Mention India to many CEOs and investors, and they will smile broadly at the thought of its “demographic dividend”.
Two-thirds of India’s population are under-35,and are already swelling the numbers of those in the critical Wealth Creator 25 – 54 age group which drives economic growth. As the chart shows:
India’s median age is just 27 years today. It will still be only 31 years by 2030
The Wealth Creator cohort is already 523m, and will reach 652m by 2030, whilst the Under-25 cohort is over 600m
There are only 169m in the New Old 55+ generation. Although life expectancy in India is now 69 years, it was just 37 years as recently as 1950
Helpfully, a major new survey by India’s Centre for the Study of Developing Societies provides new evidence on the hopes and values of this vast younger generation. It aims:
“At understanding the social and psychological wellbeing of young people….because if the expectations of this growing mass of youth are not addressed on time, then the disappointments of this burgeoning population could translate into social unrest and even violence.”
Its key findings are critically important:
One-third of young people are classed as students, up from just 13% during the last survey in 2007. But many are apparently “studying further to delay entry into the workforce or perhaps as a means of ‘timepass’
There is also a clear caste divide in terms of access to education, with “42% of Upper Caste youth reporting themselves as students, compared to 25% of Dalit youth and just 16% of Adivasi.”
“Agriculture is the largest employer of India’s youth” – and 39% of these young people are lowly-paid hired workers
Unsurprisingly, given this background, nearly 1 in 5 young people are worried about jobs and employment, whilst 1 in 10 worry about inequality and corruption
India’s youth also tend to be conservative – 53% oppose dating before marriage, 45% oppose inter-religious marriages and 36% oppose inter-caste marriages. And the survey adds:
“We also ascertained the youth’s opinion on contentious issues which have been at the centre stage of the ongoing debate over liberty and progressive beliefs – banning of movies which hurt religious sentiments, beef consumption and death penalty. We find that 60% supported banning movies which hurt religious sentiments. 46% object to allowing beef consumption and 49% support retaining capital punishment. These figures clearly indicate that most youngsters remain averse to progressive beliefs on political issues.”
As the Financial Times notes in its comments on the survey:
“Religion retains a powerful grip. Nearly half give religion precedence over science when they clash, while just a third would privilege science over religion….more than half of youths believe women should always listen to their husbands. Nearly two-fifths feel it is inappropriate for a woman to work after marriage, while a significant 38% feel women should not wear jeans.”
Similarly, 40% of young Indian women “favoured the idea of an obedient wife”
The survey evidence confirms a critical paradox about India:
Most young Indians have smartphones and are style-conscious
Yet like most poor people, they are very conservative in their social attitudes, with patriarchy deeply-rooted
It is very easy for non-Indians – seeing television news or making an overnight visit en route to/from China – to simply see the smartphones and fashion, and assume India has now become a middle class society by Western standards. Of course, it does have relatively rich people. But fundamentally, as Indians all know, it remains a very poor country with average earnings just INR 272/day ($4.20) – and less than two-thirds of adults are literate.
There are vast opportunities in India, once one accepts these key facts. These are often focused on helping people to build a better life for themselves – one example, as premier Modi has highlighted, is in providing toilets for the 600m who currently lack access to them.
Hindustan Unilever has understood this basic truth for many years, and has become India’s largest consumer products company as a result. Their mission statement is simple and powerful – “doing well by doing good“.
2.5bn people in the world still lack access to toilets, according to the World Health Organisation. That’s down just 7% from the 2.7bn people without toilets in 1990.
What have we been doing over the past 20 years to allow this terrible situation to continue? Why have we not focused on this area as a way of boosting economic growth and global health? As the UN’s deputy secretary general, Jan Eliasson has warned:
“This failure to address the issue of sanitation is potentially disastrous.
“Sanitation is cross-cutting: if you make progress on sanitation, then you dramatically improve the achievement of at least four other goals” :
- “One of the main reasons for child mortality is diarrhoea and dysentery because of bad water and a lack of sanitation
- “You get a much better way of working with maternal health issues: I can’t tell you how many women are dying in childbirth because of a lack of clean water
- “You’ll affect education, because people can’t go to school when they have these huge problems
- “You will have productive people who can go to work.”
Eliasson also argues that building toilets for women is fundamental to gender equality, education – and safety:
“In Africa, in particular, there is an unfortunate situation where girls don’t have toilets in their schools. It’s very easy to arrange them for the boys, but girls require more privacy.
“And then you get into the area that we saw in that horrible example in India, when the girls went out at night and were raped and killed. This is done in innumerable cases: men preying on young girls who are going out like that.”
India under new Premier Modi is the great example of the sea-change in thinking that is now underway on this issue. Major Indian companies such as Indian Oil and many others are now following his lead.
The Bill and Melinda Gates Foundation is similarly prioritising this key issue, awarding $100k prizes to universities for designing better toilets for the developing world.
Of course, moving into this new market represents a challenge. But it will also be a stepping-stone to further, currently untapped markets focused on basic needs, as we described in Chapter 7 of ‘Boom, Gloom and the New Normal’.
The New Normal is now just around the corner. The Boomer-led economic Supercycle will not return. Companies and investors who continue to focus on producing ‘affordable luxury’ will soon find themselves out of business.
Too late, they will then wonder, “Why did we not see what happening in front of our eyes?”.
The blog is delighted to be able to congratulate Indian Oil (IOC) on becoming the first company to commit to building toilets in India. In response to Premier Modi’s appeal, the chairman of India’s bggest refiner, B. Ashok, last week personally began to build toilets at a school near its refinery in Mathura in Uttar Pradesh state.
IOC have already committed to builidng 1000 toilets for girls. Even better is that Oil and Natural Gas Corporation (ONGC) along with GAIL, Bharat Petroleum and Hindustan Petroleum are also planning to participate. ONGC said in a statement:
“The project has been launched in 2 schools in Ganjam and 8 schools in Gajapati districts of Odisha and in 10 schools near ONGC work centres in Tamil Nadu, Andhra Pradesh, Gujarat, Assam and Tripura. The mission is to achieve total sanitation in India over a period of next five years”
The key driver behind this activity is Modi’s policy of targeting sanitation for all within 10 years. This is an enormous task, as around 600 million Indians curently have no access to toilets. As a result, they have to defecate in the fields, as the picture above shows. This not only transmits disease, but also puts women at risk of rape by forcing them to defecate at night-time.
This is why the blog is so supportive of the premier’s initiative. Providing sanitation is likely to prove the best possible way of boosting India’s long-term growth potential. And it also creates a virtuous circle for manufacturers, as it creates a major new market for polymers – worth at least $10bn.
It hopes that more companies will now follow IOC’s lead. India has some of the best demographics in the world, and its economy could therefore have excellent growth rates in the next few decades. But it will not achieve its potential unless its people are fit and healthy.
Modi’s campaign also highlights how a focus on real needs, such as proper sanitation, will be the key to success as the world enters today’s New Normal
The Indian Prime Minister’s address on Independence Day is the major event of the political year, equal to the US President’s ‘State of the Union’ speech. It was particularly important this year as India has a new reforming prime minister in Narendra Modi.
It it is thus hugely significant that top of his agenda was opening up the country to foreign business, and the need for toilets, as the Financial Times reports:
“I want to tell the world, ‘come, make in India’,” he said from the walls of the 17th-century Red Fort in Delhi in his first Independence Day speech. “We have the skills, we have the strength, we have the people.”
Modi then focused on toilets, and confirmed that the government was targeting sanitation for all in 10 years:
“I don’t know if people will appreciate my talking about dirt and toilets from the Red Fort. But I come from a poor family. I have seen poverty, and the attempt to give dignity to the poor starts from there”
The need is truly desperate, as the chart above shows from the World Health Organisation. They suggest that 597 million people still defecate outside in India. This vast number equals 10% of the world’s total population. It is also 10 times more than 2nd-placed Indonesia, where 54m have no access to toilets.
The blog knows that most companies are currently not set up to focus on critical issues like this. But that is no reason to ignore the potential. There are not many $10bn markets where competition is currently non-existent, and where the technology and know-how required are available immediately.
