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May 13, 2013, 10.53 PM IST | Source: CNBC-TV18

Slums, new consumption backbone to drive FMCG growth

CNBC-TV18's Farah Bookwala reports that slums in India are no longer just important as political vote banks. ccounting for nearly 6 percent of India's 1.2 billion population, they are quickly taking over as the backbone of India's consumption story.

Slums in India are no longer just important as political vote banks. Accounting for nearly 6 percent of India's 1.2 billion population , they are quickly taking over as the backbone of India's consumption story. A story that has consumer durable and fast-moving consumer goods (FMCG) players watering at the mouth, CNBC-TV18’s Farah Bookwala reports.

Mumbai's Bandra slum is a classic example of paradoxes at play. But they house TV sets, complete with DTH, mobile phone connectivity and air-condition systems to keep the heat at bay. Slums like these are home to some seven crore strong low-income families and are a veritable consumption powerhouse.

According to a report by Ambit Research, slum dwelling families whose incomes range between Rs 6,000 and Rs 15,000 a month, have better access to basic amenities than the rest of the country and spend more on consumer products that an average middle-income family.

For instance, electricity is the main source of lighting for only 67 percent of pan-India households but in slums, this stands at a whopping 91 percent. Small wonder for consumer durable manufacturers, these slums are a treasure trove.

Penetration levels of mobile phones and TVs among slum households exceed that of the rest of India. They buy as many laptops and computers as the rest of India. FMCG companies also have nothing to complain about.

Nearly, 40-50 percent of household expenditure goes towards food especially processed food like noodles and biscuits. Personal care products like soaps and talcum powder are also in high demand.

There are some very good reasons for the emergence of these strata of society as the backbone of India's consumption story. Firstly, slum dwellers have become critical vote banks, and political parties are going all out to woo them with redevelopment drives.

Secondly, with faster growth and increasing literacy, blue-collared wages have grown at a record compound annual gold rate (CAGR) of 15 percent over the past 3 years, despite a slowing economy which means more spending power.

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