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Friday, February 11, 2005

The Great Indian Middle Class

A recent Times article gave a breathless account of the all consuming Indian middle class, peopled with characters like Amit:
He wears Levi's and Nike, eats at McDonald's or Pizza Express, shops in malls full of Benetton, Reebok, Lacoste and adidas, and catches up with friends in the evening at a pub called 10 Downing Street.
Much of this article is the same old eulogy, bereft of any sociological insight and full of the same banalities as other pieces describing the momentous changes taking place in India. However, I did like the account of 'moving fridges' and the shifts in symbolic meaning that accompany the movement of fridges from living room to kitchen. Similar to my analysis of the place of television sets in north Indian households and what they express about conjugality and ideas about the jointness of families.

February 04, 2004
No one saves for a rainy day nowBy Amrit DhillonA decade ago the average Indian's consumer choice amounted to a lumbering Austin Ambassador and Colgate toothpaste. But an educated population and unprecedented growth in the software and back-office service sectors have created a new young and wealthy middle classTHE DAY MIDDLE-CLASS Indian families began keeping their fridge in the kitchen instead of displaying it in the living room like a trophy - a beige plastic doily draped on the top to ward off dust and scratches - was the day the consumer society finally arrived in India. The fridge, and its position in the family home, has come to symbolise a revolution in the way Indian people think and live.
In the bad old days of a decade ago, families gave the fridge pride of place in the home because buying any consumer durable was a major decision for people with little disposable income. Frugal and self-denying, if they decided to buy a new TV or stereo system the average family would diligently research models, seek expert opinions, compare prices in ten shops and, finally, hold a family summit to discuss the findings.
Often, the verdict would be to hang on to the ten-year-old TV for another year by having it repaired yet again. Electrical resuscitation was universal in the India of a decade ago. Consumer durables were denied a dignified death. Kept on ventilators, they were allowed to gasp their last only if the electrician announced that any further surgery would kill the patient.
The new India is a very different place. Walk into the dazzling shopping malls in Hyderabad or any other Indian city and the signs of a transformation in the lifestyle, spending habits and mentality of an entire class are etched into the landscape - busy roads, bright street lighting (even Delhi roads were Stygian a few years ago), neon lights, huge billboards and hordes of frenzied shoppers.
Until 1948 Hyderabad was the capital of India's richest princely state, a charming feudal city famed for pearls, biryani and palaces and governed by a dynasty of Muslim rulers called nizams. Today it competes with Bangalore to be the high-tech capital of the subcontinent.
Mobile phones jingle everywhere, drowning out bicycle bells. Amit Kumar, 26, changes his mobile every few months. Now, it's a Panasonic with every feature except a camera. Four months ago he had a Nokia. He wears Levi's and Nike, eats at McDonald's or Pizza Express, shops in malls full of Benetton, Reebok, Lacoste and adidas, and catches up with friends in the evening at a pub called 10 Downing Street.
Another Hyderabad resident, Gaurav Roy, who recruits staff for GE Cap's call centre in the city, says that when he returned from Australia four years ago and told friends he would cook pasta for them but needed oregano, they asked: "What's that?" Such exotica was unavailable because of India's policy of sealing off the country from imports to protect domestic industry. Now Roy can buy extra-virgin olive oil, sun-dried tomatoes, broccoli, Dijon mustard, Twinings Earl Grey and balsamic vinegar.
"I saw Matrix Reloaded last month at the local Imax," he says. Anywhere else, this would be a banality. Here, it shows how the country has changed beyond recognition. Roy inhabits the new India, where economic reforms and annual growth rates of around 7 per cent have led to unprecedented prosperity and higher incomes.
The most successful new industry to emerge from this growth was the software industry, largely because the Government absent-mindedly forgot to interfere in what was a new sector. Had the Indian bureaucracy become involved the industry would have been stifled to death. New pioneering companies such as Infosys, Wipro and Tata Consultancy Services began selling software solutions to American and European firms. As the orders grew, they became software giants. In fact, the industry as a whole grew by 50 per cent a year, prompting Bill Gates to predict that "India is likely to be the next software superpower". By 2000 more than 200 of the Fortune 1000 companies were outsourcing their software requirements to India rather than handling them in-house.
