Mutual Fund CMOs, Are You Tapping The Stories In Lucknow, Ernakulam, Vadodara?

For the longest time, the Indian mutual fund industry was a story of latent potential as risk-averse Indians, even for their long-term savings, preferred the safety of bank deposits to the savvy of mutual funds. In recent years, that potential is starting to be unlocked as more investors gravitate towards mutual funds as a savings and investment habit. Where in India might be more money like that located?

It’s a business question for chief marketing officers (CMOs) of mutual funds as they try to find new markets and new investors. A dataset that can provide direction to that search is the district-wise data on deposits that India’s central bank releases on a quarterly basis, the last being as of June 2017.

This Reserve Bank of India (RBI) dataset carves India into 666 districts. For each district, it breaks down total deposits available with a scheduled bank into three categories:

Current deposits: Typically, used by businesses. For the sake of the question we are trying to answer, we will keep this aside, and focus on the other two deposit categories.
Savings deposits: Fluid money belonging to individuals.
Term deposits: Sticky money belonging to individuals and businesses.

Here are two takeaways from this dataset:

1. Metros matter: Much as India is growing beyond her big cities, its current economic nerve centres—and personal wealth—are still concentrated in and around the metros. There are only 12 districts where the total savings and term deposits exceeds Rs 100,000 crore. And they are spread across a wide range: from Gurgaon (Rs 103,772 crore) to New Delhi (Rs 1,009,694 crore).

In the map below, these are the yellow dots. Click on the legend to isolate them and mouseover on the dots to see which ones they are and their bank deposits. Other than the five main metros or their offshoots, there’s Hyderabad, Pune, Ahmedabad and Lucknow.
Mumbai and New Delhi stand out by a long way. The deposits in New Delhi, for example, are 9 times that of Lucknow and 4 times that of Chennai.

2. The 3 clusters: The map plots 169 districts that have deposits of above Rs 10,000 crore, divided into four bands. From the point of view of focusing marketing resources, there are 3 clusters that can be seen:

i) The capital cluster: Around Delhi, extending into Punjab, Haryana, Western Uttar Pradesh and Uttarakhand. This houses districts like Jalandhar (rank 26, Rs 55,779 crore of deposits) and Dehradun (rank 28).

ii) The Pune-Ahmedabad cluster: This belt runs from Pune to Ahmedabad, and passes through Mumbai—the biggest of them all—and touches several districts in Gujarat. This includes Vadodara (rank 17), Surat (rank 30) and Rajkot (rank 45).

iii) The Kerala belt: It runs along the length of Kerala, and branches off into Tamil Nadu at two points. This belt has 6 districts in the top 50, led by Ernakulam (rank 16), Thiruvananthapuram (rank 23) and Coimbatore (rank 29).

Then, there are smaller pockets, in terms of number of districts: for example, around Kolkata and Chennai. The question before mutual fund CMOs is this: are they maximizing the potential of these districts.

This data is also available as a time-series for the last 5 years for all districts, which can be used to identify stories of growth. If you are interested in an analysis of this data that is tailored to your needs, please contact us.

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‘Period’ Market Is Waiting To Be Tapped

Women in India are enraged. Well, for several reasons, but at the moment, it is sanitary pads (SPs). Period pain is one thing. But, pain of bearing a higher burden of expenses every month on this most essential item in every woman’s closet is under debate.

So, what’s going on here? Under the new tax regime, meant to make things simpler for everybody, items/services were clubbed under five different tax slabs and taxed more or less like they used to be before. Amongst the new tax bands- 0%, 5%, 12%, 18% and 28%, sanitary napkins were put under the 12% bracket in the July meeting.

While, the government has justified the new tax bracket under which SPs are clubbed, domestic manufacturers have an opportunity to find the more affordable alternatives.

A regular no frill napkin is priced between Rs. 4 – 11 a piece, adding to the monthly bill close to Rs. 50 –132 per period cycle. For a city woman, this may be paltry, but for girls/women in 70% of India, this could cause much grief.

In India, as per the last census, of 34 crore females of menstruating age, 71% lived in rural areas. And that’s quite large a population to be ignored.

Government says they cannot make the 12% tax on sanitary pads go away. It hurts the manufacturer as the raw materials used in making a pad such as polymer, glue, poly ethylene film, is taxed between 12- 18%. So, a zero or lesser tax, would hurt the interests of domestic manufacturers as they would lose out on the input tax credit. That means, the tax they pay on the purchase of raw materials would not be set off against the tax payable on the final product. So, a higher tax burden. Another justification for a higher tax is, that before GST, sanitary napkins were taxed at effectively 13.7% (6% – Excise and 5% Vat), so its pretty much status quo post GST as well. While for manufacturers and states, there’s hardly any loss of revenue, it doesn’t do anything for the end-consumers. Women who found it expensive then, find SPs unaffordable even now. As per the latest NHFS survey, only 48.2% of rural females age between 15-24 years use hygienic methods of protection during their periods. This percentage is much higher among the urban females, 77.5%. And country as a whole fair pretty dismally.

