Demand

Curve
Glimpses into the Indian Economy and
Consumers

Indicus Analytics
 1. Heterogeneity in rural markets
Unlike in urban markets
where demand is highly
concentrated, rural markets
tend to be spread out. This
increases the sales efforts
and costs
Source: Market Skyline of India
Most market size data on rural India takes the aggregate
households or household spend for a predetermined geographical
boundary. District boundary is the most used defining
characteristic, though some of the more research savvy look at
market sizes down to the block level, and almost no one looks at
up-to-date village level data for their sales and market planning.
Unlike in urban markets where demand is highly concentrated,
rural markets tend to be spread out. This, of course, dramatically
increases the sales efforts and costs. Consequently, though many
rural markets look good on paper, in reality they are quite costly to
service.
The best way to compare rural locations is, therefore, to look at
market density, or expenditure per unit area. The accompanying
graphic provides the 10 best rural locations in India as per this
parameter. We find that markets that are otherwise quite large, do
not show up as the best in terms of market density.
Large parts of Gurgaon have highly educated households with
organized-sector jobs living in its rural areas. Moreover, high land
values have also dramatically increased the wealth and incomes of
its traditional residents. Gurgaon’s rural area, therefore, scores
high because of the growing suburbia.
The story of Kerala is different. Cash crops combined with
returning international workers, continued repatriations and high
educational profiles make its rural markets similar to urban
markets.
The story of Jharkhand and West Bengal’s districts is, however,
different. These rural markets are characterized not by high per
household expenditure, but a high population density.

Unlike in urban markets
where demand is highly
concentrated, rural markets
tend to be spread out. This
increases the sales efforts
and costs
The districts of Malda, Murshidabad and
Birbhum in West Bengal and Sahibganj in
Jharkhand have extremely fertile land fed by
the Ganga that has contributed to the high
population densities in these areas. Cross-
border trade with Bangladesh also contributes
to the high market density levels.
These four contiguous districts have a large
number of poor, underprivileged tribal
population, and poor education levels. These
rural markets, therefore, are more agriculture-
dominated, combined with low per capita
incomes. Consequently, these are not
premium markets such as the ones in
Gurgaon or Wayanad, Kollam or Kottayam.
They are large markets characterized by
greater demand for low-quality, low-cost
goods and services.

Source: Market Skyline of India
Density, therefore, is just one measure that
companies interested in servicing rural markets
need to look for. There is a large heterogeneity
in the character of rural markets. The Union
territories of Daman and Diu, Lakshadweep and
Chandigarh top the charts in rural market
density, while among the states it is Kerala,
West Bengal and Haryana that lead.
However, there are significant differences in the
market characteristics in these states. Some
such as those in Kerala are large markets of
premium goods and services—but they have a
mobile consumer base that can travel to
neighbouring cities for major purchases.
At the other extreme are the large markets such
as those in West Bengal, that are characterized
by a poorly educated, poor and underprivileged,
relatively immobile but large consumer base.
These markets would be low in purchases of
premium products or durables. Demand Curve
is a weekly column by research firm
Indicus Analytics Pvt. Ltd on consumer trends
and markets.
2. Suburbs have come to be independent economic entities

These sibling locations

include communities that
may be large such as Navi
Mumbai or small such as Salt
Lake or spontaneously arisen
such as large tracts of
Ghaziabad, with good urban
planning such as Noida or
without quality infrastructure
such as Gurgaon

Source: Market Skyline of India

No analysis on the top Indian cities can be complete without a mention of the suburbs around them.
Typically, a suburb is a residential area or community outlying a city such that those living in the suburb
can commute to the main city for their economic needs. Internationally, the term suburb conjures up
images of a relatively unspoilt, less densely populated and predominantly residential community close to
a city. In India, it is difficult to find such conditions. Whether it is Gurgaon, or Salt Lake, we find them to
be economic entities quite independent from the larger city near which they are located.

These sibling locations include
communities that may be large such
as Navi Mumbai or small such as
Salt Lake or spontaneously arisen
such as large tracts of Ghaziabad,
with good urban planning such as
Noida or without quality
infrastructure such as Gurgaon
Source: Market Skyline of India
For instance, Noida, Ghaziabad, Faridabad, and
Gurgaon are much more than mere suburbs of
New Delhi. But they are also not large enough to
be called New Delhi’s twins. These are younger
cities which may, one day, even overtake New
Delhi.
There are quite a few such locations in India.
There is Salt Lake near Kolkata, Navi Mumbai in
Thane district, the communities on Bangalore-
Hosur and Bangalore-Mysore routes in Bangalore
rural district, Pimpri Chinchwad near Pune, and so
on. And there are many more across the country,
not as well known yet, but will be known soon
enough.
These cities typically fulfil an important need that
the larger city was unable to offer. In the initial
phase they may have been unidimensional but
over time they have gained a distinct character
and momentum of their own. The lack of office
space in New Delhi, the lack of new residential
areas in Kolkata and expensive real estate in
Mumbai have contributed to the growth of Salt
Lake, Gurgaon, and Navi Mumbai. Now all three
are more than just real estate alternatives to
larger neighbours.

These sibling locations include
communities that may be large such as
Navi Mumbai or small such as Salt
Lake or spontaneously arisen such as
large tracts of Ghaziabad, with good
urban planning such as Noida or
without quality infrastructure such as
Gurgaon
Source: Market Skyline of India
These sibling locations include
communities that may be large such as
Navi Mumbai or small such as Salt Lake
or spontaneously arisen such as large
tracts of Ghaziabad, with good urban
planning such as Noida or without
quality infrastructure such as Gurgaon.
Some have a large concentration of
high-income households such as
Gurgaon, others like those around
Kolkata have a large number of poor,
still others such as Navi Mumbai tend to
have a large middle class.
There is only one thing in common
between them—they are in the
geographical vicinity of a larger city. And
they are increasingly becoming more
important than their older sibling.
Demand Curve is a weekly column by
research firm Indicus Analytics Pvt. Ltd
on consumer trends and markets.
 3. Middle class accounts for bulk of urban spending
What we find is that it is the
middle bulge of expenditure
by the middle class that
accounts for the bulk of
India’s urban consumer
expenditure

Source: Market Skyline of India

The bottom of the pyramid is the buzzword that has captured the hearts and minds of academics and
marketeers alike. Though large in numbers, the consumer spend by this segment is quite low.
What we find is that it is the middle bulge of expenditure by the middle class that accounts for the bulk of
India’s urban consumer expenditure. About 61% of total urban income comes from households that can be
classified as middle class—earning be-tween Rs75,000 and Rs 5 lakh a year.
This segment comprises the lower middle-class earning between Rs75,000 and Rs1.5 lakh a year (10% of
total urban income is from this category), the middle-class earning between Rs1.5 lakh and Rs2 lakh a
year (29% of income share) and the upper middle-class earning between Rs3 lakh and Rs5 lakh a year (22
% of urban income).
By market size, the largest urban middle-class markets are in the main cities, with Delhi in first place,
followed by Mumbai, Ahmedabad, Bangalore, Chennai, Kolkata and Pune. There are also other attractive
markets that are in the second rung and whose middle class spends between Rs5,000 crore and Rs10,000
crore a year.

What we find is that it is the
middle bulge of expenditure by
the middle class that accounts
for the bulk of India’s urban
consumer expenditure
Source: Market Skyline of India
This group of urban areas includes those
that benefit from proximity to the metros—
Rangareddy to Hyderabad and Tiruvallur
to Chennai. West Bengal has three
districts in this list, Burdwan, Howrah and
Hoogly, whose large population is a
significant factor in expenditures by the
middle class.
There are other cities as well that are
more than just suburbs of larger cities.
Jaipur is not only the capital of Rajasthan,
it is also the gateway to a large but thinly
spread market in the interiors of the desert
state. Nagpur is among India’s most
cosmopolitan cities with people from
Gujarat, Andhra Pradesh, Madhya
Pradesh and also the east, found in large
numbers. The fact that it is the closest to
being at the geographic centre of the
country helps a bit.

