The Indian Economy Blog

June 10, 2007

The Next Big Rupees One Lakh Product

Filed under: Business — Kiran @ 5:27 pm

Introduction

Let me qualify the “Rupees One Lakh” phrase first. Essentially I refer to a level of affordability, based on the Tatas’ new low cost car which targeted that exact price point (since revised upwards). It is significant for two reasons:
1. It is a major achievement in manufacturing and marketing in the automobile world.
2. It is a rare serious attempt to target CK Prahlad’s “Fortune at the Bottom of the Pyramid”. Well if not quite the bottom, somewhere significantly lower down than all others, by the auto world.

If the Tata’s small car is successful, it will no doubt have a serious cascade effect on the automobile industry and force competitors to launch similar products. Hero Honda has already announced plans to lauch a “low-cost” motorcycle costing less than Rs 15000 – a move that is seen as inspired by the Tata move.

Does the country need a Rs 100,000 car? Perhaps. Will it revolutionize the country? It might, particularly if it rubs off on other sectors.

The Shri 420 Promise

One fortune at the bottom of the pyramid which remains untapped is the one Raju (Raj Kapoor’s character) suggested in the Hindi movie Shri 420 way back in 1955. In the movie, Sonechand and Raju build up scam after scam to swindle the rich. But the final scam which would get them enough money to retire was a scam to rob the poor – those at the bottom of the pyramid. However, in the end, there is a realization that the tiny individual contributions had added up to a sum so significant that the dream was probably feasible. (And keeping in with the optimism of the early Nehru era, it does turn true – in the movie I mean).

The dream that the scam sold was the promise of a house for Rs 100, an amount that the poorest of the poor could somehow manage to accumulate (even a beggar is shown submitting the sum as his life-long earnings). Affordability-wise it is a sum that compares with Rs 100,000 today, over 50 years later.

Truth be told there is housing available for Rs 100,000 even today in the metropolis of Bombay. It is in the slums, home to 50% of the city’s residents. Hardly a place worthy of being called a residence, it nevertheless points to a huge market that operates at that price point already.

Will the Bottom benefit?

One aim of low-cost housing in the cities would be to move people from slums to apartments. To an extent slum rehabilitation is already happening but largely as an effort to move people out of the slum land which can then be used to build super-deluxe apartments for the rich.
I foresee a genuine effort to reach those at the bottom of the pyramid would be rather different. It should be a real option not just for existing slum dwellers, but also for migrants coming in from the hinterland, whether the family from Pather Panchali, or the dreamy eyed youngsters from Bunty Aur Babli (who would have ended up in a slum if they did not turn to crime).

We will have huge colonies of low cost housing set up all around the major cities – like satellite townships – and connected to the city center by excellent public transport. Organized housing would enable the residents to get a lot of the facilities they currently dont – like sanitation and drinking water, better hospitals and schools, a clean and filth-free environment. Their next generations would have more of an equal opportunity to compete in a globalized India.

The Implementation Nightmare? Hmmm… we’ll need to write a book on that!

5 Comments »

  1. The implementations nightmare? Here’s the answer:

    http://www.ted.com/index.php/talks/view/id/123

    http://www.ted.com/index.php/talks/view/id/36

    http://squattercity.blogspot.com/

    Comment by Alex — June 10, 2007 @ 7:48 pm

  2. Two challenges to overcome
    1) Reduce construction time
    2) Find cheaper construction material that is suitable for very hot summer as well ass monsoon rain

    Comment by Devang — June 11, 2007 @ 11:20 am

  3. Maybe… one bonus exist here: good SOFTWARE from India :).

    Comment by Narah — June 12, 2007 @ 3:09 am

  4. thaks for providing me such a good information.
    but sir i want to cover some more dimentions like comptitiveness amog other companies &chances of growth,
    pitfalls etc…
    once again we are thankful to you.

    Comment by souhardra — July 23, 2007 @ 12:17 pm

  5. India’s next big one lakh product has already been invented – the three wheeler or autorickshaw. All it needs is a redesign or repackaging of some sort. I know I keep thinking of buying one.

    How hard can it be to soup up one of those suckers with an AC and Mcpherson struts to soak up the occasional pothole? Bajaj Auto and Bajaj Tempo already have the assembly lines in place. Switching to an electic motor can be a nice eco option. Our roads will all but go to hell but we will have our one lakh personal rickshaws.

    Of course we can offer Orange County Chopper style customs for those who would like a little more style to their rides.

    Comment by Nikhil — July 24, 2007 @ 12:30 am

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