Cheaper Products for better Economy??

“A promise is a promise.”
Apart from Mr. Tata, there is one more person who loves this line. It is none other than ‘Yours Truly’. After using this line in many application essays last year here I am again, using it to start another piece of write up (Thanks to Nano and Mr. Tata for thatJ).

The 1-lakh-Car project started some 4-5 years back and Mr. Tata indeed kept his promise, but he would never have thought that his timing would be so perfect. No doubt, the credit bubble has affected Indian economy. Markets have been sent down crashing to half the value what they were a year and half back. Mourning market sentiments have only led to diminished demands (thank god we didn’t have to face to deflation yet). True, FIIs have been running away as if they have seen a deadly demon at Dalal Street, but in the process of keeping his promise Mr. Tata has shown a way that might actually bring back our economy on track.

With more than 1 Billion people and strong numbers in middle class and lower middle class, India need not concern about external factors and exports. Our domestic consumption, if stimulated properly, can produce enough demands to offset the downturn in economy.

In order to roll out 1L cars, Tatas would have to double their manufacturing capacity. The huge response to Nano would mean more demand in cars (auto sector), which in turn means more consumption of steel (large/small-scale industries) and small spare parts (small-scale industries). It would also mean increased demand for loans from banks, insurance (financial sector) (which could have some positive effects on our IT sector), infrastructure such as roads, parking slots (especially in rural areas) there by stimulating demands in worst hit cements sectors. In short, it will fuel important parts of Manufacturing and Service sectors (two most important contributors in our GDP).

Another, very recent, superb innovative idea by Tatas is the ‘Shub Grah’ project, cheaper homes at Rs. 4 L. To tell in brief about the response, the project was entitled to build 1000 homes in a sub-urban area 100 km from Mumbai. Already, 3500 bookings have been made (3.5 times the allotted requirement). The ‘Shub Grah’ site has already witnessed 15L hits (6.7 hits from US and 3.3 L from India, rest I don’t know and don’t care). From January to March 2009, DLF could only sell 600 apartments in Rs. 30-40L range. Now such kind of projects will surely give much needed oxygen to the ailing Realty Sector. It would again increase demand in Banking and Insurance sector. It would require more construction work.

These huge requirements would also improve the employment situation in many sectors. All sectors are interdependent on each other. The thing common in both the examples is that both the commodities are available very cheaply when compared to existing commodities in the market. One has to be innovative to become cheaper and it is always tough to be innovative.

There have been instances such as Hyundai, Toyota, which have single handedly, changed whole nation into a developed nation. It is true that India is not as small as S.Korea and Japan to be single handedly turned around only by Tatas, but there are many behemoths like Tata in India. Well I am not saying these things could turn our nations to a developed one, but yes they could certainly pull our economy. This is time for better and cheap products and it would be a win-win situation for both consumers and suppliers if they could take a leaf from Tatas.