What we find is that it is the
middle bulge of expenditure
by the middle class that
accounts for the bulk of
India’s urban consumer
expenditure
Source: Market Skyline of India
Nashik has risen on the back of its
cooperative movement and the
technologically progressive farmers in its
vicinity. Rajkot is the capital of erstwhile
Saurashtra, an important centre for small
and medium enterprises. Baroda was
known as the cultural and educational
capital of Gujarat and though it has since
the 1970s lost this position, its large
industrial base continues to power
consumer spending.
The size and expanse of the great Indian
middle class does not follow any
standard patterns and theories. It is
created via a combination of agriculture,
industry, human capital, good
infrastructure or trade.
The story of every so-called tier-2 town is
different, but there is one thing they have
in common with each other—large
middle-class expenditure.
Demand Curve is a weekly column by
research firm Indicus Analytics Pvt. Ltd
on consumer trends and markets.
4. Smaller towns are more affected by the monsoon
So far manufacturing & service
industries have been flagging in these
cities, but the combination of high
agricultural activity & production of
commercial crops makes these towns
ideal locations for processing of these
agricultural products
Source: City Skyline of India

Not everyone realizes that dependence on the monsoon is not limited to rural areas alone. Workers in
many Indian cities are heavily engaged in agriculture and related activities, and for them, the monsoon will
play an important role.Naturally, the smaller the town, the larger the share of agricultural dominance. As
cities grow in size, agricultural land is taken over for non-farm activities, and industry and services
proliferate. Metros, for example, have less than 2% of their workers in farm-related activities, and this, of
course, includes fishing in Mumbai, Chennai and Kolkata.
These Alpha cities have the largest market sizes, but at the other end of the spectrum are the Delta cities,
a large group of 50 cities that are budding, or have the potential to turn into much larger centres. It is this
group of cities that have a preponderance of labour engaged in primary sector activities. Clearly, along with
the rural markets, these towns owe their income more to agriculture than to industry or service sectors,
and consumer expenditures in these cities will, to a large extent, be vulnerable to the vagaries of the
monsoon.
 Source: City Skyline of India

Many of these Delta cities are steadily gaining the necessary scales in terms of population and market size.
Capitals of states and Union territories, such as Gandhinagar, Srinagar and Shillong, centres that are siblings
of larger cities such as Gurgaon and Noida (near Delhi), industrial centres such as Durg-Bhilai (Chhattisgarh)
and Bokaro (Jharkhand), historically important cities such as Udaipur (Rajasthan) and Mysore (Karnataka),
large emerging centres such as Jamnagar (Gujarat), religious cities such as Varanasi (Uttar Pradesh) and
Ajmer (Rajasthan), etc.
If we look at the set of Delta cities that have at least 60% of their workers engaged in the primary sector, it is
curious that they lie geographically almost totally in the south-central belt of the country; only Shimla is an
exception. Durg-Bhilai, of course, is a mining centre.
So far manufacturing and service industries have been flagging in these cities, but the combination of high
agricultural activity and production of commercial crops, such as sugar cane, cotton, groundnut and chillies
makes these towns ideal locations for processing of these agricultural products through further stages.
However, these towns have not yet boomed into manufacturing centres.
Purchases of many services and manufactured goods in these centres are directly affected by the
performance of the agriculture sector. High-end hospitals in Gurgaon, for instance, are looking at the rural rich
as an important new consumer segment to target in this era of manufacturing and services slowdown. Even
the government is becoming more sensitive to the underlying economic structure.
The first farmer special economic zone in the country is to be set up in Nellore district of Andhra Pradesh, and
this should be a cue to other centres to develop accordingly and put in place the backward and forward
linkages necessary to add value to the already existing agricultural resources within or close to urban areas.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.
5. How multiple-income family types differ across cities
As India and Indian consumers change
rapidly, there is one churn that has
already played out in urban India. The
joint family is dead and the extended
family is dying. It is now the era of
nuclear families

Source: Housing Skyline of India

Households in India can be classified into three types: nuclear families where one married couple lives
with, in some cases, unmarried siblings; extended families which have more than one married couple from
different generations; and joint families where more than one married couple of the same generation live
together, which are essentially multi-income families.
That the joint family system is out of mode in urban India is clear from the fact that only 8% of the
households belong to this category in India’s top 112 cities. Nuclear households dominate the urban
landscape with almost 70% of households falling in this category, while extended families take up the
remaining 23%, a sizeable share. This reflects, to some extent, the lack of housing capacity to
accommodate nuclear families, a status that upwardly mobile urban Indians seem to aspire to.
 Source: Housing Skyline of India

