Demand for industrial consumer goods in India: a study of linkages

Abstract

In recent years the growth of industrial output as a whole as well as that of consumer goods industries have been anything but impressive. Given this not too cheerful a situation the constraints to industrialization need to be studied seriously for strategic decision making at both micro and macro levels. Market saturation in case of consumer goods is one of such much talked but little researched constraints. In this dissertation we have examined the nature of industrial consumer goods demand in India and its behavior over time. Secondly we have attempted to analyses the linkages between the demand for industrial consumer goods and other variables in the system. In course of the study we did not find any overwhelming evidence in favour of the market saturation hypothesis. However the rates of growth in a number of industries happen to be inadequate. The examination of the fractile specific market size shows that it is heavily concentrated in the top decile of the population in both rural and urban areas. The concept of linkages used in this study is much broader than typical Hireshman type backward and forward linkages. The models estimated show that amongst others, marketed surplus, agricultural output and habit formation (or permanent income variable) are extremely important in determining the demand. While exploring the demand linkages we have tried to study the impact of growth, distribution and behavioural variables. It is observed that if the growth of national income is adequate, a large part of the problem of demand deficiency can be taken care of, however this is not to suggest that other variables are redundant.