Kanika Datta: The mass penetration of 'luxury' goods

SWOT

The housing colony in which I live thoughtfully provides its residents with a thick yellow pages directory every month free of cost. This is a hugely useful B2C (business to customer) service. The publication make its revenues by getting local businesses "" everything from local restaurants to contractors, beauty parlours, flower delivery services and water tankers "" to advertise at extremely nominal rates.

A cursory look at the inserts for household repair services is interesting. The bulk of the advertisements came from score of single-proprietor businesses that rejoice in such names as "Pintoo Plumber", "Mohan Glass Works", "Jolly Electrician," "Husain Painter" and so on. Their insertions are basic: the name followed by a mobile number in large boxed type.

Pintoo plumber, who was summoned for a tank-cleaning operation, turned out to be a young man from Orissa who lived in one of nearby villages-turned-semi-cities that dot Delhi. He arrived on a recently acquired bicycle and was armed with the most rudimentary of tools. His most high-tech equipment was a battered mobile phone.

Yet this one phone had transformed his life. Before he set up his own business "" such as it is "" he worked for a malik who routinely cheated him and kept him in eternal penury. Now, thanks to capital investment in a mobile phone and a small expense on a pre-paid card and a yellow-page ad, this former agricultural labourer was able to become an entrepreneur in his own right.

Despite being mostly unlettered, this self-taught plumber had enough business sense to understand that there was no need to add an address or advertising hype to his yellow-page insertion. That would, he explained, reduce the print size and, therefore, his chances of rising above the clutter "" the same challenge that gives marketing managers of consumer goods companies sleepless nights.

Like him, there are thousands of stories of how the telecom revolution, in which competition has driven down tariffs, has helped transform the lives of ordinary people in big and small ways. But this is not the sole point of this piece. The wider point is that telecom has demonstrated "" despite the constant and fiercely competitive squabbles among the giant telecom operators "" how even a small improvement in the enabling environment can make a difference to the livelihoods of ordinary people.

The combination of an improving and liberalised business environment and better purchasing power is amply demonstrated in the Auto Expo that opened in the capital yesterday. This year's event has been rescued from the somnolence that had descended on this annual event chiefly because of the launch of two small cars from two Indian auto giants "" Tata Motors and Bajaj Auto.

Much has been said about Tata Motors' incredibly priced Rs 1 lakh small car. The point to note, however, is that the car is targeted not just at car-buyers but at helping two-wheeler owners drive up the value chain.

This is also patently the focus of Bajaj Auto's joint offering with Renault and Nissan. Rajiv Bajaj, chief of the country's second-largest two-wheeler maker, was careful to stress the mileage his car would promise, a key concern of any owner of a low-priced car.

Contrast this with the days when the only small car available was the Maruti 800, that too, produced by a cosseted government-owned company and attracting a long waiting list for those who declined the heavy charms of Hindustan Motors' Ambassador or Premier Automobiles' Padmini.

Contrast this, too, with auto-makers' moves when the industry was partially liberalised, first, in the eighties and later and more permanently in the nineties.

In those days, the initial launches were all so-called "luxury cars" aimed at the upper middle class and the rich "" the doomed Standard 2000, built on a defunct Rover design, in the eighties and the equally ill-fated Daewoo Cielo.

Until the Matiz and Santro hit the scene and provided Maruti's small-car monopoly with some competition, this was largely the market on which car makers focused.

Today, the fact that many more auto companies "" Ford, General Motors and Honda among them "" are also thinking small now is a reflection of a new emerging purchasing power as more and more people reap the benefits of economic growth and are able to afford middle class lifestyles.

The remarkable point is that all this has been achieved in one of the world's worst enabling environments for business. Imagine how small, itinerant businessmen would grow if their access to power, water and petty approvals to set up organised businesses improved. And imagine what this would do to purchasing power in the world's second-most populous country.