Looking at the largest Indian cities, the alpha cities and the cities in the south have a larger proportion of
nuclear families, while those in the west have a greater tendency towards more extended and joint family
setups. Why is that the case? There are likely to be economic and socio-cultural reasons that have not been
studied in great detail. But the patterns are clear.
Households in the south are predominantly nuclear, have fewer children and tend to have higher incomes
than their peers in the north and east. Resource allocation within the households, therefore, takes on a very
different character.
The western part of India has also benefited from greater economic growth. However, a significantly larger
share of households continue to live in extended and joint families. Decision-making in these households
tends to be different, with a greater number of people having a say in major purchases.
At the other end, spur-of-the-moment purchase decisions will be less likely, especially in durables that the
household members share in the larger and more complex households of western India. At the same time, per
capita expenditure in larger households tend to be lower, leading to greater possibility of savings or purchase
of luxuries, depending upon household preferences.
As India and Indian consumers change rapidly, there is one churn that has already played out in urban India.
The joint family is dead and the extended family is dying. It is now the era of nuclear families.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.
 6. How cities define size of households

Cities that are growing

rapidly and have high
levels of in-migration
also tend to have smaller
households

Source: Housing Skyline of India

The majority of households in the top 112 cities in India constitute between three
and five persons, including children and adults. Yet, at least a quarter of the
households have at least six persons in it, and just 15% consist of one-two people
living under one roof.
Typically, cities in southern India and larger cities tend to have smaller households.
This is partly due to lower fertility rates among women who are better educated and
live in households with higher incomes—both more likely in the south and in larger
cities. But education and awareness are not the only criteria that determine
household size.
Source: Housing Skyline of India

Cities that are growing rapidly and have high levels of in-migration also tend to have
smaller households. Early migrants tend to be unmarried, and, even if married, may
live by themselves. It is only after a few years of living in a new location, and after they
establish themselves, do their families join them.
It is for this reason that cities such as Allahabad, Kanpur, Srinagar or Gulbarga—with
low economic growth and in-migration—tend to have a larger share of large-sized
households. Cities such as Faridabad, Kanchipuram and Mangalore that are relatively
more dynamic with high economic growth tend to have fewer large households.
The size of a household has a huge impact on purchases of consumer goods. Larger
households typically spend less on consumer goods on a per capita basis as they are
able to share better. For the same reason, larger households are more able to afford
better quality of consumer goods.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.
 7. India is witnessing a durables revolution
As incomes increase,
media reach increases,
electrification spreads
and education levels
rise, and the demand for
durables expand Per household expenditure on durables (Rs. per annum)
Mumbai

significantly (Suburban)
Wayanad
Mumbai
Kinnaur
Nainital
Source: Market Skyline of India Udupi
Kolkata
Solan
Ludhiana
North Goa
0 5000 10000 15000 20000 25000 30000 35000 40000
Source: Market Skyline, Indicus Analytics

Consumer durables include not just white goods, such as refrigerators, air conditioners and cars, but also
goods such as furniture and kitchen appliances.
The largest markets for durables are naturally states with large population. Yet, Maharashtra leads on
account of higher income, followed by West Bengal and Uttar Pradesh. Interestingly, Kerala and Gujarat,
states with considerably smaller populations, make it to the top five states in markets for consumer
durables, with better income levels and infrastructure distribution.
At a finer geographical level, the largest markets for durables are naturally in the larger cities, where
greater incomes and population numbers warrant greater expenditure and also typically ensure better and
greater supply.
However, it is not that the poor do not consume such items. There are many essentials included in the durables
category, such as utensils, basic furniture, etc. Consequently, total durables expenditure is defined by the
income, size and location of a household, not to mention household preferences.
Location, therefore, matters a lot. Areas that have better power availability make it feasible to use white goods;
consequently, rural areas tend to have lower penetration of durables for the same level of income.
At the same time, even if incomes are higher, smaller homes are less able to purchase more durables. To take
an extreme case, a household living in an urban slum would tend to have fewer durables than a household with
similar incomes in a rural area, or in a non-slum urban area.
Similarly, we find that households that have greater education levels and those where there are a greater number
of older persons tend to spend more on durables.
Per household annual expenditure on durables, therefore, reflects many of these forces that work in tandem. Goa
has among the highest per capita incomes in the country, insignificant slum population, greater education levels,
etc. Not surprisingly, it has among the highest durables expenditure on a per household basis.
The district of Ludhiana in Punjab comes next, driven mainly by its high incomes in both urban and rural areas.
Households in Himachal are not surprising entrants into this league—a large part of Himachal’s youth reside in
the plains, repatriating their surpluses to those at home. The easy availability of electricity, the colder climate and
better infrastructure, all enable its households to derive the full benefits that durables offer.
Mumbai, Kolkata and other larger cities tend to be lower in this categorization despite their higher incomes simply
because they have large slum populations; hence, on a per-household basis, they show up as lower even though
they remain the largest market for consumer durable purchases.
As incomes increase, media reach increases, electrification spreads and education levels rise, we expect the
demand for durables to expand significantly. Moreover, as rural roads are able to connect the hinterlands across
the country, the costs of supply will also fall.
In other words, a great durables revolution is currently occurring in the country, and whether India grows at 6% or
8% a year, this spread of household durables is likely to see a continued growth at a rate far greater than overall
consumption expenditure..
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and markets.
8. Why some cities are getting younger and some are not
One factor that influences
the number of young people
in a city is its attractiveness
for migrants and then there
are educational
considerations
Source: City Skyline of India

