"What does the rest of the world not get about India?" I asked Kunal Shah this question last week. Kunal founded CRED - one of India's leading consumer fintech companies valued at $6.4B. He gave me a laundry list of nuanced observations. This list is a *must read* if you're interested in Indian startups. Here were my 8 favorite insights he shared: *** 1. India is not a big consumer nation. All of the ARPU is concentrated in what consumers perceive as "long term assets." This list is tiny: (1) education, (2) health, (3) real estate & (4) gold. Believe it or not, 18% of the world's gold is held by Indian retail consumers 🤯 *** 2. Indian consumers are primarily men. Less than 7% of the urban female population has independent final income. This is staggeringly low - for reference, this is 90%+ in China. Even 50% of shopping on female fashion portals in India have men shopping for their significant others! *** 3. India is a low trust society - the implication is trust is bifurcated. Trust is hyper local OR hyper national. Hyper local - you trust your family, extended family and community. Hyper national - you trust mega brands and conglomerates. Conglomerates like Tata and Reliance are able to launch products in 25+ verticals *precisely* because people trust them. *** 4. Focus is a curse word in Indian startups. India is a big market when you think of the headline numbers, but it's tiny on a per capita consumption basis. Startups can't become big by focusing on one product or service; the consumer class doesn't have enough monetary depth. *** 5. In India, averages hide how acutely concentrated things really are. Per capita income is $2,000. Remove the top 30 million people (out of 1.5B) and per capita income drops to ~$700. 70-80% of all discretionary spend in India is done by 2% of the population. *** 6. Indian consumers are more like CFOs than CMOs. CFOs are prudent and calculated. CMOs are dreamers and storyteller. In India, the CFO function dominates every consumer category. Except...Education, Healthcare and Weddings! When the Indian CMO takes over, it's with a knockout punch. The Indian consumer will spend (in many cases) 10-20x their annual income on weddings (!) *** 7. Credit cards are going to set off an explosion of new financial outcomes in India. Historically credit cards were given to consumers who could demonstrate stable income on record (a very small fraction of consumers given India is largely an informal economy). The India stack has changed this. Now there's an at scale account aggregator framework to gather bank data, tax data, etc. with a simple API call. There's a fundamentally new data set to underwrite on. *** 8. This will be India's decade. Capital availability. Digital Stacks. Talent pool. Support from regulators and government. Stability in the economy. Consumer readiness for tech. UPI. Smartphones. 5G. The next 10 years will be the best years to build startups in India!
Would love to understand how credit cards will help evolve financial outcomes. The typical tier 2/3 Indian consumer is either indifferent or still averse to exploitative nature of credit cards and the high interest rates accompanying it. As you mentioned, Indian households are dominated by the CFO type and Indian CFOs don’t want to spend more than they can afford for everyday purchases. Exceptions being the 4 categories you mentioned.
Thanks for putting together & sharing. Loved the analogy on Indian customers being CFO versus CMO in most use cases. Just like weddings, Indians have a very very high WTP & spend disproportionately on education & especially college education. But sadly the quality & outcomes they get or have access to, have failed to keep pace with spends here. Hopefully that will change soon, much needed to help solve the looming talent crisis. cc Varun Limaye
This is a great great summary! Real India still lives in villages - there are more than 600,000 villages where over 2/3rd of our population lives. Serving them is not easy due to variety of reasons and some have already been covered in this post. Long-term winners would be the firms that are able to crack this code, which is easier said than done!! Utilizing digital infra would be the optimum solution to reach and serve India's masses and we have all the ingredients ready now, as covered in point #8.
On #7, I think Romeen doesn't essentially mean credit card debt as we recognize it today - high interest rates that are applied regardless of the credit worthiness of the borrower. The key is the third paragraph: 'The India stack has changed this. Now there's an at scale account aggregator framework to gather bank data, tax data, etc. with a simple API call. ' This is a game changer - behavioral data that will enable the best SMEs to get access to cheaper growth capital.
Thank you for putting these interesting insights together. Point No. 2 on "Indian consumers are primarily men with less than 7% of the urban female population having an independent final income" is interesting. But, there may be more nuances to the decision-making process within a family. For example, in quite a few families, women are the decision-makers irrespective of the fact whether they are earning or not.
Great insights. Any company that can address low income, mass market needs with low priced products and services will succeed. And they will grow with inclusive economic growth, but it'll be a slow process. Rest will start out for the consumers with higher paying capacity and hit a roadblock when they scale up.
Great post on the nuances of the Indian market. It's always enlightening to hear from industry leaders like Kunal Shah on their observations and insights. I particularly found the points on the Indian consumer being primarily men and the low trust society to be quite interesting. I believe these are key factors that startups operating in India should keep in mind when building their strategies. Additionally, I think the observation on the curse of focus in Indian startups is a valuable takeaway. The Indian market is so vast and diverse, it's important for startups to be able to adapt and pivot their strategies accordingly. I also agree with the point that this will be India's decade, with the availability of capital, digital stacks, talent pool, and support from regulators and government, the Indian market is poised for growth. I look forward to seeing how the Indian startup ecosystem evolves in the coming years.
The current conditions in India are conducive for growth and innovation in various sectors, particularly in technology. The availability of capital, digital infrastructure, and a talented workforce, along with support from regulators and government, a stable economy, and a tech-savvy population are key factors that will drive India's growth in this decade. The emergence of UPI, smartphones and 5G will only accelerate this progress. Exciting times ahead for India and the potential for it to be a global leader in technology is huge!
India is not YET a consumer nation, but if you look at the saving rate and private consumption rate, you’ll see that the savings rate is falling - especially amongst youth, and private consumption is growing (in fact steady private consumption and domestic demand is one the key factors driving India’s GDP growth in this uncertain environment) - and therein lies the real potential. India’s consumption rate and domestic demand will grow exponentially, creating space for millions of D2C brands and services to grow. #makeinindia #makeforindia
CEO at Metasys
1yTo hear the full conversation: https://open.spotify.com/episode/4HkucuNI1NOUIWAxNLzx8L?si=H6ivAJPORr-uTlArwERrPA