R Gopalkrishnan
The author is executive director, Tata Sons

In this series, I hope to demonstrate three points, some of which may be contrarian.

• That there is a heritage of genius in Indian business, which has been a premier marketeer for several centuries; the last century has been an aberration when Indian business forgot that ‘marketing is the business of business’ and became inwardly focused.
• That the next 15 years are going to be a period of life-threatening change for Indian businesses, and I will share four mega-trends as I see them.
• Four lessons from the challenge of recalibrating business to the marketing mindset.

Merchants from Harappa and Mohenjodaro were trading with Sumeria as early as 2300 BC. For centuries, spinning and weaving of cotton have been a premier economic activity, both for the home market and exports. Roman coins have been found in South Indian ports in such volume that it is suspected that the balance of trade in the first century of the Christian era even favoured India! In 1498, when Vasco da Gama sailed into Calicut, it was already a thriving port familiar to Arab and Chinese merchants. In 1608, an English captain, William Hawkins, dropped anchor at Surat, armed with 25,000 pieces of gold and a letter from King James I to Mughal Emperor Jehangir.

He found that Surat was a bustling city, its warehouses bulged with merchandise from most of Asia, peddling everything from peacock feathers to elephants. It is worth noting that Captain Hawkins’ tour report to King James I read, “Nothing that England makes at this time is really desired by Indian merchants or officials.” After the battle of Plassey, as colonialism established roots, the East India Company attempted to establish a monopolistic trade. The passing of the Charter Act in 1813 further opened up trade. Due to huge demand for commodities in post-Napoleon Europe, India gradually converted from an exporter of manufactured products to a supplier of primary commodities.

For eighty years from 1835 to 1915, India had a consistent and handsome trade surplus with export always ahead of imports. A new impetus was imparted to our foreign trade, thanks to the opening of the first Indian railway line in 1853 and the Suez Canal in 1869. It was a fabulous era of multilateral trade, of simple international payments and exchange rates. Major advantages were the global free trade policy, rapid industrialisation of Europe and the US, and the transformation of Japan under the Meiji Restoration, all of which created a new level of demand for raw materials and foodstuffs.

The turmoil of the two Wars was reflected in the pattern of India’s foreign trade which was quite erratic. There was no growth, imports in some periods exceeded exports, and the Great Depression undoubtedly took its toll. Compared to the previous 80 years, the interwar period witnessed trade distorting policies like tariff protection, foreign exchange control and growth of bilateral trading.

A characteristic throughout these 110 years was the existence of a large Indian export surplus, which was not offset by a rise in foreign exchange reserves or an increase in overseas lending. The key to this puzzle lies in invisible items in the Balance of Payments and unilateral transfer of funds to Britain. This was the genesis of the idea of ‘drain of wealth’ from India. But what happened after 1945? India has consistently run a trade deficit during the last 55 years. A trade surplus situation that lasted a long time, probably for 2000 years, suddenly got reversed.

Future Scenarios
If we were to crystal-gaze into the India of 2011, we will see a land of one-and-a-quarter billion consumers, many of whom are rural and poor, have real choices, that they exercise with earthy common-sense, and spend money in ways that will attract many from all over the world. I wish to touch upon four mega aspects: the non-consumer, distribution, services and migration.

The Non-Consumer
India has always lived in the villages. Although seven out of 10 people live there, marketeers behave as though it is another world, which is separate from themselves. In the villages, there are rich people who may follow adoption models of urban brands. What about people who are today non-consumers, who are rural and poor? Marketeers’ understanding of those consumers, comprehension of their economics and aspirations, are all vague.

In the fifties, there were about 250,000 outlets catering to 400 million people - say 600 outlets per million. Nowadays, it is estimated that there are 5 million outlets catering to a billion people - say 5000 outlets per million population. This is the opposite of trends in other parts of the world, including developing countries, where outlets per million are decreasing and trade is getting more concentrated.

Indian retailing is different because the infrastructure is woefully underdeveloped - roads, traffic, cars. It’s not that there will be no supermarkets or self-service stores, but the consumer will by and large continue to shop in neighbourhood stores even in 2011 when it comes to items of daily consumption. This means that distribution and selling will continue to play a major role within the marketing mix, as it has in the past. With urban-centric marketeers and their agencies, there’s growing resistance among youngsters, for whom a stint in selling - let alone a career - is unattractive. Companies that do not manage this aspect judiciously will not be around in 2011.

Another development will be the rapid rise of services in employment. In 1951, there were 125 million unorganised sector workers and 15 million organised sector workers, making a workforce of 140 million. In 2011, there will be 430 million unorganised sector workers and only 30 million in the organised sector. Here’s the point to remember: while organised sector employment will double in 60 years, unorganised sector will increase by over 3 times, again a trend that is contrary to global trends.

It is also instructive to note that even within the organised sector, employment in services is growing faster than industry, eg trade, banking, insurance, public administration and so on constitute services. Services were 25 per cent of GDP in 1951, now they are at 45 per cent and by 2011, they could well be around 55 per cent of the economy. And this is not about more IT-enabled services or software professionals. Have we not noticed neighbourhood caterers for parties, the pickle or health-food maker next door, the small company that does housecleaning on contract? All services sector.

In 1971, there were one million vehicles on the road, today there are 48 million, in 2011 it could exceed 100 million! These require highways, drivers, cleaners, petrol pumps. The difference in the income per agricultural worker and income per non-agricultural worker indicates how attractive it is to migrate from agriculture. In Punjab and Haryana, if a worker earns Rs 100 in agriculture, then he can earn about Rs 150 in non-agriculture. In Maharashtra and Tamil Nadu, Rs 100 from agriculture compares to Rs 550 from non-agriculture, thus explaining rapid urbanisation. In the cow belt, it is Rs 100 to Rs 300.

What will people do when the cities of their own state cannot absorb them? Employment statistics show that the cow belt states have the maximum backlog of unemployment, but it is in these states that the growth of labour force is expected to be very high. These states will witness a 50 per cent increase in the already high rate of unemployment, according to Plan documents.

Job opportunities in Andhra Pradesh, Karnataka, Maharashtra and Gujarat, on the other hand, would be higher than the labour force growth. Thus, while the nation is doing aggregate growth planning, labour is migrating to where the jobs are. This is not new per se, what’s new is the migration from home to faraway places in the country.