India's software success rests on its human capital. It has the second-largest pool of English-speaking technical power in the world (unlike China, where the lack of proficiency in English is a problem). And the number of world-class scientists and engineers it churns out every year is also the second highest in the world, after the US. They are also cheap: their salaries are around a quarter of what their foreign counterparts earn . As the realisation of this human talent spread, foreign companies realised they could make cost savings of 40 per cent by outsourcing much of their white-collar work to India - answering credit card inquiries, transcribing medical notes, processing insurance claims etc.
That's when another boom occurred - the call centre business that is prising white-collar jobs away from America and Britain. Norwich Union is the latest British company to announce that it is exporting jobs to India. UK drugs giant GlaxoSmithKline has just decided to outsource the development of new drugs to an Indian drugs company. As the country's economy booms, financial analysts McKinsey predict that by 2008 IT services and back-office work will swell fivefold to a $57 billion annual export industry employing four million people and accounting for 7 per cent of India's GDP.
Much of that work will find its way to Cyberabad, the Hyderabad surburb where you find Oracle, Dell, Microsoft, GE Caps, Infosys, Wipro, HSBC and IBM, all housed in glittering steel and glass fortresses and surrounded by the huge, randomly-placed, Stonehenge-like rocks that are a feature of the local landscape. The city is full of engineering colleges and computer institutes churning out bright young English-speaking graduates. Critics such as the Booker prizewinner Arundhati Roy sneer at call centres for being glorified sweatshops and producing "cybercoolies", but the salaries they offer are extraordinary for India. "Where graduates used to get starting salaries of 5,000-9,000 rupees (£68-£120) a month, they now get 18,000- 30,000 rupees," Gaurav Roy says.
Such salaries are chickenfeed compared with the West, but in India, where the cost of living is low, they go a very long way. If Indians are spending more than ever it's because they have cash in their pockets. With money to burn and no time for the Gandhian ascetism of the earlier generation, the young are fuelling the retail boom. A study by the property consultants Knight Frank shows that India will have about 55 new shopping malls by 2005. Delhi alone will have another 23. Hyderabad will have eight more by the middle of this year.
Unprecedented levels of disposable income are fuelling the retail boom. Consumer spending has grown at an average of 12 per cent a year over the past decade. The National Council for Applied Economic Research in Delhi estimates that the "consuming class", or those with an annual income of 45,000-215,000 rupees, will constitute 75 million households by 2006.
But there are two other reasons for the explosion in consumer spending. First, the younger generation wants the good life. Second, shopping is finally therapy instead of the retail purgatory it used to be in the days when the absence of choice meant that Indians could buy any car as long as it was an Ambassador (the old 1950s Morris Oxford), any TV as long as it was a Phillips and any toothpaste as long as it was Colgate.
Buying a car used to be such a momentous occasion that it would be whisked straight from the showroom to the temple to be garlanded and blessed. Its proud owners would hang net curtains on the windows and keep the plastic covers on the seats for weeks to show off its newness.
The old India had no washing machines, no furniture shops, no restaurants outside the five-star hotels, no fast-food places, no supermarkets, no department stores, no frozen foods, cereals or juices, no wine, no credit cards, no ATMs, no discos or bars apart from those in the big hotels, no cable television and no tampons.
If you wanted contemporary furniture you borrowed a dog-eared Ikea catalogue from a friend and got the local carpenter to copy a bookshelf or sofa. If you wanted a fashionable outfit you either had to go to London or New York or buy a foreign magazine and ask the tailor to run up an identical outfit.
Those days feel like another historical epoch when compared with the lifestyle of Vinod and Shalini Bachala, interior designers in Hyderabad. Vinod drives a Ford Ikon. His shirts are from Arrow, his trousers from Lee. Their house has a DVD player, microwave, washing machine, flat-screen TV, stereo system, fridge and hob. He carries an Ericsson with a camera, hers is a Samsung.
Vinod and Shalini are part of India's 19 million mobile users (up from six million a couple of years ago). Thanks to cheap phones and rock-bottom tariffs (about half a cent a minute), when they call the plumber or electrician these days he comes with his own mobile, even though his home probably has no running water or flush toilet.
After work the Bachalas go to a bar, swimming or the cineplex. They buy their groceries at Foodworld supermarket or RPG's hypermarket and eat out regularly, something their parents used to do three times a year. Their children go bowling or go-karting at weekends instead of visiting aunties and uncles, as Vinod and Shalini did when they were growing up. Loans are so cheap that they have just taken one out to build a second home. "When we go abroad we no longer come home with bulging suitcases full of the stuff that friends and relatives used to beg us for - Marks & Spencer's knickers and bras, Revlon lipsticks, Black Label, Oil of Olay and Chanel --because everything is now available here," Shalini says.
