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The Mckinsey report is flawed

Addressing a heon thrown by businessmen before his historic visit to India in 2006, President Bush had stated, “...the population of middle-class in India is larger than the population of Britain. They are the market for us. Think about the demand of ACs, cars and things like that.” Clearly, Bush and the likes are focusing on an apple-pie called India whose middle-class is swelling.

And that is what McKinsey’s latest report on Indian middle-class suggests- the size of Indian middle class is going to swell from 50 million currently to 583 million in 2025. The report includes households with an annual income in the range of $4,380-21,890. It highlights that India is poised to grow at the rate of 7.6% per annum for the next 18 years and so is the income of the middle-class.

The report, full of loopholes, is hardly based on hard-facts. The figure of 50 million is contestable. Noted Economist, Abusaleh Sharif told B&E, “No one can deny the growth of consumer class. But to arrive at figures on sketchy data will always produce fl awed results”. How come a country with 300 million mobile subscriber base and close to 80 million internet users has only a 50 million middle-class population? The report is based on number of people who pay income tax. A sizable portion of Indian population is dependent on agriculture and is out of the taxbracket; then how could the report reach a fi gure by ignoring them?

Clearly, the Indian middle class is much larger than what McKinsey projects. And with consumerism rearing its head, corporates are most certainly not the ones complaining!

B&E research: Saurabh Kumar

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative