Rural India acquires taste for luxury

Growing prosperity and improving education outside the main Indian cities has coincided with an upsurge in spending on big-ticket items and designer labels. And the trend has not gone unnoticed by retailers.

Alvina Agnel with Shanti Peter, her grandmother. Subhash Sharma for The National
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Langebandar Vasai is an isolated fishing community on the west coast of India.

There is a flurry of activity on the shoreline each day as fishing boats deliver their catch and the women of the village, dressed in bright floral-patterned saris and laden with gold jewellery, sort the seafood.

In the village, there are some huge houses, painted in vibrant colours. New homes are being built and televisions are blaring from even the smallest houses. Evidence of prosperity is everywhere.

Alvina Agnel, 20, lives in one of the larger houses in the village, which has been renovated. She is studying in Mumbai and hopes to become a teacher. Her father is a fisherman, while her mother sells fish. The household last year bought a new Honda scooter and members of the family have new Nokia mobile phones.

"We want to buy a laptop," she says.

The household reflects a trend of growth in rural spending outpacing urban consumption in India, identified in a report by Crisil, an Indian ratings and research firm and a subsidiary of Standard & Poor's.

As the income from fishing has increased over the years, the money has been invested in education. That means many of the younger generation are going into different professions, diversifying the income stream, the residents of Langebandar Vasai say when asked about the relative affluence of the village. The fact that the price of the fishing village's speciality catch, pomfret, has almost doubled in the past three years, from about 500 rupees (Dh33) per kilogram to more than 900 rupees, has also helped substantially.

"There has been a lot of progress in the last three years," says Nazreth Mankar, an adviser at the Vasai Fishing Society. "We now have multiple sources of income."

He adds that some members of village families are working in Indian cities or even abroad and sending money home.

Rural spending has outpaced urban consumption in the two years to the end of the last financial year, according to the report by Crisil. "That was the first time in nearly 25 years," the report revealed.

With the majority of India's population living in villages, the total value of goods consumed has long been higher in rural areas. But in the past decade, urban regions have been catching up by growing at a faster pace.

But in the past two years, rural consumption per head grew at 19 per cent annually, two percentage points higher than urban consumption, figures from the National Sample Survey Organisation showed.

Incremental consumption spending by rural India during these two years reached 3.75 trillion rupees, compared with 2.99tn rupees in urban India, the data show.

There has been a shift from necessities to discretionary items, with one in two rural homes now having a mobile phone, while 42 per cent of rural households owned a television in 2010 compared with 26 per cent five years earlier.

"Underpinning this growth in rural consumption is a strong increase in incomes due to rising non-farm employment opportunities and the government's rural focus through employment generation schemes," says Roopa Kudva, the managing director and chief executive of Crisil.

"For India, a young population, rising income and low penetration of many consumer goods means that rural consumption has the potential to remain an important source of demand."

An e-commerce company called Rock.In, which partners with major western brands such as Calvin Klein, DKNY and Punky Fish, has been quick to spot the trend in rural India.

"India as a country was primarily more focused on sales in the metros or the bigger cities of India but in the last five years the trend is drastically changing," says Aashish Puri, the chief operating officer and co-founder of Rock.In.

"Definitely we're getting a heavy growth from the smaller pockets of India. There are people sitting in rural areas where facilities are not that great. But because these people have travelled abroad, travelled to the metros, and have seen how things happen, they want the same kinds of things in their home town."

He explains the increase is largely fuelled by the rise in the number of mobile phones and tablet computers Indians in rural areas are buying and what he describes as a "massive generational shift", with more than half India's population under the age of 25.

"Rural India is a still a little conservative compared to modern India but they're still trying out different clothing items which we offer," says Mr Puri.

"Indian women in small towns used to wear traditional Indian clothing but now they're moving more and more towards modern clothing, such as tops which are from the known brands and denim. These categories are opening up for us and we're seeing a boost."

He adds that the online medium gives some access to clothing they might not be comfortable buying in shops in the smaller towns.

"We've started selling a lot of lingerie to women in smaller pockets of India, which we had never thought of."

Meanwhile, Shreyans, which represents brands including Bang & Olufsen, Ferrari and Porsche in India, is taking its products closer to shoppers outside the major cities to meet their appetite for big-ticket items.

"We have seen encouraging demand from tier two and three cities in India across all the luxury brands we represent," says Ashish Chordia, the chairman of Shreyans.

"The affluent in these cities are fairly discerning and appreciate luxury as much as the rich in metros.

"Previously, they would travel to metros to fulfil their desire of owning luxury brands but now, since brands are available [nearby], they can buy their favourite brands with ease."

Shamrao Katke has been a shopkeeper in Langebandar Vasai for 25 years. He says the inhabitants of the village have become more brand-conscious. "They come and they name the product," he says.

But some sectors still need to catch up. One challenge in catering to rural India is logistical, with some of the more remote areas not receiving delivery services, says Mr Puri.

"In one particular case, this person was living in an area which is not serviceable by any of the service providers," he recalls.

"Nevertheless, she made an arrangement for us to send to another destination from where she would have it collected.

"This shows how interested they are. There's definitely a hunger. There's definitely demand."

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