Late Extra: Invisibles show up faults in India's economy

Economic forecasters have at last begun taking into account the role of the 'invisibles', which contribute to the robustness of any economy. Parameters applied in pure economics to assess economic progress and health has undergone a drastic change in India too.

The silent growth engines are those, which used to be normally ignored. The factors in an agro-based economy like India's normally are the fortune of the agricultural sector, the industrial sector, the capital markets performance and the banking sector.

Over the past five years what has become more and more noticeable in India is the pattern of consumer spending. The ratio of middle class spending on non-listed food and beverages outlets has increased dramatically in relation to the 'creamy layer' spending power in listed two to five star outlets.

The other silent engine including middle class buyers of fast moving consumer goods, directly selling of utility items, the ad spend especially on television channels spurring buying and egging on the 'kid factor' which the product marketers, manufacturers and advertising agencies have all recognised as vital.

The most important development is the access to money, which is increasingly becoming easier in India as the retail lending segment of both banks and non-banking financial institutions increases by the day. Plastic money has a good grip on the Indian consumer and is no longer the preserve of developed economies.

Door-to-door selling has increased sharply though the call bell in most homes is rung by this category of caller on an average at least twice a day; this segment is yet to develop to its full potential.

The reason is that the consumer is first wary of the quality of the products being sold by the salesmen but more importantly the he or she is not sure of the credentials of the door-to-door salesmen with incidents of crime committed by some increasing by the day.

The Indian consumer today with less time on his hands does not really lend himself to impulse buying induced via window-shopping. The latter is now becoming the territory of tourists both international and domestic.

That has resulted in pre-determined consumer spending induced or driven by advertising in media with the television visual acting as the trigger with print advertising especially those which carry price tags on a wide range of products acting as the deciding factor.

In fact it has been observed that children and teenagers are fast turning into the motivators with demands for goods, which they have seen on television and backed up with the details given in print media.

The Indian consumer is fast emerging from the 'pay-day' syndrome to begin spending and is embarking on the buy first, pay later trip with increasing regularity.

Spending on consumer durables, out of home food and beverage and even luxury items is no longer the preserve of those Indians who were perceived as ones with 'money to burn' as cash which had to be spent out of sight of the taxman. In brief those who had generated income through dubious means.

The consumer today is one who is paying taxes regularly and honestly but borrowing substantially too from retail lenders. It is the growth of this segment, which has forced the central bank to advise caution to the lenders.

This advice has been passed on to the banking sector even though retail borrowing for consumables is less than half a percentage point the GDP. The warning has come at the right time before the lenders overextend themselves and land in a mess with no tangible assets to effect recovery from.

Buy now, pay later has yet to mature in the Indian consumer psyche. The Reserve Bank of India has realised this.

The author is an India-based journalist