New Delhi leads the country in terms of its population of young adults. At four million, the proportion of
people between the ages of 18 and 24 in the city is 25%. Mumbai and the urban areas of Thane (this
includes all satellite towns of Mumbai in Thane district, including Navi Mumbai) follow with 2.6 million and
1.8 million, respectively, while Bangalore is fourth with 1.3 million. Interestingly, Kolkata and Chennai do
not make it to the Top 10—not just in terms of the absolute population of young people, but also in terms of
proportion (in both cities around 18% of the population is accounted for by the young in the age group of
18-24 years). Both Kolkata and Chennai have a larger share of people above the age of 45 than other
cities.
One factor that influences the number of young people in a city is its attractiveness for migrants—
Bangalore’s software industry and Surat’s textile and jewellery industries are natural magnets for the youth.
Then there are educational considerations; cities such as Pune, Delhi, and Hyderabad have become hubs
for higher education, bringing in students not just from within their states, but also from other regions.
Yet, in most of these cities, as share of total population, the proportion of the young does not exceed 25%.
In just six of India’s top 112 cities, this proportion is higher than 30%. On top of the list of the six is Noida, a
New Delhi satellite. It has become the preferred base for students and single people, and is close enough
to New Delhi for them to commute daily.
But what draws the youth to some cities? Educational
opportunities are one factor, but not the most significant. A large
number of young people in cities popular with the young are not
graduates. These people largely find jobs in the so-called
unorganized sector. Cities with high economic growth (Delhi, Pune
and Surat being some examples), and, consequently, a bigger and
thriving unorganized sector are, therefore, far more attractive than
others with much better educational options.
Population growth and high fertility rates in the city and in its
surrounding areas are another factor and an important one.
Allahabad is a case in point— high fertility rates in eastern Uttar
Pradesh and Bihar have resulted in there being more young
people in this area. And Allahabad is among the few large cities in
that part of the country. Bokaro is another such area, and also one
with a distinct advantage—its large mining and basic industry is a
magnet for uneducated or marginally educated young people.
Similarly, Kohima has the maximum opportunities in terms of
education and jobs in Nagaland, and is, understandably, popular
with the young.
Smaller cities might have a larger proportion of young people than
bigger ones, but the most number of young people continue to be
clustered in the major metros or their suburbs. This is not
surprising. Young people aspire most towards greater options and
opportunities, and by their very size, larger cities are able to offer
the largest menu of choices— for income and entertainment. The
poor infrastructure in India’s smaller cities does not help matters,
and this often chases away those who are going to build India’s
future.
Demand Curve is a weekly column by research firm
Indicus Analytics Pvt. Ltd on consumer trends and markets.
9. People in large cities earn more but save much less
If India’s top 112 cities are
classified into metros, state
capitals and other cities, we see
that metros on an average have
the lowest savings rate and
highest per capita income Source: City Skyline of
India

