When data for two-wheeler production and sales in India in October 2023 were released recently, the author realised that the long winter for 'aspirational Indians' might finally be coming to an end.
This was confirmed by the evening of 30 November when data for GDP growth for the July-September quarter was released. Contrary to expectations of a 6.5 percent growth rate, the Indian economy grew at a more than healthy 7.6 percent.
It’s not party time yet for them, but it does look like this bloc of Indians are finally beginning to open their digital wallets. This could be huge factor for the future of the Indian economy, irrespective of who wins electoral battles and wars.
In October 2023, about 1.9 million two wheelers were shipped from a range of old and spanking new factories. According to the Federation of Automobile Dealers Association, festive season sales of two-wheelers in 2023 was 2.9 million units, up about 20 percent from 2022.
Who are the Aspirational Indians?
This author is not a cynical hawk and critic when it comes to the current regime led by Narendra Modi. Nor is he someone who thinks that civilisation, growth, and resurgence started in 2014.
One reason for skeptical views about this regime has been the condition of aspirational Indians. Who are the aspirational Indians? They form the bulk of India between the very poor, and the middle class and the affluent. Almost all of them are first-generation “escapees” from poverty.
They have not been having a good time for a long time. The really poor Indians always suffer. Most of the middle-class muddle through and the affluent don’t really care either way. Aspirational Indians, on the other hand, are dreamers struggling to permanently escape poverty.
They are done and dusted with the bicycle. But they can’t afford cars, though they drool over pictures and videos of new car models on their budget smart phones. Without them, it would be impossible for the Indian economy to sustain a GDP growth rate of 6 percent a year.
If they start betting on a better financial future for their families, a GDP growth rate of 7 percent a year can be comfortably sustained for a long time.
Numbers Tell a Simple and Straightforward Story
Look at the chart to get a feel of why the number 1.9 million is so significant. Hypothetically, if 1.9 million two-wheelers are sold every month on average during a year, total sales would be close to 23 million units.
The highest ever sales of two-wheelers in India at 21.2 million was recorded in 2018-19. It has been downhill since then as aspirational Indian families have been bruised, battered, and bloodied by virtually stagnant incomes and high inflation. The COVID-19 pandemic was another body blow.
And while middle class and affluent Indians rode on the aftermath, aspirational Indians struggled to manage household budgets. Quite naturally, these families buried their dreams about buying a new two-wheeler. The perception captured by numerous CVoter surveys has been: maybe sometime in the future.
Not surprisingly, from a peak of 21.2 million in 2018-19, two-wheeler sales crashed to 13.6 million in 2021-22. Don’t forget, this year was remarkable because two-wheeler sales crashed to a decade-long low while passenger car sales were breaking all previous records.
Don’t also forget that the GDP growth rate in 2021-22 was a mouthwatering 9.1 percent as the Indian economy shrugged off the devastation of the pandemic. The growth momentum was maintained in 2022-23 as GDP grew at 7.2 percent. Passenger car sales of more than 3.8 million broke all previous records.
There was a recovery in two-wheeler sales.
But it was anaemic at best as recorded sales stood at 15.9 million — more than 5 million down from the record 21.2 clocked in 2018-19. Economists have been arguing and debating about a V shaped and a K shaped economic recovery. Jargon apart, these numbers tell a simple and straightforward story: the affluent are making merry, the middle class is comfortable, but the aspirational Indian is still dazed and uncertain.
Where the Number 1.9 Million Assumes Significance
A look at the sales of another ubiquitous product - the smart phone - tells the same story.
Companies that sell high end premium phones like Apple have been reporting phenomenal growth in sales, often exceeding 100 percent a year. But a bulk of smart phone sales is through budget or entry level models. And they have been languishing.
According to various industry estimates, smart phone sales clocked 161 million units in 2021. They plunged to 144 million units in 2022 even as sales of premium models like the i-phone were galloping. It’s the same story: the aspirational Indian family is still beset by uncertainty about its economic future.
The natural decision when uncertainty dominates consumer sentiments is to postpone “discretionary” purchases. CVoter has been conducting consumer sentiment surveys for years. One of the questions asked to ordinary Indians during these rolling surveys is: how difficult do you find managing your family or household budget. More than three-fourths of the respondents in 2021 and 2022 said they found it very difficult. Two thirds still have the same opinion in 2023, though their perceptions about the future have improved dramatically this year.
That is where the number 1.9 million assumes significance.
To twist and flog a cliché: one Siberian crane doesn’t make a winter. It would be foolish to expect or assume that 1.9 million two-wheeler sales a month would become a norm. There are lean patches and sales tend to peak during festive season. Yet, Diwali in 2022 was towards the end of October. Two-wheeler sales clocked 1.58 million units.
This year, Indians have just celebrated Diwali in November and October sales clocked 1.9 million units. The record sales figure of 21.2 million units no longer looks like a distant dream. This could be the inflection point for the Indian economy if one looks at numbers without surrendering to the pathologies of jargon.
About 60 percent of India’s GDP comes from private consumption expenditure. A bulk of that comes from aspirational Indians who “indulge” in two wheelers and budget smart phones. For the first time in more than four years, there are hints that the aspirational Indian family is dreaming again.
(Sutanu Guru is the Executive Director of the CVoter Foundation. This is an opinion article and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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