I remember the first time I read about the Indian middle class was in an India Today article cover article in 1991 saying India's middle class has arrived and for the last 32 years we are still waiting for it to arrive. So there is a lot to be done.

So if you look at how to look at the middle class, there are various sets of data points.

I take a simple one: 57 million people pay income tax. You take duplication off by 510%. So say 53 million people multiplied by 4.4, you have about 236,000,000 people there you can count as middle class. You can add agri-based people who are not paying taxes. So you have a size of anything between 330 million to 430 million. OK. So that is my first sense of where we are in terms of the middle class.

The second one I would say is that the Indian middle-class story from a brands and business perspective has been penetration-led for many, many years. It has to be consumption-led now and I have been saying it for about 10 years now. If you look at the data of the FMCG companies, all the FMCG companies have underperformed against the Indian GDP. Believe it or not, India's GDP nominal growth is 10.4% in the period 2012 to 22. FMCG companies have grown by 5.5%, so FMCG is no longer the benchmark. That is the first point I want to make.

They have not got the consumption act right. They will not get it right for some time because the leadership does not think like that. They need to change significantly if they need to think about consumption in a digital world. So that’s why 40% of the market still is in FMCG sachets or price points. The big difference between sachets in India compared to anywhere else in the world is that sachet is both a penetration vehicle and a consumption vehicle. It is a consumption vehicle because it is a tool of productivity for the housewife. A housewife gives a 50 paise shampoo sachet or a 1 rupee shampoo sachet to the kid and says OK, you will have a bath with this or will give a sachet of jam and say you will take it in your school bag or tiffin.

So sachet is as much a productivity vehicle in India, which is what very few people understand. A number of companies just blindly enter India and think, let’s put a sachet out and we will win. A very good example is the drinking chocolate segment. They have introduced ₹10 sachets, ₹15 sachets and failed miserably. Sachets don't work for everybody. It works for low-price daily use categories.

But if I were to look at the middle class, what truly drives it in my book, are 3 things, both urban and rural. The order is different. Aspiration, price, and quality. All three are important. India is an aspirational society. I think many people get it wrong when they just think that India is a price-conscious society. Aspiration plays a huge role in India and every single brand and category has to understand that. That's why Indians love advertising.

That's why they look for brands. If you went to somebody's house, 10 years ago, it was all about, you know, my kid is so smart, he or she can recite all the ads for you. Today, if you go to somebody's house, your kid is so smart, he or she knows all the apps on the mobile phone.  So that's how India has changed. If you look at branding, in most parts of the world, branding is multinational brands fighting each other, and a few local brands. But by and large, it is store brands or retail brands which fight with each other.

In India, you have a hierarchy that is very different. You have the loose or the commodity market, which is branded in its own right. On top of that, you have retail brands. On top of retail brands, you have local brands. On top of local brands, you have regional brands. On top of regional brands, you have national brands. On top of national brands, you have multinational brands competing with each other.

So when somebody tells you as a brand manufacturer that we're going to upgrade from loose, he's far away from the truth. He doesn't understand that there are many layers and hence the issue of aspiration, quality, and price is very crucial. A lot of brands have made the mistake of cutting quality, cutting price, and thinking they will give half the product for a half price somewhere and it's failed miserably. There is no category in this country where the price leader is the market leader except Maruti. If you take the average selling price of Maruti, then you can say the price leader is the market leader in every category. The brand leader has a significant premium over the five levels that I have discussed.

So, India is a brand-conscious market at one level, and India has an aspirational market at one level. India will always be a quality market at one level. And finally, I would say for the development of any consumption to happen, there is the consumer, there is the manufacturer, there is the retailer, there are some things that have enabled the growth of branded packets, and one of them is PCRO. PCRO is the ultimate benefit to consumers. Otherwise, large companies will buy in huge quantities and cut prices at various levels. Thanks to the PCRO, you have an MRP anywhere in the country which is the same. Before 1991 when PCR was introduced, only two brands, one Wix and the other Maggie, had the same common price across the country. Today, every single brand has the same price across the country. That gives the consumer a moment of assurance saying this price, this quality, this value is guaranteed. When the price fluctuates, especially for consumption items, consumers feel cheated.

The final point I want to make is Indians have a lot of aspirations. The fastest growing category right now is personal loans. Personal loans to buy, whether it is a mobile phone, a durable education, vacation, or travel aspiration are being fueled by personal loans. India's debt to GDP is still very low. Household debt to GDP is still very low. So there is still a headroom for growth. I'm sure some people will argue that it is good for the Indian consumer, and some people will say it's good for the economy. There will be arguments on both sides, but I think personal loans are going to play a very significant role in driving consumption in the direction that Rajesh pointed out. 

I have consistently noticed when I map brands, Indians tend to take to brands slowly but they also give up a brand slowly. So for example you look at brands like Hamam, every brand manager of Hamam has tried to kill it with no success. Coca-Cola has tried to kill thumbs up over the years with no success. Once a brand gains acceptance is very difficult for consumers to give it up in India. And it is a triangle of aspiration, quality, and price. You have to get all three elements in the right direction.