Look To The Rupee

As western businesses scamper to get into the pockets of the Chinese, perhaps they should think about another emerging economic giant, and one that actually spends money on consumer goods: India.

As was pointed out in Business Week recently, the reason the west can’t break into the market in China is because government-owned companies are taking 75 percent of the population’s money, which then finds it way back into government coffers. Private businesses are still very much on the losing end in Beijing.

The reverse is true in India. The private sector, despite the huge differences in income in the populace, is booming, creating a massive middle class that is far greater than China’s. What this means is that Indians are spending money and it’s not just going back to the state. It also reflects the fact that the rural population (which makes up most of both countries) couldn’t be more contrasting. Rural Chinese haven’t gained more wealth in the last decade, they’ve endured declining incomes, whereas economic growth in rural India has far outpaced that of the city centre’s. This is very important for western businesses to understand. Depending on what they are trying to market, if it is utilitarian/egalitarian, as opposed to being a luxury item, it might be a better bet to aim for Mumbai and not Beijing – not to mention the inevitable pitfalls of dealing with a censoring and heavy-handed bureaucracy as we’ve witnessed recently with Google.