In Indian middle-class culture frugality was a virtue and savings accounts were crucial. Conversation was peppered with the middle class obsession with "FDs" (fixed deposits) and anyone known to have borrowed from the bank to buy things for the house was deemed to be in a state of turpitude. Instant gratification was a vice, to be enjoyed only by the rich elite.
In 1991, when India moved away from a state-directed economy and opened markets to global competition, multinationals flocked into the country, pulses racing at the prospect of profits. Within a year they were banging their heads against a wall. The Great Indian Middle Class, this fabled beast that hungered for material fulfilment after enduring decades of brand deprivation, turned out to be deeply masochistic. It believed in self-denial, not spending.
For the new generation, deferred gratification is as uncool as the grey polyester safari suits their fathers used to wear. With cheap and easy credit available, young professionals just take out a loan if they fancy a Bose wave radio or Poggenpohl kitchen. "I spend on two restaurant meals what my mother used to spend running the house for a month. She still gets nervous when she sees my restaurant bills," says advertising agency owner Ram Reddy, who is handling the campaign for Chief Minister Chandrababu Naidu in next March's local elections.
Naidu has done much to push Hyderabad into another orbit. He represents a new breed of politician unencumbered by the old ideological baggage that demonised Western multinationals. He just wants to get the Bill Gateses and the Michael Dells of the world to invest in his state. A new international airport is being built to rival those of Delhi and Mumbai and he is trying to get India's first Formula 1 Grand Prix racing track built in Hyderabad.
Reddy attributes much of his newfound prosperity to Naidu. "My friends and I earn in a month what our fathers earned after 30 years' work. I can splurge when I want to thanks to my income doubling in the past three to four years, and that's a result of Hyderabad becoming a more attractive destination for investors."
He drives a Mitsubishi Lancer. His father used to drive an Ambassador. A decade ago a traffic jam in Hyderabad consisted of a few cars jostling with bicycles, decrepit buses and anorexic cows. Now Korean and Japanese car makers are battling for a growing market; car sales in November rose by 41 per cent on the previous month.
India's middle class, already bigger than the population of the United States, is expected to grow to 445 million by 2006. Moreover, the age profile of the population is likely to sustain consumer spending. More than 45 per cent of Indians are under the age of 20.
Amit possesses hardly any savings, nor does Reddy. Both live for the day. Their parents spent their entire lives squirreling away the little that was left after running the house. Among their friends, no one saves much. "I'll tell you why my friends are not saving for a rainy day, it's because they don't see a rainy day coming," Reddy says. "If they lose a job, they'll get another one. They're optimistic about the future so there isn't the same fear."
The image of India in the eyes of the world has also changed. It is known for its brainpower, its millions of talented engineering, business and medical graduates. When Goldman Sachs predicted, as they did recently, that India will become the world's third largest economy by 2050, Indians did not dismiss it as hyperbole. They simply nodded.
In fact, a growing number of Indians who left to settle in the US and UK are coming back. Bawant Anand, whose furniture shop, Khazana, is patronised by Hyderabad's elite, says his overseas friends are envious when they visit. "I enjoy most of the same material things as they do but I can also afford a driver, maid, cook and nanny. They see that they can live like kings here. They need never iron a shirt again."
Of course, the much-debated question is whether cities such as Hyderabad are islands of prosperity surrounded by poverty, despair and the same old bullock carts. The new India is still work in progress. India still looks like a Third World country. Illiteracy and pathetic infrastructure are still problems. People in the capital still suffer power cuts. Worse, about 41.6 million Indians are unemployed. Such is the desperation for jobs that when Indian Railways advertised 22,000 posts last month, 740,000 people applied.
For many in the countryside prosperity has created a new rural middle class, but others remain hopelessly poor, untouched by the changes that have swept through the cities.
But there is even a new attitude towards India's immemorial poverty. The feeling is growing that its gigantic one-billion strong population can be a fantastic resource rather than a burden and that poverty is not immutable.
"India's boom is being driven by IT and we in the younger generation can really deliver the country from poverty," Roy says as he checks the time on his Asprey watch, picks up his state-of the-art laptop and walks out of the hotel lobby.

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