modern outlook reflected in new consumer preferences and lifestyles, Indian consumers have proved just the opposite. Technology has made it easier to form communities, enabled parochialism across vast geographies, and Indian consumers can now shop for exactly what they want anywhere they are. There is more and easier access to all forms of religious practice. Translations of ancient prayers are now on the Internet; astrology has not vanished—in fact, its practice has been made easier by computerized horoscope-casting. Temples have gone online and offer e-services. If someone still needs proof, here is the story of a young person who was heard asking in a chat room, ‘If I cut and paste this mantra 108 times, will I get the same punya as when I recite it 108 times as prescribed?’

  I Want It All My Way: Indian consumers never think in terms of this OR that—they think always in terms of this AND that. Yes, I want my pizza and burger but can you make the toppings tandoori chicken and the patty potato instead of beef? Yes, I like noodles but wholewheat with masala flavour, please. The repertoire of mix-and-match cuisine in any home, rich or middle-income, is larger and more diverse than ever before. Indian consumers don’t suffer from the confusion of contradictions—they e-shop but also enter a supermarket and want to ask someone, ‘Where do I find this colour, can you check inside if you have it?’ They shop on Amazon and they get to buy packaged cow dung (six varieties) for religious ceremonies. They have guided the creation of a whole new category of women’s apparel called Indo-Western and kurtis—short tunics that can be worn modestly with trousers.

  Pragmatism Trumps Indulgence: Indian consumers are actually quite boring. Barring a tiny sliver, they prefer pragmatic, ‘do good’ consumption over impulsive, ‘feel good’ consumption.

  I was once asked by an American luxury-brand owner when upper-income Indian women would recognize the value of brands and be ready to spend $5000 on a handbag. My answer was that she already recognizes the value of brands and is using her money to send her kids to Harvard, after which she may consider the handbag.

  Seven out of ten homes in India have a young child and the aspiration that unites all Indians is to provide their children with the escape velocity to move into a higher orbit of living. Also high up on the aspiration list is owning a home with amenities that make for easier living. The lower-income Indian consumer wants to own a weatherproof house; the little better-off consumer wants electricity and water connections of his own. Durables that are productivity tools and help save time and boost income are high priority. The two-wheeler and the cell phone are the most wanted productivity-tools as is the refrigerator and LPG (enabling women to be more productive and work longer hours outside the home). Spending on entertainment and eating out (seen as entertainment too) are also high priority for Indian consumers, who see them as a reward for the hard daily slog—stuck as they are between the pressures of a demanding modern economy and a creaking infrastructure, the logistics of living are very tough. However, it has to be entertainment which is affordable and not wasteful. Frequency of consumption of entertainment trumps quality and splurging. As Indian households have increased their incomes, they have opted to spend on pragmatic quality-of-life improvers (to make up for the pathetic state of public goods) for themselves and their children, on productivity tools that help them earn more and spend less, and on affordable entertainment and indulgences.

  Data presented by the National Sample Survey show that the fastest growing categories of expenditure between 1993 and 2015 were education, conveyance, consumer durables and healthcare.3

  Indian consumers have interesting and sophisticated value-processing logic and consume intelligently to optimize cost and benefit. The overlap between two-wheelers and cars is very high and car-owning households have cheaper brands of two-wheelers. One is the status symbol for the family and the other the workhorse. However, in families that can
not afford a car and only have a two-wheeler, the top-of-the-line brand is bought. Lower-income consumers will tell you that they subscribe to two pay movie channels because that keeps teenage boys at home—otherwise, they will go out and end up spending money—and also mothers-in-law so that they can cook dinner while the daughters-in-law work late and earn overtime wages. Consumers will tell you that a second-hand refrigerator signals status better than an expensive shampoo in the bathroom; and that going to the nearby hole-in-the-wall beauty parlour and getting hair blow-dried and styled is more gratifying than buying expensive haircare products for use at home. But modest-income consumers will also tell you that faced with the choice of using a cheaper material to plug a hole in the heart and a more expensive one, they will opt for the latter—the doctor’s fees, cost of surgery and attendant expenditure must not go to waste with even the slightest chance of failure.

  Worth a Lot, Grossly Under-penetrated and Far More Demanding than its Worth!

  Despite the significant growth in per capita income between 1991 and today, in absolute terms the bulk of Indians are far poorer than their counterparts in most of the world. Even by the broad-range definition of the ‘global middle class’ ($10–100 per day per capita), only 5 per cent of Indians qualify today for the category and by 2020-21, it will still be only 10 per cent that qualify.

  The oft-cited fact that the growth in sales of many luxury goods in India is significantly higher than their growth in sales in the rest of the world is not surprising, because even a small percentage of a large number is a large number. When a luxury auto brand says India will be their second- or third-largest market in 2020–21, it is not a statement of how wealthy Consumer India is; rather, it is a statement of how thinly populated the rich world is and how even the tip of the iceberg, the small percentage of India that is equivalently rich, is many times larger. It stands to reason that low prices will be the way to unlock the enormous collective buying power that Consumer India has. In recent times, we have seen several examples of this—shampoo sachets, cell phones, organized retail for second-hand two-wheelers, telecom services, and so on—and many more examples have been discussed earlier in this chapter.

  The problem though is that Consumer India is a demanding monster, made even more so by the exceptionally personalized service and low-cost offerings from low-overhead small suppliers who don’t invest in scaling.

  In the past twenty-five years, Consumer India has seen the prices of almost everything fall and the quality of almost everything go up. People are now used to this and their expectations have been shaped accordingly. As traditional marketers started facing margin pressures and talked of raising prices, along came the e-commerce wave and hyper-funded start-ups, and deep-pocket global companies locked in battle over one of the most valuable and difficult markets in the world. The sharing economy is in full force here, giving further boost to consumers who expect—and get—the moon for six pence

  Welcome to a consumer base that is overwhelmingly young, very, very large, hugely aspiring and consumption-loving, growing its income at a faster clip relative to the rest of the world, and one that has evolved over these past twenty-five years into one of the most attractive and one of the most challenging markets to serve.