There’s a case for domestic manufacturers to find affordable and healthier solutions to reach this market, which if covered, would greatly benefit the well-being of our women and as a customer base, it is waiting to be tapped.

The map below shows the share of rural females between the age 10-50 years by districts. Out of 640 districts recognised by Census, there are just 12 such, that have zero presence of rural females. And nearly 300, which have close to 80-100% share of the targeted group.

(Click on the top left to view the color indexing done on the basis of % of rural females in each district.)

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Can You Guess Where This Market Is?


Let’s watch this video, first.

At first glance, it will look like any market in rural India. But a close look will reveal tall apartment buildings. This is where the market was located. It’s active for half-a-day, twice a week.

The market is located just opposite to a property developed by ATS in Sector 109, Gurgaon. It is approximately 5 kms from the Delhi airport, as the crow flies.

These are some of my observations:

Approximately 100-125 people were in the market when the video was taken (around 6.30 PM).

  • The total number of people who will visit this market from past one year is around 700-800 people, spending on average Rs 75-100.
  • There are between 40-50 vendors selling vegetables, fruits, sweets, toys, clothes, dry fruits, utensils, meat (usually chicken and fish), fruit juice, ice cream, food and everyday use items like comb, hair brush etc.,
  • Majority of people buy from vegetable vendors. They seem like anchor clients in the market.
  • Majority of customers are neighbouring villages (which were there before the place was urbanised) and construction workers. In another post, we will discuss about purchase patterns of construction workers and what they reveal.
  • Rain or storm, the markets function with great regularity.
  • The quality of vegetables are far superior compared to what Big Basket supplies, and prices are much cheaper.
  • The vendors move as a pack, with their own transport vehicles.
  • The market opens post-lunch, and ends by around 9.30 PM. Hardly seen them functioning beyond 10 PM.
  • Most customers walk to the market, hardly anyone come by vehicles.

What you won’t see here:

Near absence of any branded goods. It’s a challenge to find a single brand.

Think of this: This is a market in one of the most urbanised cities (Gurgaon) and located very close to Delhi. Yet, brands have no presence in the market – which is catering to the people in the bottom of the pyramid. A back of the envelope calculation shows the market makes a turnover of Rs 80,000 – Rs 100,000 in a day. A small economy of 800 consumers, 40 vendors and turnover of Rs80,000.

If I am a policy maker, I will look at ways to promote these markets which creates employment.

And, if you’re an executive looking to expand your brand’s presence, this is a market waiting to be studied and understood, so that next range of products targetting the bottom of the pyramid can be launched.

For more reading on ‘bottom of the pyramid’, read C K Prahlad’s essays on this topic.

(How India Lives has the most granular data about India. Name any village in a rural area or a ward in an urban location, we have 550 metrics ranging from demographics to asset ownership to how they live. Contact us, if you think we can help you.)

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Profiling: Hindi Vs Non Hindi Markets

One way to understand the market is through the language spoken by consumers. And in India, it can be broadly divided into Hindi and non-Hindi speaking population. The data can be further sliced to look at differences between Hindi speaking states.

For example, Chandigarh is vastly different from Patna in all aspects – demographics to economic affluence. This article is an attempt to understand the major differences between the Hindi and non-Hindi speaking markets through three parameters – urbanisation, education and female population. In the next article, we’ll look at what people own in these two markets.

We have considered 14 states as Hindi speaking states, mainly based on percentage of people who can talk in Hindi as per 2001 Census data (Yes, that’s the last time Census released data on languages spoken). Marathi is the mother tongue for Maharashtra, but they would come under Hindi speaking state because a large proportion of the population can talk in Hindi. A detailed table can be seen at the end of this article.

What can these indicators speak of:
Urbanisation – more non-farm employment opportunities, higher share of service sector jobs, more opportunities to move ahead economically
Literacy – ability to read and understand issues and take an informed decision.
Share of female population – how are women treated in the society.

In terms of population, Hindi speaking states account for nearly two-thirds of India’s population. But in other parameters – urbanisation, literacy and share of female population – they lag behind.

State-wise data on the parameters used in the analysis, see the map below.

In the second-part of the series in understanding Hindi vs Non-Hindi speaking markets, we will look at affluence as measured by ownership of assets like two or four wheelers etc. For more data, please check HowIndiaLives.com, India’s most granular database covering all the 715,000 geographical locations.

(John is co-founder of How India Lives)

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