India’s high savings rate is touted as a strong

defence against any economic slowdown.
These savings help in routing funds towards
greater investment that in turn fuels growth.
However, the spread and sustainability of
India’s savings rate is unclear. Many believe
that since households in the metros have
higher incomes, they would also be the
highest savers. The numbers do not bear this
out.
The disparity in savings rate in urban India
point to many factors that influence such
behaviour.
People in large cities earn more but save a smaller proportion of their income compared with residents of
smaller cities. There are many reasons for this.
First, larger cities usually have a greater share of slum population that typically save less. Secondly, many
large cities also have a large number of immigrants who repatriate their monthly surpluses to families,
which would otherwise have been saved. Thirdly, larger cities have greater avenues to spend.
Better roads lead to more people buying automobiles, and better entertainment options and higher
property rentals eat away a greater share of incomes. Hence, it is no accident that Mumbai, which has
among the highest average incomes in India, does not have the highest savings rate.
If India’s top 112 cities are classified into metros, state capitals and other cities, we see that metros on an
average have the lowest savings rate and highest per capita income, while capital cities earn more and
save more than non-capital cities.
This is because capital cities typically have a larger share of people in government jobs where incomes
tend to be higher and more stable for the same level of education as someone in the private sector, except
at the top levels.
However, there are significant differences within state capitals. Chandigarh, for instance, has a different
economic structure than, say, Bhopal.
Better infrastructure in state capitals, compared with other cities in the same state, has also led to greater
levels of new economic activities coming up in these, whether it is Lucknow or Patna.
The numbers indicate a clear pattern. Out of the top 30 cities, the smaller ones save at a much higher rate
than the larger.
Also, there are no north-south or east-west divides. In other words, it is not that people in southern India
save more and those in the northern parts of the country save the least.
There may be cultural differences across India’s economic geography, but they do not play out strongly
where savings rates are concerned.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.
 10. The Indian rich- who are they and where do they live?
Mumbai and Delhi are homes
to very affluent
neighbourhoods, in terms of
the number of affluent
households

Source: City Skyline of India – Neighborhood Series

The affluent are those who have a large amount of wealth and spending power. This is also most likely to
be reflected in their high-income profile. As is evident, the bulk of the affluent in India reside in urban
areas; it is also likely that they are most concentrated in the larger metros.
However, that does not imply that the affluent do not exist in other parts of the country.
Large rural landowners, agricultural commodity traders, contractors, public servants, or those living in
large farms or farm houses in the vicinity of (but not within) large urban centres are spread across India.
They tend to travel nationally and internationally, and can access products aimed at them through many
different sources.
The affluent tend to be very different from those less economicaly fortunate. Affluent households tend to
have lifestyles characterized by lesser physical work, greater expenditure on entertainment, less time spent
on day-to-day necessities of household chores and occupation. They also have a different disease profile.
 Mumbai and Delhi are homes to very affluent neighbourhoods, in terms of the
number of affluent households.
As is evident, the Oshiwara in Andheri (West) is the richest neighbourhood in India, in terms of
the number of millionaire families, with at least 15,000 households having
bulk of the affluent annual incomes of at least Rs10 lakh. In fact, of the top 20 neighbourhoods in
in India reside in India, in terms of number of millionaire families, as many as 18 are in
Mumbai.
urban areas; it is The top ranking neighbourhoods in Mumbai are Oshiwara, Sahar, Walkeshwar,
also likely that they Mahalakshmi, Versova Creek, Chembur West (Golf Club), and Borivali West.
The richest neighbourhood (in terms of the number of millionaire households)
are most in other major cities are: Rohini in New Delhi (overall rank 9), JP Nagar in
concentrated in the Bangalore (overall rank 42), Adyar West in Chennai (overall rank 48) and
Beckbagan-Ballygunge in Kolkata (overall rank 78).
larger metros. There are 166 neighbourhoods in the country’s five major cities that have at
least 1,000 households having annual incomes of at least Rs10 lakh (out of a
total of 626 neighbourhoods which together make up these five cities). Of
these, 37 are from Bangalore, 11 from Chennai, 47 from New Delhi, nine from
Kolkata and 62 from Mumbai.
In terms of total income (sum total of incomes of all the households), the
richest neighbourhood in India is Bhandup in Mumbai, with an aggregate
income of a little over Rs6,400 crore. The top 15 neighbourhoods are again all
from Mumbai. These include Oshiwara, Sanjay Nagar (Chembur East),
Matunga-Sion, Sahar, Dadar Plaza, Chembur West (Golf Club), and Borivali
West.
Rohini, Preet Vihar, Rithala, Greater Kailash II and Greater Kailash I are the
neighbourhoods with the highest incomes in New Delhi.
The top neighbourhoods in Bangalore, Chennai and Kolkata are Padmanava
Nagar, Thiruvanmiyur (East) and Jodhpur Park-Indian Institute of Chemical
Biology, respectively.
There are 181 neighbourhoods in the five major cities with aggregate incomes
of Rs600 crore or more.
Of these, 21 are from Bangalore, 10 are from Chennai, 79 are from New Delhi,
two are from Kolkata and 69 are from Mumbai.Demand Curve is a weekly
column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.
11. Indian cities should make space for low-cost housing
Rising slum and squatter settlements in cities is a clear sign that the demand for the
low-cost housing is not being met through formal housing stock.
Source: Housing
Skyline of India

