CONSUMER BEHAVIOUR ASSIGNMENT

VIMAL ROMEO
ROLL NO. 174

Question 1: Is the deviation in approach to evaluate the development of sates as welcome approach?
The Raghuram Rajan committee has come-up with a Multi dimensional Index of backwardness based on per capita consumption as measured by the NSSO, the poverty ratio, and a number of other measures which correspond to the multi dimensional approach. Some of the criterias used are
(i) Monthly per capita consumption expenditure, (ii) Education, (iii) Health, (iv) Household amenities, (v) Poverty rate, (vi) Female literacy, (vii) Percent of SC-ST (iv ) Population, (viii) Urbanization rate, (viii) Financial inclusion, and (x) Connectivity.

The main findings of the committee are

The Committee has recommended a fresh approach that gets rid of the Special Category classification for states with high funding needs. Funding from the Centre to the states will be based on a states development needs as well as its development performance. The Panel headed by Raghuram Rajan has worked on a Multi Dimensional Index. The Index categorizes backwardness of states based on monthly per capita consumption expenditure, education, health, household amenities, poverty rate, and female literacy, percent of SC-ST population, urbanization rate, financial inclusion and connectivity. Depending on how it scores on the Multi Dimensional Index, each state will be categorized into: Least Developed, Less Developed and Relatively Developed. Ten states that score above 0.6 (out of 1) on the composite index have been classified as Least Developed, the 11 states that scored from 0.4 to 0.6 are Less Developed and the seven states that scored less than 0.4 are Relatively Developed.

State
0.798 Odisha 0.765 Bihar Madhya Pradesh 0.759

Underdevelopment/Need Classification Index Least Developed Least Developed Least Developed 0.571 0.551 0.546 Less Developed Less Developed Less Developed
Relatively Developed Relatively Developed Relatively Developed

Manipur West Bengal Nagaland

Tamil Nadu Kerala Goa 0.341 0.095 0.045

With the help of these newly introduced criteria, the government will be able to provide the adequate fund to the states which deserves it the most. Many important factors such as health, education, female literacy etc which were not given proper importance before is taken into account now. So according to me, the multidimensional approach is most welcome and it will help in finding the places which requires the funding. The formula for allocation of central government funds can be represented as follows: Percent share of state in total central government funds allocates = 0.3% + Percent share of state based on need + Percent share of state based on performance

Question 2: Which companies do you think will grasp and use the marketing concept? Question 3: Why do you think so?

In my openion, the FMCG companies will be the first in finding the opportunities. They will be able to find out the states which are ranked higher and target their products in those states. They will look upon the important criteria such as population, urbanization rate, education etc and will come up with the best products for each states.. The needs of the consumers in each these states will be different. For example, the consumers of states like Bihar will require low cost products and they will be willing to compromise on quality, whereas the consumers of states like Kerala may be more quality conscious. FMCG companies will be able to tap these opportunities first using market research techniques. As they have experience in marketing concepts like advertising, product improvement etc, they will be able to react fast.