Special issue with the Sunday Magazine
From the publishers of THE HINDU

CONSUMER : October 31, 1999

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Spending is priority today

Goutam Ghosh

Who says people prefer hoarding to spending cash? Who says they would rather invest in land, shares and gold while dodging the finale in the ocean of life by hugging a plank - a staid diet of curd rice and rasam? Who says they do not know how to enjoy life? If you, as many others do, tend to stereotype the spending pattern, then desist.

On December 31, the Kumar family sacrifices the evening sitcoms which it thrives on for 364 days and retires early. The Kumars are >Pazhakkam aiyarchay," (got used to it) they say gleefully. There are vendors who make a tidy pile from jaws which refuse to stop munching. Chilled beverages move in a steady train, while the usually phlegmatic security guard becomes a Flintstone whose frenzied activity always guar> Penetrating the vehicular phalanx that day on roads which are dense with traffic on any other day is anyone's nightmare, including the traffic constable whose calorie-burning trots to and fro hardly help. Impatient buyers loaded with cash shift their weight uneasily, hoping to reach the gate that lies a few hundred metres away. Touching their desired product? That's another story.

Amar Talwar/Fotomedia

No matter what Shakespeare inscribed on the three caskets that steered the Merchant of Venice, the metal that is over 19 times heavier than water, volume for volume, continues to draw an endless stream of visitors in all well-known Treasure Troves anywhere in India. If you > If you think only women are confused before they buy an item, you are wrong. Men pitch their fingers into perfectly combed locks and pluck a hair or two in frustration when they hop into shops with > What light does this helpless indecision shed on consumer psychology? If the shopping malls and reputed stores are a guide, people love to hang around. Buying is the finale to a sequence of gratifying moves, including rounds of fizzed drinks, deep-fried snacks and food items which load the system with cholesterol. People seem to love digging into mountains of clothing for an unanticipated item of treasure.

The indecision seems to be status-independent. At the Hawkers' Corner near the Kali Temple, Calcutta; the markets in Delhi or Pondy Bazaar or Parry's Corner in Chennai, buyers are as indecisive and as resolute to pull down the "ionospheric prices". Anyone would prefer to have four items for Rs. 10 instead of three offered. Fixed prices are for the boutique and other stores where the exclusive clients' urge to buy is rarely deterred by a few hundred rupees more than elsewhere.

Consumers in the West are as indecisive as their peers here. Shopping malls are crowded, particularly in the evenings and at weekends. Buyers spend prodigious amounts of energy and time to inspect, feel and even try on wares displayed. Incidents of items tending to vanish are as common a sight as store detectives politely reminding the free riders that the item in the pocket needs to be paid for.

But on the whole as K. Sai Prasad and S. Ramarajan of Sundaram Honda, Chennai say, "Consumers are better informed in the West."

How well have the multinational companies fared in India? According to knowledgeable sources brand names matter but so do their price. Buyers here still tend to look at the price tag first. Unlike their peers in economically better-off nations, Indians, it is believed, rarely consider the technical details defending comparative superiority. This implies the MNCs would be worse off in India. But MNCs seem to be thriving probably because of the "snob effect" which motivates a person to maintain an exclusive status - higher than his paper. A neighbour would tend to buy an automatic washing machine if you use an outdated but efficient unit.

Siddhartha Mitra

That products from MNCs seem to enjoy an exalted status here is obvious. Visit the Pizza Huts, or the Kentucky Fried Chicken franchises, the United Colours of Benetton showrooms or the outlets for Adidas shoes and you will agree that MNCs are thriving in India. And are you wondering how one spends so freely? Using cash for transactions is ancient history today. People have access to credit which as a Mumbai-based spokesperson for Countrywide Finance said "helps advance the date of purchase". But as a sales officer of a credit card in Chennai averred, "It also motivates people to spend more than they can fund in the long run."

Take Citibank Cards. Its office in Chennai kept this correspondent on hold while entertaining him with foot-tapping tunes, and finally refused to divulge the number of cardusers in India. One senior marketing officer with an American drawl assigned the responsibility to a colleague who was on tour. Compare this hide-and-seek to the ever smiling faces which welcome you at the bank's service point. To guess the number of users, walk into any large store or a starred restaurant and see the number of clients who flash a credit card.