In the next six years, urban India needs to build

at least 10.5 million houses to meet the demand
for housing that accompanies rising levels of
urbanization. With the financial crisis bringing
affordable housing back on the radar of
promoters and builders, it is worthwhile to
estimate the extent of unmet demand for low-
cost houses.
As much as 65% of the demand in India’s top
112 cities is for houses measuring less than
1,000 sq. ft. This translates into approximately
6.8 million new homes. Interestingly, about 70%
of the demand would be for houses with two
rooms or less. This means 7.4 million new
houses need to meet these specifications. This
is because 90% of the urban households have
incomes under Rs 5 lakh per annum.
Thus, the demand for majority of the urban housing would be in this category.
Greater housing demand originates from two sources—those who have arrived earlier and residing in
makeshift tenements, shacks and slums, and those who are expected to migrate into these areas. The
requirements are different. Typically recent in-migrants require smaller areas, but as they stay on, their
families join them and expand, and their incomes and wealth also increase. This translates into requirements
for marginally larger carpet areas.
The cities that have the largest requirement for such housing are those that attract migrants—Mumbai and
New Delhi and their surrounding areas, Bangalore, Pune, Surat, Coimbatore, etc. These cities either saw large
migration in the recent past but are slowly stagnating (for instance, Mumbai), or continue to have great levels
of in-migration (New Delhi, Surat and Pune, for example). Either way, these cities are already bursting at their
seams.
The need to expand opportunities in other cities is paramount, as is the need to get a better grip on land
utilization within these cities. Typically, government bodies have almost monopolistic control over land, and
this is a serious problem as land management is riddled with bureaucracy and poor governance. What is
needed is a much more aggressive and forward-looking approach that looks at the requirements for each city
specifically. Ensuring there is regular availability of land for low-cost housing within a city is among the first
and foremost steps.
The supply side constraints for provision of low-cost housing are well known and these problems have been
made worse due to the rapid increase in real estate values.
As a result, the largest action in urban housing has been in suburban areas surrounding the large cities— rural
Bangalore, Ranga Reddy near Hyderabad, the Gurgaon, Noida, Faridabad and Ghaziabad quadrilateral
surrounding New Delhi, and Howrah and North and South 24 Parganas near Kolkata are well-known
examples. The bulk of new housing is occurring on converted agriculture land around these cities.
This need not have been the case, had local governments been more responsive to emerging requirements.
Unfortunately, unplanned and unstructured development is a hallmark of urban India and is unlikely to change
very soon.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer
trends and markets.
 12. Beta cities - on the threshold
India’s tier II cities have benefited to a large extent from the boom of the past few
years but need to get their act together to draw investment and attention away from
the tier I cities.
Source: City Skyline of
India
Just as emerging economies are those that
stand on the threshold of advancing into the big
league, there are emerging cities in India: the
cities that have the potential to match the larger
cities in market size.
Indeed some among them will become elite
cities eventually. These Beta cities, as opposed
to the Alpha top-tier cities of India, have diverse
characteristics. Many of these cities are state
capitals such as Jaipur and Lucknow, benefiting
from better infrastructure and public services.
Cities such as Jamshedpur and Faridabad have
been industrial centres for decades now, but
seemed to be content giving precedence to
other newer centres that have grown. Some
such as Indore have been threatening to make it
big for many years, but never quite managed it.
Some others such as Kanpur have somehow
lost their way.
India’s tier II cities, are among the largest urban markets and can at anytime break
into the elite club the way Surat and Coimbatore have.
Cities such as Thane and Thiruvallur have boomed, thanks to their proximity to metros. Except for Kanpur, all
have had double-digit, or close to that, annual growth in their market size over the past two years.
Whatever be their current status, these Beta cities, or India’s tier II cities, are among the largest urban
markets and can at anytime break into the elite club the way Surat and Coimbatore have. They have
benefited to a large extent from the boom of the past few years but need to get their act together to draw
investment and attention away from the tier I cities. What is needed is a concerted plan of action to improve
infrastructure and governance.
These cities will over the next few years grow in importance and in a range of areas. Many of these cities
were in the past specializing in a few sectors and industries; but with growing population and large-scale in-
migration, they are steadily growing in the range of activities that are undertaken within and in their vicinity.
The bulk of these cities have quite poor public infrastructure (since serious urban investment in the past has
been limited to state capitals); but that is already changing rapidly. Supply always finds a way to meet the
demand, even if the governments are unresponsive. High incomes in Indore, for instance, and availability of
credit led to high auto demand; when the urban government could not provide that, residential areas started
to put up their own roads. Residents of Patna are working with the government for improved law and order,
the industrial community in Ludhiana is working together to improve the city, and there are many such
examples. Cities such as Coimbatore and Surat have in the past already shown how cities and administration
in the second tier towns of India are slowly but steadily creating urban communities that will one day totally
change India’s urban landscape.
These cities currently are much smaller than the top metros, but many have per capita incomes that are
higher than those in the top metros, and most of them have sustained double-digit growth. It is only a matter
of time before they become important metros in their own right.

Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.
13. Finance institutions need to focus on expanding market
On average, only 16% of Indian households
have taken loans from institutional agencies--
commercial banks and cooperative societies.
Financial inclusion is a stated policy of the government and the central bank,
but it will take some concerted effort to bring more of the population into the
network of formal financial services.
The current spread of formal finance network is quite inadequate. At least
60% of Indians do not have access to the banking system. Even though the
average number of people that a bank branch serves is around 15,000, there
are six states where each branch serves around 20,000. These states are
mostly in the east.
The inadequate spread of banking is reflected in the data on credit as well.
On average, only 16% of Indian households have taken loans from
institutional agencies—commercial banks and cooperative societies. Non-
institutional agencies, including moneylenders, friends and relatives, have a
higher reach at 22%.
Again, sharp regional differences show up, with Kerala coming up high on
indicators of banking and finance. As many as 14 of the top 20 districts that
have access to institutional credit are from Kerala. The districts of Kottayam,
Kannur and Idukki top the list, with at least 65% of households taking loans
from institutional agencies.
Kerala, however, has some peculiar characteristics that help explain this
widespread integration with the formal financial system—high literacy and
educational levels, well-connected rural areas as density of population is
high, and remittances from overseas migrant workforce. All these make for an Source: Indian
Financial Scape
environment more conducive towards higher access to formal finance.
At the other end of the spectrum are districts where less than 1% of
households have taken credit from institutional agencies. These are mostly
in Assam, Manipur, Meghalaya, Arunachal Pradesh, Jammu and Kashmir
and Mizoram, where the banking system is extremely underdeveloped given
constraints of a low density of population, poor connectivity and law and
order concerns.
In regard to the penetration of non-institutional loans, the focus shifts from
Kerala at the top end. Here, the top 24 districts have penetration ranging
from 50-53% and are mostly located in Tamil Nadu and Andhra Pradesh.
These are the states where microfinance and self-help groups have spread
into the hinterland.
The districts languishing at the bottom remain the ones from the hill states.
In fact, 64 districts have less than 7% penetration of non-institutional loans.
Of these, two are from Andaman and Nicobar, 13 from Arunachal Pradesh,
14 from Jammu and Kashmir, seven from Meghalaya, eight from Mizoram,
four from Sikkim, 13 from Uttarakhand and three from West Bengal.
At a broader level, there is a clear need for better services in the hill states.
The question remains whether the government measures of banking
correspondents, using post offices, etc., will reap dividends in expanding the
financial network in areas where topography and socio-economic
characteristics remain tough barriers to overcome.
Essentially, there are two clear characteristics of household access to
finance. One, the bulk of the population is financially underserved and rely
on informal lending. Two, non-institutional agencies have together achieved
a much higher penetration than institutional agencies. The need of the hour
is for financial institutions to focus more on expanding the market rather
than flog the existing ones. And for this, innovative use of technology just
might be the way to go.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt
. Ltd on consumer trends and markets.