If ever there were to be a consumer market utopia in India, we are surely on our way there. For not only does the Business Today-Indica Research Index of Consumer Sentiment (BT-IRICS)-that measures sentiment across 10 major cities-for May 2005 stand at its all-time, three-year high (BT-IRICS started out in August 2002) of 206, it has leapfrogged almost 22 per cent in a matter of just four months, from an already high 169 in January this year. And remarkably, all 11 index variables have moved up in tandem and reached new peaks.

From the consumer's sense of her current economic situation, future economic expectations and consumption mood, everything is gung-ho. Current income is up 28 per cent and expectations of rise in future income up a whopping 42 per cent. Not without reason. For, salaries across the board in corporate India have jumped over 15 per cent in FY 2005 (see cover story Skyrocketing Salaries on page 48). Business conditions look upbeat, and it will only improve in the next 12 months.

"We're getting a loud and clear message from the consumer. And it's not just on increased consumption, but more importantly on change in the fundamentals that drive consumption," says Nakul Chopra, Group President of ad major Publicis India. He is right. Take the case of eternal consumption bugbears such as job insecurity and price rise. Just about a fourth of all consumers are pessimistic about employment now compared to two-thirds to three-fourths almost six months to a year ago. And price negativity is down to just 15 per cent of all consumers compared to over 80 per cent all these years.

Not that prices aren't going to go up, but it has more to do with consumer mindset change than price per se. For, inflation is still over 5 per cent and there is risk of manufactured goods prices escalating if the artificially subdued oil prices were to be upped by the government. And quite a few manufacturers are already taking prices up or at least calling off long-running prices wars, such as in detergents, toothpastes and two-wheelers. But by all indications, demand across consumer market in durables, autos, expendables and entertainment remains strong and headed north.

"There is belief in the country, across government, industry and the consumer that if high global oil prices did not impact growth anywhere else, why should it be different for India?" says Indranil Pan, Chief Economist at Kotak Mahindra Bank. Little wonder the most pessimistic forecast of economic growth for 2005-06 (surprisingly coming out of the Prime Minister's Economic Advisory Council) is a good 6.7 per cent, with a caveat of 0.5 per cent bonus growth if the monsoon turns good and the government took some proactive policy initiatives in the infrastructure sector.

"A high index (BT-IRICS) is coinciding with the upward economic and investment cycle across the economy," says Rajiv Kumar, Chief Economist at CII. Non-food credit growth, a measure of industry borrowings, remains strong. Interest and lending rates are expected to remain stable. The only real concern is the monsoon, because manufacturing and services growth is pretty much on auto-pilot, predicted to grow over 7 per cent and 8-9 per cent, respectively.

It is the volatility in agriculture growth-up more than 10 per cent in 2003-04, but down to under one per cent last year-that makes the difference between average, good or great economic growth. "For some time now the two-wheeler market has grown on the strength of cities," says S. Shridhar, Vice President (Marketing & Sales), Bajaj Auto. With over 60 per cent of 4.9 million two-wheeler sales coming in from rural and semi-urban markets, agriculture growth will be critical in reaching the 15 per cent growth that the industry is gunning for in FY 2006.

"Our major concern from here on is not so much growth but its distribution across various income segments," says Kotak's Pan. A fact borne out by BT-IRICS new parallel track on socio economic classification (SEC) C consumers (see The SEC C Effect and A World Of Difference). For just about everything-from current economic status, economic expectations to consumption mood-SEC C consumers are somewhat restrained compared to an out-and-out bullish SEC A & B consumer.

Perhaps this explains why marketers who are now tapping upcountry and middle-to-lower income consumers in big cities, though positive on growth, are still shy of committing big and bold marketing investments. The silver lining though is that new SEC A, B & C BT-IRICS is still 4 per cent higher at 176 compared to 169 in January 2005. And there is an almost 30 per cent increase in even SEC C consumers who are spending more now compared to even four months ago. "The outlook for all cafe chains is rosy," says Brotin Banerjee, COO, Barista Coffee Company. Obviously, more and all manner of consumers are walking into the 450-odd coffee cafes that dot the country. A rising economic tide, it seems, will set everyone's boat clipping.

Indica Research Index of Consumer Sentiment: The Indica Research Opinion The Great Indian Elbow Point

The BT-IRICS index has crossed 200 with a whoosh, and moves to 206 from 169 in Feb. 2005. The SEC A & B householders expect their financial status to improve and prices to behave well-so the perception of income relative to price has improved a lot. And they are in a mood to spend. Looking from a consumption standpoint, the summer is traditionally a period when nothing much happens. Categories that have a direct relation to summer witness a seasonal peak-ice cream and soft drinks-for instance. Another category that enjoys its seasonal high is education-be it the formal one or the informal sector of tuitions or preparations for cat. But these no longer seem to hold true. Indeed the anecdotal evidence is that in several categories the peaks and valleys are getting evened out-another indication of spending that is not specifically constrained or timed. This is driven by the larger pricing regimes too. The data suggests that it's the perception of price where the improvement is pronounced-and hence the translation into a better expectation on the income relative to price. The prices have temptingly dropped in some categories like home theatre systems and consumer electronics. But they have most visibly dropped on air travel, a service that is both functional and aspirational to the middle class. HOW WE DID IT » Total sample 1,220 » 10 cities: Delhi (135), Mumbai (120), Chennai (120), Bangalore (120), Hyderabad (120), Kolkata (120), Ahmedabad (120), Lucknow (125), Cochin (120), Nagpur (120) » Purely random sampling process; 609 male and 611 female; SEC A 414 respondents, SEC B 402 respondents and SEC C 404 respondents » Face-to-face interviews using a structured questionnaire » The questionnaire covered three core areas: current assessment of economic situation, expectation about the future economic situation and overall consumption mood » Besides key variables for indexing, the survey measured explanatory measures » All data was weighted; each variable first indexed for Nett optimism » Data then indexed as proportion of total score possible » This index then weighted to arrive at All India Index of Consumer Confidence The budget did have some oddities like the FBT, but it does not affect the larger set of SEC A and B. On the other hand, the stock markets and the successful IPOs, one would expect, would have actually released spendable amounts into the wallet. Moreover, the data also suggests that the penetration of mobiles has crossed the 50 per cent mark (the sample average is 51 per cent across all markets). It is nowhere close to what the international evidence would suggest as being the potential, so one can expect the action to shift to the smaller towns. This would then yield some discretionary monies to flow into a variety of other categories in the metros and larger cities as well. Amidst all this optimism amongst SEC A and B, we must note the difference in SEC C, which we included in this round (the future IRICS measurements will include SEC C). They are not that optimistic-the index when SEC C is included is still higher but not that much-176. The notable disquiet is in the North, where the optimism amongst the traders and small businessmen, who also constitute a part of the SEC C, is dampened by the vat implementation. We daresay that this data would lend support to the 'tipping point' theory that we hypothesised in February. If the monsoons are also good, we should look forward to a buoyant year of consumption. So a range of factors are working together, some ephemeral perhaps, but some fundamental. All in all it certainly points to exciting times ahead-what with even the other Great Indian Elbow now seemingly well on the way to complete recovery in a few weeks.