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Nov 5, 2009

South is growing !!

About 30 of India’s top 112 cities are located in the four southern states—Andhra Pradesh, Karnataka, Kerala and Tamil Nadu; but the bulk of them are in India’s most urbanized large state, Tamil Nadu. About half of the state’s population lives in cities and most of these cities have a strong manufacturing base. While Chennai as the state capital is the financial and commercial hub, Thiruvallur also has a large tertiary sector. These two cities with their higher incomes and diversified activity rank at the top of the list of urban markets in the states and among the top 25 of the country. Others that make it to the top 50 urban markets of India include Kancheepuram, Kanyakumari, Madurai and Salem. Kancheepuram, the city of a thousand temples and silk saree centre, has also attracted investment from large production houses—Ford, St Gobain and Hyundai, etc., while steel city Salem is also a major textile centre.


Graphics: Ahmed Raza Khan / Mint


From Karnataka only Bangalore makes it to the top 50 urban markets and Kerala’s Thiruvananthapuram and Kochi rank here. Four of the top 50 urban markets are from Andhra Pradesh: Hyderabad and areas surrounding Rangareddy, Visakhapatnam and Vijayawada.

Despite their high ranking in India’s urban markets, it would not be correct to place all four states of the south in the same basket—each has a distinct socio-economic identity. While Tamil Nadu has the highest urbanization level, Kerala has one of the lowest. Yet, incomes in Kerala are high, with a highly literate and skilled population bringing in remittances from abroad. Rural incomes in Kerala are also higher than the levels seen in other states. In fact, in terms of character, it is difficult to distinguish between rural and urban markets in Kerala. Karnataka and Andhra Pradesh, both larger states, have significant regional imbalances within and urban clusters are few and concentrated.


Karnataka’s urban markets are highly concentrated in the southern part in and around Bangalore. The region around Mangalore ranks a very distant second in the state. Some of the northern parts of Karnataka are not very different from parts of Bihar and UP or even sub-saharan Africa on many socio-economic parameters. The same is true for the region around Dharmapuri in Tamil Nadu. But all in all, urban centres are much better spread in south India. Moreover, they are well networked with surrounding rural areas through a relatively well-maintained rural road network. This ensures that some part of the higher value demand from rural areas is fed by urban areas in these states.

Two factors that have contributed to the success of southern states are good governance and high levels of public security. Law and order has been maintained while bureaucracy has delivered on many fronts, relative to the northern states. Land reforms have also been more successful in Tamil Nadu and Kerala than in other states and a more decentralized government has helped. Moreover, despite being highly dependent upon the international economy, these urban centres have managed to bear the international economic slowdown well—this indicates that these are not only rapidly growing markets, they are also very stable. Manufacturing, services and agriculture have all benefited from good governance and higher education in the region.

Interestingly, though the south will remain an important source of urban consumption, it would not be very different in character from other parts of India. It is becoming fairly clear that socio-economic or cultural differences are not affecting the size or character of urban consumer markets to a large extent. High levels of consumer expenditure are seen in Chennai—what was considered by many to be a conservative spender. Hyderabad shows levels of conspicuous consumption, not very different from New Delhi. Bangalore’s large professional class behaves not very different from that in Mumbai, where consumption expenditures are concerned.

In other words, though all cities are different, with different cultural and socio-economic characteristics, consumption characteristics are not that different once we account for the incomes, education and socio-economic characteristics of the individual consumer.

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