Indias New G Spots

For decades, the enduring aphorism that best condensed the economic theory of trickle-down benefits of high economic growth has been "A rising tide lifts all boats". The ultimate mantra of free market evangelists popularised by John F. Kennedy finds vindication across India too.

As India migrated from a $500-per-capita income at the beginning of the decade to $1000 now, higher earnings fuelled consumption and created markets in new geographic landscapes, extending beyond the big metros and even Tier II submetros. Kolhapur, better known for its hand-made chappals; Kannur, famous for the export of communism; cotton town

Erode and Yamunanagar, best known for the manufacture of utensils, are now the destinations for companies seeking consumers and market share.

If Future Group Chairman Kishore Biyani has chosen small town Jharkhand boy Mahendra Singh Dhoni as the brand ambassador for Big Bazaar, it is not just for cricket but market economics too.

True, the stereotypical images of the unpaved economy growing haphazardly persist, but the picture has changed. In fact, the optimism of an 8-plus per cent GDP growth this year, despite the high inflation and the spectre of slowdown, is driven by the new width acquired by the economy.

Thanks to the resurgence of manufacturing which led to the revival of small and medium enterprises, these small towns are now emerging as the fountainheads of entrepreneurship. A study derived from the RKSWAMY/BBDO Guide reveals the emergence of new markets that are driving incremental growth in basic durables, automobiles, mobile phones and FMCG. Thanks to growth in both rural and urban incomes, district towns have emerged as hot spots.

In fact, according to the RKSWAMY/BBDO study, 60 district towns of less than five lakh account for a tenth of national consumption. Indeed the top 13 district towns combined could match the consumption of Mumbai and Delhi markets.

You could say that the emergence of these new towns is the result of a serendipitous coming together of factors.

The boom in manufacturing, the priming of the rural economy with a spend of over Rs 2,00,000 crore by the Government and investments in new industrial estates and IT enclaves all combined to generate employment and higher incomes in urban and rural economies. This fuelled consumption of goods, services and real estate triggering the virtuous cycle.

Evidence of the coming together is reflected in the transformation of the towns: take Kolhapur, for instance. Nestled in a fertile valley fed by four rivers, it has always been an agri hub with higher-than-average income levels.

But it is the revival of the textile industry coupled with the opening up of textile and IT parks that has created economic viability. Erode, a small town in west Tamil Nadu, is abuzz with activity every Monday evening as people from as far as Jammu in the north, Assam in the east and Gujarat in the west descend for the weekly Monday Market, which winds up only by Tuesday dawn.

Yarn, processed and cotton fabric are sold and bought from this market. "Nearly 70 per cent of raw materials needed for the Indian textile market flow through Erode," says S. Sivananthan, secretary, Erode Textile and Garments Exporters' Association.

Plastics and steel are the new areas of growth. In a sense, Erode has built on its traditional strengths to emerge as a multifaceted economy." To start with, plastic industries were set up to supply spares for textile companies.
Today we manufacture spares for the automobile sector too, for companies like Hyundai, Tata Motors and TVS Motors," says M.Venkatachalam, managing partner, Jayanthi Plastics.

Evidence of a diversifying economy is visible in the north too. Yamunanagar is no longer a one-business town. Besides hosting biggies like Ballarpur Industries and Saraswati Sugar Mills, it is emerging as a major centre for plywood production. With new projects like the 600 MW Reliance Energy thermal power plant, this town is evolving into a commercial hub.

Ditto with Patiala. Located in Punjab's farm-rich Malwa region, it has been in the fast lane of development since 2000. While agriculture remains the mainstay of the economy, the emergence of the service sector and the presence of a mélange of institutions, including two universities, the Thapar Institute of Engineering and Technology, two medical colleges and two of Punjab's best known public schools, has delivered sustainability.