The faith in the 46 sq.cm. plastic card seems to be total but is package offered worth it? The round-the-clock access to automated teller machines seems impressive but each time you withdraw crisp bank notes, a service charge of nearly three per cent is slapped on you. The expense could be tolerated if you were a moneylender who lent to poor vegetable vendors at Rs. 2 daily for every Rs. 100. As many of the clients belong to the upper middle class and most are not moneylenders, the card tends to be prohibitively expensive. In the Eighties, VISA or Master Card did not have any service charge for ATM use in the U.S. which their franchisee, the Citibank, now has in India.

If you think a while, you will surmise easily that the rotary credit facility and the ease of transactions are not clinching justifications to use a credit card. The monthly service charge on the balance payable is nearly three per cent - a whopping 36 per cent interest a year. Who says using cash is a burden? You would have seen dhoti-clad middle aged men carrying bundles of currency notes in faded cloth bags and taking a bus home. So the hype on the security of the cashless transaction is intended to impress a gullible customer who needs far less to be convinced. A prospective customer also may not be aware that manhandling delinquent debtors is unheard of in the U.S. but is common in India. It may appear strange that business houses are taken for a ride by clever customers in the West but the customers here are so considerate that they do not seem to mind paying a high price for a doubtful privilege. Expenses charged to the credit card turn out to be quicksand in the long run and a spendthrift is soon brought to his knees - or worse - by the collection agents.

Take another example of how MNCs fare in India. Coke and Pepsi enjoy a higher market share in India than similar local products. Consumer reprisal against the famous brands in case of quality violation is strong and immediate in the West but have you heard of people boycotting the non-nutritious brands here? R. Desikan, a consumer activist, says he had come across a Pepsi bottle with a pouch in it. Another fizz drink addict came across a bottle with dead insects. The bottles were promptly replaced, which impressed the buyers. Had that happened in the West, the MNC would have its arm wrenched to pay a ransom. Does this not show that consumers are more tolerant to aberrations in India - a mindset that MNCs exploit to the hilt?

Siddhartha Mitra

In the early Eighties at Albertsons, a departmental store in Utah, an aged woman slipped on a broken egg and broke her hipbone. She got over $one million from the store for tardy maintenance of the shop floor. The consumer is king in the West. Such protection and such an awareness of one's rights are still non-existent in India. Your car may have a manufacturing defect which the company will fix, but you will have to pay the bill because vehicle maintenance is still not transparent in India. Why? Because no car manufacturer in his right mind will tell you that there is a defect. Parts may also be removed from your brand new car to grace an older model. You will never find out because you are denied access to the workshop floor.

In order to retaliate against the recent U.S. decision to impose 100 per cent duty on some foodstuffs from the European Union, traders in France doubled the price of Coke instantly, ramming its sale. Call it what you may, but when the so-called inflammable rayon skirts from India sent shockwaves because of calculated adverse campaigns in the U.S., the market here never responded to the insinuation. Fords, Cokes and Pepsis have sold and still sell well.

Any firm may be allowed to sell its products here, but if the buyers took a stiff stand, no foreign company can survive for long unless they are consumer friendly. As Desikan says, "Boycott died with Mahatma Gandhi." MNCs thrive because of our inherent weakness of which we are proud.

You cannot deny that people now have the resources to buy a wide range of products but does this consumer-oriented culture help the economy? If one could agree with

P. L. Ramesh Kumar, of Chennai Central Cooperative Bank, it does "because hire-purchase helps move stocks which aids production. If there were no credit facility and people had to save before they could buy, production would slow down considerably."

Whatever it is, consumers have greater choice now than before. Though our country has one of the best consumer protection laws, we still have a long way to go before we can even think of catching up with the consumer's regal status in the West. We are moving forward if the annual statistical figures are believed to be true. But we are moving with our face firmly set to stare at the past. We do not seem to mind stumbling while heading towards progress, walking backwards, "Why should we follow the West?" you ask. Why not let our spendthrifts be hounded by the collection agents of alien financial institutions? Would you not be better off just sitting by the window and enjoying the sight of a creditor chasing a debtor who runs for his life, with whatever is left of his dignity trailing like an empty can behind him?