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India to be fifth largest consumer market by 2025

May 9, 2007

A report by Mckinsey titled the ‘Bird of Gold: The Rise of India’s Consumer Market’ has said that by 2025 income levels in India will almost triple and India will become the fifth largest consumer market, larger than Germany. More from the report:

As Indian incomes rise, the shape of the country’s income pyramid will also change dramatically. Over 291 million people will move from desperate poverty to a more sustainable life, and India’s middle class will swell by more than ten times from its current size of 50 million to 583 million people. By 2025 over 23 million Indians—more than the population of Australia today—will number among the country’s wealthiest citizens.

Indians will spend a higher percentage of their income on communication, education, recreation and health care and less on food and apparel. Today almost half of the income of the average Indian is spent of food, but by 2025 Indians will spend only about a quarter of their income on food. Expenditure on healthcare will rise from 7 percent to 13 percent. 60 per cent of goods will be bought by the middle class (companies better keep their prices down!) while the rich are expected to buy only 20 per cent. Poverty will also decrease dramatically and people below the poverty will drop to 10 percent of the population.

Whew. Thats really quite something isn’t it? But will it actually happen? Well, if the economy grows as predicted, at the rate of 7.3 per cent for the next twenty years, it will happen. But will the economy grow this fast for this long? The Mckinsey report warns that the Indian government has to provide the requisite infrastructure, a large part of which is good quality education if India’s dreams are to come true.

Today, government education at primary and secondary levels is in shambles. Lack of proper classrooms, not enough schools, lack of teachers, a poor state syllabus…the list goes on. And not only is half of India’s population illiterate, many of the so-called literates are often so badly educated due to the poor education provided by the government schools that they cannot even read and write properly. In fact the government schools are so bad that even the poorest of the poor scrape up money so that they can send their children to private schools, many of which aren’t too good, but at least they are better than the state schools.

In this year’s budget the government has decided to give priority to the education sector and has planned to invest heavily in primary, secondary as well as higher education. But there are those who are highly skeptical about India’s moves.

An article in the latest Economist says:

Yet it is still hard to imagine so many hundreds of millions of Indians being educated to a standard befitting middle-income status. Transforming the thousands of rotten schools might prove impossible, even if sufficient money can be found. Given India’s relatively weak fiscal position, it perhaps cannot be.

The Economist is wrong in one sense, because India can do it, but in another sense they are right. The problem is corruption. Money allocated for government schemes and plans is eaten up by corrupt politicians more often than not. Weeding out corruption should be the first step of the government but where this is concerned, only the electronic media is doing something. They are exposing corrupt politicians and policemen.

Our private sector offers some hope, at least for higher education, but these educational institutes need to be started by educationists. The private educational institutions (specially those started by politicians ) are a hotbed of corruption, with the owners exploiting the lack of medical and engineering seats by asking for obscene amount of donations which are taken under the table. These donations are over and above the fees. Naturally these people do not want to get into educating the poor…for which we have to depend on the government.

(Photo taken in Mumbai)

Related Reading:
According to Goldman Sachs, India will be number two economy by 2050
Pay hikes in India highest in the world in 2007
Unequal Education in India
Municipal schools teach poor English
India’s poverty is being eradicated, although slowly
The difference between the rich and poor in India

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