Do the startups & investors over-estimate India’s market size?
India has a mammoth population of 1.41 billion people which is thrice the size of the USA, 20 times of UK, more than twice the size of the EU, so on and so forth. There’s no denying to this fact which is nothing less than a gospel of truth.
Most of the startups especially Indian origins launch products & services assuming that they have such gigantic population who will be their target audience and that too within the geography of their country thereby negating them the troubles of launching abroad and complying with different country’s complex rules and regulations. And believig this same story investors too jump the bandwagon. However, there’s more to it than that meets the eye.
This assumption is fundamentally flawed to say the least. India might be a 1.41 billion populous country but its not homogenous despite sharing the same nationality. This 1.41 billion population is made up of diverse set of people who’s needs and demands are differ significantly with one another. So its not a one size fits all market and its as good as targeting multiple countries for the startups.
Even if we ignore the country’s diverse market and their diversity in demands, there’s one big elephant in the room which no startup or investor addresses.
The elephant in the room
Despite having a population of 141 crores, only 5.83 crore people filed ITR (income tax returns) in July 2022. Out of them only 76 lakhs earn between 10 lakhs and 1 crore p.a., only 1.3 lakh people earn over 1 crore annually. Over 70% or around 1.04 crore people earn between 5-10 lakhs p.a.
The above stats imply that the population which earns over 5 lakhs annually are only over 1.8 crores out of a gigantic 141 crores size. This 1.8 crore people are the only ones who have some disposable income left to spend on others apart from their necessities. Thats precisely the problem the Indian startups face- despite India having a population of 141 crores, the actual population size who has a means to pay for better services are just 1.8 crores. This is the elephant in the room.
Most Indian startups and investors make the major mistake here i.e. overestimating the market size and believing it to be 141 crores without taking into account their paying capacity. Target audience essentially means those people who want and can pay for your products and services.
Therefore you see so many Indian startups struggling as the target market or the market size is too small at just over 19 million which is less than half of the UK, a fraction of the USA and EU and many startups are competing to win over this small lot of 19 million or 1.9 crore people.
Hence I feel the startups and investors are overestimating India’s market size and jumping blindly into this bandwagon of India growth story. Various study indicates that it won’t be before 2047 when India will have a majority or atleast a sizeable chunk of population which earns over 10 lakhs annually. That too if the political atmosphere and several other factors remain stable. So, a long way to go before India lives upto its true potentials.
