BUSINESS SPECIAL.....How Gen I will transform India's consumption patterns by 2020

How Gen I will transform India's consumption patterns by 2020

I was a teenager in 1991. I had many things on my mind that most teenagers do - studies, sports, and friends - not necessarily in that order! But I don't recall much of what exactly I was doing that year. What I do recall, however, is a lot of discussions around tough times that India was headed into. Many years later as I use flashes of memory, talk to knowledgeable elders and add pieces of data to reconstruct what was happening, a grim picture emerges.

High fiscal deficit and strain on sovereign debt. Rock-bottom foreign exchange reserves - that could cover only two weeks of import. India's gold - and along with that our pride - pledged to the IMF, with 67 tonnes being air-lifted to England and Switzerland. Political crisis, collapse of a government etc a deep insecurity about what would happen next.

Why am I reliving history in a column that is supposed to focus on business? Because that moment in Indian economic history tr iggered a set of changes that will have a defining influence on the consumption pattern of this country, going forward. A new India came into being and an entire generation of Indians has grown up in this new India. This generation will (a) be a significant part of the Indian consuming class by 2020, and (b) will have significantly different consumption behaviour from previous generations. Let's look at some facts to grasp this.

If we consider this generation to be individuals who were either born after 1991 or 'came of age' post 1991 - let's say 14 years or below in 1991 - 75% of the Indian population by 2020 will qualify. More interestingly, almost 65% of Indian households will have a 'chief wage earner' belonging to this generation. In other words, how and what this generation consumes will determine how India consumes.

This generation has grown in a completely different environment. In 1990, India had one TV channel. As a child, I remember looking forward t o 'Chitrahar' at 8pm on Wednesdays - and later Fridays - and the evening news read in a very serious tone in Hindi as well as English. Today, India has over 500 channels - in more languages than probably any country in the world, delivering every possible entertainment and informative content. In 1990, about 2 million Indians travelled outside India. By 2010, the number was 12 million. And then, of course, there is the internet. In short, this generation knows a LOT more than any previous generation ever did.

This generation also has a lot more choice. Products that were available only when a distant uncle visited from abroad - picturise the very distinctive triangular Toblerones to make it real - are now relatively easily available - at least in urban India. From about 5 car models in 1990, we touched ~ 165 in 2010. And this generation is increasingly comfortable with using credit to exercise this choice. There are now over 18 million credit cards and greater than 10 million housing and car loans outstanding in the country, from practically nothing two decades ago.

This dramatic change in external stimuli and availability of choice are already having a significant impact on consumption behaviour - a trend that will only get stronger over the next decade. Take the Pawar - name changed to preserve privacy - household, for instance. Chandrakant Pawar, 51, owns a small business and lives in a two-bedroom apartment in Mumbai suburb with his wife and 25-year-old son, Nikhil. Nikhil is an MBA and works with an oil trading company. In many ways, Chandrakant's and Nikhil's choices exemplify this generational shift.

Chandrakant is amazed at the choice available in stores these days, but sticks to the brands he has known for decades and shops with a list. Nikhil, on the other, likes to try out new brands and makes at least one impulse purchase a week - `5,000 pair of shoes being a case in point. Chandrakant is strictly against loans - he would rather delay a purchase or not buy it at all, versus buying on credit. As he puts it - "What if I can't repay? What will happen to my respect in society?" Nikhil carries more than one credit card and feels very comfortable with the idea of buying a car or home using a loan. Nikhil spends 7-10 hours a week on the internet - buying products on deals and staying in touch with friends who live outside India. Chandrakant admits that he has no friends abroad.

This is just one story to illustrate the point. Extensive consumer research conducted by BCG clearly shows that this phenomenon is very real and has deep implications for businesses. Consumer companies need to understand how important it is with this generation for their category and how their behaviour is different. They need to understand what appeals to them, what can make them enter the category and what can make them stay with a brand or switch brands. Most importantly, they need to realise that followi ng the principle of 'don't fix it if it ain't broken' is no longer acceptable - this a gradual but certain shift and the sooner one prepares for it, the better it is.

In a recent BCG report where we talk about this phenomenon, we decided to give this generation a name. We call it 'Gen I' - where 'I' stands for India, Independence and Individuality. Gen I will drive consumption over the next decade and they will drive it differently from their parents. What started off as a dark moment in Indian economic history will end up having a profound impact on the Indian economic future.

Amitabh Mall,Partner & Director, The Boston Consulting Group. DNA 120502