Demand Curve - The rapidly growing stable markets of

southern India
Good Governance, and high levels of public security have contributed to the
success of the southern states

Demand Curve
About 30 of India’s top 112 cities are located in
the four southern states—Andhra Pradesh,
Karnataka, Kerala and Tamil Nadu; but the bulk of
them are in India’s most urbanized large state,
Tamil Nadu. About half of the state’s population
lives in cities and most of these cities have a
strong manufacturing base. While Chennai as the
state capital is the financial and commercial hub,
Thiruvallur also has a large tertiary sector. These
two cities with their higher incomes and diversified
activity rank at the top of the list of urban markets
in the states and among the top 25 of the country.
Others that make it to the top 50 urban markets of
India include Kancheepuram, Kanyakumari,
Madurai and Salem. Kancheepuram, the city of a
thousand temples and silk saree centre, has also
attracted investment from large production houses
—Ford, St Gobain and Hyundai, etc., while steel
city Salem is also a major textile centre.
From Karnataka only Bangalore makes it to the top 50
urban markets and Kerala’s Thiruvananthapuram and
Kochi rank here. Four of the top 50 urban markets are
from Andhra Pradesh: Hyderabad and areas surrounding
Rangareddy, Visakhapatnam and Vijayawada.
Despite their high ranking in India’s urban markets, it
would not be correct to place all four states of the south
in the same basket—each has a distinct socio-economic
identity. While Tamil Nadu has the highest urbanization
level, Kerala has one of the lowest. Yet, incomes in
Kerala are high, with a highly literate and skilled
population bringing in remittances from abroad. Rural
incomes in Kerala are also higher than the levels seen in
other states. In fact, in terms of character, it is difficult to
distinguish between rural and urban markets in Kerala.
Karnataka and Andhra Pradesh, both larger states, have
significant regional imbalances within and urban clusters
are few and concentrated.
Karnataka’s urban markets are highly concentrated in the
southern part in and around Bangalore. The region
around Mangalore ranks a very distant second in the
state. Some of the northern parts of Karnataka are not
very different from parts of Bihar and UP or even sub-
saharan Africa on many socio-economic parameters. The
same is true for the region around Dharmapuri in Tamil
Nadu. But all in all, urban centres are much better spread
in south India. Moreover, they are well networked with
surrounding rural areas through a relatively well-
maintained rural road network. This ensures that some
part of the higher value demand from rural areas is fed by
urban areas in these states.
Two factors that have contributed to the success of southern states
are good governance and high levels of public security. Law and
order has been maintained while bureaucracy has delivered on
many fronts, relative to the northern states. Land reforms have also
been more successful in Tamil Nadu and Kerala than in other
states and a more decentralized government has helped. Moreover,
despite being highly dependent upon the international economy,
these urban centres have managed to bear the international
economic slowdown well—this indicates that these are not only
rapidly growing markets, they are also very stable. Manufacturing,
services and agriculture have all benefited from good governance
and higher education in the region.
Interestingly, though the south will remain an important source of
urban consumption, it would not be very different in character from
other parts of India. It is becoming fairly clear that socio-economic
or cultural differences are not affecting the size or character of
urban consumer markets to a large extent. High levels of consumer
expenditure are seen in Chennai—what was considered by many to
be a conservative spender. Hyderabad shows levels of
conspicuous consumption, not very different from New Delhi.
Bangalore’s large professional class behaves not very different
from that in Mumbai, where consumption expenditures are
concerned.
In other words, though all cities are different, with different cultural
and socio-economic characteristics, consumption characteristics
are not that different once we account for the incomes, education
and socio-economic characteristics of the individual consumer.
Demand Curve is a weekly column by research firm Indicus
Analytics Pvt. Ltd on consumer trends and markets.