What does one Indian mother’s purchase of a McDonald’s Happy Meal say about macroeconomic trends?
Fast food chains like McDonald’s and Pizza Hut are looking to expand operations in India where over 60 percent of the population is younger than 30. McDonald’s India plans to open 30 new restaurants in southern and western India in 2011, according to Hardcastle Restaurants Private Ltd. In 2010, they opened 33 new restaurants.
Basically, India’s growing demand for fast food reflects the rise of a middle class able to afford such luxuries.
In 2007, McKinsey Global Institute released a study predicting that India’s middle class would explode (growing from 5 percent of the population to more than 40 percent) and that the nation would become the world’s 5th-largest consumer by 2025 (up from 12th in 2007).
Historically, India’s middle class has constituted a small fraction of a population polarized between extreme wealth and extreme poverty. In 2001-02, 13.8 million Indian households qualified as middle-class, with an annual income that exceeded 4,000 USD. In 2009-10, the number had risen to 46.7 million households, according to the National Council for Applied Economic Research.
Indian government implemented economic “liberalization” reforms in 1991 designed to move the country toward a capitalistic market. The reforms coupled with other convergent factors, such as a climbing literacy rate, have resulted in this expanding middle class.
The question companies now need to be asking is what will this new force of middle class households want to buy?
Sony projects TV sales in India to grow more than 70 percent by the next fiscal year. The Japanese company is capitalizing on the growing demand for electronics, luxury items previously unaffordable but now within reach of millions more Indian households.
India’s Prime Minister Manmohan Singh met with Afghanistan’s President Hamid Karzai in February to discuss their countries’ recent economic changes. Both leaders voiced some concern about the observed consumeristic “lifestyle” and discussed how to reduce the negative impacts that consumerism and industrialization have on culture and climate.