  28

  Building a Global-scale Corporate in India

  Mukesh D. Ambani

  The born dreamer and natural doer that he was, my father dreamt of building a global-scale Indian business empire. And in economic reforms, he saw the opportunity to turn his dreams into reality. By seizing the opportunities created, Reliance Industries Limited has now emerged as a world-class and world-scale Indian business enterprise.

  Introduction: Indian Economy through the Ages

  The narrative about a new, emerging India creating and nurturing businesses having a global scale and reach is not new. It is, in fact, the reassertion of a forgotten tale in the history of this country and of its intrepid entrepreneurs. In precolonial times, India had been the envy of the world as a self-reliant and prosperous economy. Even until 1700 AD, India had commanded a dominant share of the global economy. Its merchants and traders serviced commerce across the seas, and its textiles and handicrafts set the standards for ingenuity and craftsmanship. Before the eighteenth century, India and China were the two largest economies in the world.

  Colonialism undid this vibrant economy. As noted by Angus Maddison, the British economist, India’s share of the world’s income fell from 24 per cent in 1700 (compared to Europe’s share of 25 per cent) to a lowly 3 per cent by 1950.1 During colonial rule, India was by design relegated to becoming a mere supplier of raw material on the one hand and a consumer of finished products of British industries on the other. The biggest blow came in the form of massive imports of cheap textiles from England, breaking the back of some of the world’s most skilled craftsmen and traders.

  Post-Independence, India adopted a mixed economy. The 1980s heralded the first tentative steps towards some form of economic liberalization. However, the reform process got a serious push only in 1991, in the face of the severe balance-of-payments crisis that the country found itself in. India’s foreign-exchange reserves had dipped to perilously low levels—just enough to pay for seven weeks of imports.2 The country had been pushed close to the edge of default. The situation was so precarious that gold had to be pledged abroad.

  The government then signalled a systemic shift towards a more open economy. The policy discourse shifted to a greater reliance upon market forces; a larger role for the private sector, attracting foreign investment; reforms related to public-sector enterprises; financial-sector reforms; and a restructuring of the role of the government itself.

  My father, Dhirubhai H. Ambani, was among the few vocal supporters of the dismantling of the old policy regime. He was at the forefront of this campaign for change. Few people today remember that the first public discourse on a wide range of reform issues was inspired by him. It was he who suggested to the Observer Research Foundation to hold a seminar on economic reforms and seek the views of opinion leaders in the country. In a two-day seminar at the India International Centre in Delhi in July 1991, the inevitability of reform was welcomed by everyone. Several key figures of the time as well as numerous professors, teachers and students from as far off as Kolkata and Ahmadabad attended and contributed to this seminar. A set of papers was presented for discussion and the conclusions of the seminar were printed. My father patiently listened to every recorded discussion for hours and sought the opinion of a wide cross section of people on the issues raised in the seminar—so passionate was he not only about the process of reforms but also about what people at large thought about the measures being proposed.

  This was notwithstanding my father’s considerable early successes in doing business in the pre-1990s era. His strength was his conviction that in the long run, India’s—as also Reliance’s—growth would stagnate without the efficiency, innovation and quality improvement fostered by competition in the market. The born dreamer and natural doer that he was, he dreamt of building a global-scale Indian business empire. And in economic reforms he saw the opportunity to turn his dreams into reality.

  There was another reason why my father supported economic reforms. He never viewed government policies from a narrow industry perspective. Rather, his reference point was what benefited India as a whole. It was his unshakeable belief that consideration of short-term gains must never be allowed to triumph over long-term opportunities for both the nation and the company. A continent-sized country like India, with the second-largest pool of human resources in the world, needed to confidently compete globally—and win. His own life experiences had made him a believer in liberalization and globalization long before the validity of these ideas and concepts became the recognized drivers of policy action in India.

  In the ensuing years, successive governments unveiled major reform measures. The exchange rate moved from a fixed level to a market-determined rate. Customs duty reduced from a peak
of 200 per cent to 50 per cent—falling even lower in subsequent years.3 India opened up its companies to foreign direct investment (FDI) and its stock markets to foreign institutional investors. Banking reforms and major capital market reforms were announced. Three important institutions for better governance of markets gave further impetus—the Securities and Exchange Board of India (SEBI), to serve as a statutory capital markets regulator; the National Stock Exchange (NSE), as a competitor to the Bombay Stock Exchange (BSE), the oldest stock exchange in Asia; the National Securities Depository Limited (NSDL), to facilitate electronic stocks for paperless authentication, trading and delivery. Together, they boosted the automation of capital markets, paving the way for transparent, screen-based trading, signalling that India was now ready to do business in a new way.

  Economic Reforms and Changes to the Corporate Sector

  The process of reform, once initiated, was bound to result in a major shake-up in the highest echelons of the Indian private corporate sector. It brought in changes that enabled new players in completely new industries to break into the top rung of the Indian corporate ladder. A wave of new entrepreneurship soon transformed the way of doing business, allowing many new and hitherto-unknown companies to come up rapidly.

  The data shows this churn. Of the country’s top twenty business houses today, only seven have retained that status since 1990, just over twenty-five years ago. A list of the top fifty companies today would, in fact, show that just fifteen of them had registered their presence on the charts in 1990. By way of contrast, the absence of churn before this period becomes self-evident if we examine the forty-year period predating the 1991 reforms, that is, from 1950 to 1990. We find eleven names holding sway among the top twenty through all of the forty years.4