Equally important is that the alternative of hoping for traditional growth markets to recover looks very much like wishful thinking:
- The market for luxury goods in China is looking very weak with the anti-graft campaign in full gear. And China was half of the global luxury market in 2013
- The Eurozone economy is already weakening again, whilst the German Bundesbank is warning it will be hit by the increase in global tension in the Ukraine and elsewhere
- US auto and housing markets face major question marks with the West having reached ‘peak car’ levels and US housing markets already slowing down
Of course, moving into this new market represents a challenge. But it is also likely to be a stepping-stone to further, currently untapped markets focused on basic needs, as we described in Chapter 7 of ‘Boom, Gloom and the New Normal’.
As such, it will provide valuable learning experience for the future. And it will also be a lot more satisfying than banging your head against a brick-wall, now the profitable markets of the SuperCycle have now gone ex-growth.
As the blog discussed last week, it seems that a new type of leader is starting to emerge in some of the world’s major countries. Premier Narendra Modi in India, like President Xi Jinping in China, seems to be focused on achieving change – and not just on staying in power for its own sake.
His vision is simple and very powerful:
“By 2022, no Indian should be without a home, without clean water, without electricity and without a toilet”.
This could be very good news for India, which is set to have the world’s largest population within 20 years, due to having higher fertility rates than China. As the chart above shows, however, it only has a limited time period in which to benefit from this Demographic Dividend:
- Its fertility rate has already fallen 60% since 1950, from around 6 babies/woman to just 2 babies/woman today (green shading)
- This is below the replacement level of 2.1 babies/woman, and means India’s population will start to decline if this trend continues
- Life expectancy has increased 80% over the same period, from 36 years in 1950 to 65 years today
- This means that India will follow China into becoming an ageing society in due course
India is, of course, also one of the world’s poorest countries. Its GDP/capita of just $1500 puts it in 140th place in the world. By comparison, China is 83rd with GDP/capita of $6700. So Modi’s focus has to be relevant to its economic wealth, if it is to achieve anything meaningful.
The blog’s colleague, John Richardson, has written an excellent summary of the challenges and opportunities facing Modi in India. He rightly argues that “a war on poverty – especially extreme poverty” must be the key target.
“This would mean many more children would be healthy-enough to attend school on a regular basis. In parallel major improvements in the education system must also take place.
“Key to alleviating poverty will be improving access to safe drinking water, sanitation and safe and plentiful supplies of food. This is where the chemicals industry can play a critical role in making this happen. If more and more children are able to attend good schools, they will grow up to be a little richer than their parents. This would translate into much greater domestically-derived growth, which will happen regardless of India’s success or failure in export markets.”
He is clearly right. Simple metrics are what is needed to focus activity in the right direction. The fact that half of India’s population currently have no access to a toilet, and instead have to defecate in fields, is one such target that anyone can appreciate.
The numbers speak for themselves:
- 600 million Indians currently have to defecate in the fields, or wherever they can find an available place.
- They total 60% of the world total of residents who have to live without toilets
- The previous government spent just 0.1% of GDP on water and sanitation provision, less even than Bangladesh
This is why Indian villages are thought to be among the unhealthiest communities in the world. The rewards would be immense, as Bloomberg notes:
“At stake is $54bn a year in economic costs in India, equivalent to about 3% of GDP in Asia’s third-biggest economy and a quarter of global losses from poor sanitation. Open defecation contaminates ground water, spreads disease and exposes women to sexual assaults, including two girls in India who were raped and hanged from a tree last month after squatting in a field near their homes.”
Change is, of course, difficult to achieve. As the great Italian writer Nicolo Machiavelli wrote in his most famous work,’ The Prince’
“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.
“This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly.”
We will know whether Modi is serious about reform, once today’s honeymoon period ends, if we start to find that he is being seriously attacked by people who have done well under the old conditions.
The fact that something is difficult, does not mean it should not be attempted. Companies who focus on the opportunities in India, from the provision of safe drinking water and sewage, or better food packaging, are likely to be the Winners for the future.