The Rise of Bharat; A Secular Growth Trajectory Propelled by Domestic Consumption

Friday July 20, 2012 , 4 min Read

Sanjay Anandaram — A conversation I had late last year with a leading investment banker was telling as it testified to the rise of entrepreneurs from the India that lives in Tier 2 and Tier 3 towns inhabited by close to 70% of middle class India. He said, “We’re seeing an increasing number of deals outside the metros and we believe growth will come from those places. We’re therefore looking to hire people who can speak local languages fluently, have relationships in smaller towns, aren’t averse to travelling by train and bus and staying in non-5-star hotels!’ He was making an important point—wearing branded suits, speaking in clipped accents and doing business in the lobbies and coffee shops of 5-star hotels in metro India wasn’t where all the action was going to be!

India’s secular growth trajectory is being propelled more by domestic consumption than by anything else. In turn, domestic consumption is increasingly and rapidly being driven by middle India. Thanks to media exposure, telecom penetration, growing linkages with larger urban centres, rising incomes and enhanced distribution and penetration by consumer product companies, aspiration levels of this India are at an all time high. Growth opportunities abound across all sectors of the consumer economy—from personal grooming to retail to financial services to healthcare to consumer goods to education to... the list is long. E-commerce companies are seeing robust sales from outside the metros. Not surprisingly, with increased opportunities and awareness, interest in entrepreneurship is rising fast and by choice.

Representatives of this India share some very interesting attributes as multiple studies have shown. For example, according to studies by Euro RSCG in 2005 and 2007, these attributes include the following: confident and assertive; tend to be more socially aware; are proud of being Indian; unafraid of trying the unknown; and belief in the family as the cornerstone of existence.

It is said that entrepreneurship cannot be taught, but can be learnt. Role models are important in this regard. With increasing awareness of entrepreneurship, engineering and business colleges in many non-metro towns have entrepreneurship courses and students get exposed to top-class entrepreneurs through the efforts of industry associations. Groups like TiE have, for example, centres in towns like Hubli, Ahmedabad, Pune, Patna, Kochi and Nagpur.

While the hunger, awareness and aspiration levels are on a par with those anywhere else, entrepreneurs from small towns face challenges as well:

Business skills: required to build professional, well-governed and large-scale businesses. The need to think big, to implement processes and systems, have a team in place and a disciplined and focused growth plan.

Access to capital: this continues to be an issue. Traditional venture capitalists have no way of identifying and even conducting due diligence on these investment opportunities while these entrepreneurs aren’t familiar with venture capital and how to reach this class of investors. There are no angel funds available, raising money from banks has its challenges and friends, family and the community can only provide so much capital—not enough to build a large scalable business.

Networking: building relationships with customers, investors, advisers and mentors, investment bankers, partners, learning and sharing experiences through events and blogs for example, are harder to do. Many of the entrepreneurs aren’t very internet savvy either and aren’t aware of how to leverage social media tools.

Clearly, with the all around energy of a growing India pushing for change, these challenges can be easily dealt with as they inevitably will be and soon.

In Golders Green crematorium, Hoop Lane London, there’s a statue overlooking the gardens. The statue is of a legendary Indian entrepreneur, born in 1894, and whose name is still among the most venerable in Indian business today. This entrepreneur left a small town in Rajasthan and travelled first to Mumbai and then to Kolkata, the great urban centres of the time, to make his fortune. He established businesses in jute, sugar, autos, tea, textiles, cement, chemicals, rayon and steel tubes.

In tomorrow’s India, a GD Birla will not have to travel from a Pilani to Mumbai and Kolkata to realise his entrepreneurial dreams. A Pilani, a Palanpur, a Patna or a Pune would be a good enough base from where to launch a global empire. The dreams, the will, the capabilities and aspirations exist. All that these places need is for resources—financial and non-financial—to become available. The good news? It will happen sooner than you or I can imagine.