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Finding the Recession resistant market in India

May 14, 2009
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Huff.. It's been long time since I've posted here.

Anyways, with all this talk of recession going on and how it's going to impact India, let's look at two sectors.

The steller growth phase has continued for Telecommunications sector in India with over 20 mn users being added in last two months. So, even though ARPU(Average Revenue per user) remains at rather low levels of $5/month, the healthy margins of 40% and a healthy topline growth has meant that the sector continues to grow.

Another sunrise sector, Media seems to have been hit, but not so badly. Although Reliance ADAG's BIG had to shelve its plans of launching more than 20 channels, the other major media spendings do not seem to have stopped with the GEC channel Real being launched successfully, and IPL being even a bigger success compared to last year. However, this year's IRS data seem to suggest that the readership for most of english language media haven't gone up significantly. This can be on account of purchasing power of SEC A, B segments(relatively well to do groups in Urban India) going down, but it can be also due to increased competition in lucrative territories. But overall, the trend of overall reader base going up in recent quarters seems to have been arrested this time for the english print media.

However, the regional language print media seem to have grown during this period. As many newspapers have recently reported, there has been almost no impact of recession on Rural India. Hence, my theory of surviving recession in India.

Even though I do not have geography-wise addition data for the telecom sector, I'm hypothesizing that it's the rural markets growth engine that is powering the Indian Economy during this recession. So, the sectors which depend more on Rural economy are going to perform better relative to sectors which are totally dependent on exports or demand from urban India only. So, Real estate behemoths like DLF, Unitech which are totally dependent on urban demand have suffered, while the FMCG players with large portions of their demand coming from rural areas have continued to grow.

Probably, I'll try to sift through more data and update this post in next few days to confirm my hypothesis. Also, I think it would be an interesting study to do a similar comparison for China too.

Since we are on the Urban-vs-Rural growth engine topic, a very insightful series of articles(I & II) were written by Rama Bijarpurkar few months ago on Rural markets in India. Although, she's not analyzed impact of these markets on India's growth, she has tried to prove that Rural markets are not all that independent from the Urban markets, and our classifications for Rural consumers might be misplaced.