India's middle class is entitled to cars its new money can buy

Car sales are booming all over India. That's the old news. How to manage the upsurge is the new challenge.

Car sales are booming all over India. That's the old news. How to manage the upsurge? That's the future.

Before I get to the numbers, let me get the questions out of the way: how much should a newly wealthy nation be allowed to flex its muscles? How does it balance the aspirations of a growing middle class as symbolised by buying vehicles with the havoc that 250 million vehicles can cause on traffic, infrastructure and the environment? Doesn't conspicuous consumption play a natural role in the evolution of an emerging, or as Barack Obama, the US president, would have it, "emerged", economy?

According to the Society of Indian Automobile Manufacturers (SIAM), domestic car sales grew by 45.93 per cent last month relative to growth of 21.63 per cent in September. This growth was across the board, and the numbers for some car makers were staggering. Ford, while hardly zooming ahead in the US, saw an increase in Indian sales of 161 per cent last month compared with October last year.

The luxury car segment, dominated by Mercedes-Benz, BMW and Audi, grew 60 per cent this year. Although absolute numbers are small, there has been a ninefold increase in the sales of Rolls-Royces, with most going to the rich city of Ludhiana in Punjab.

Toyota thought it would sell just 12 Priuses a month in India, given the high price caused by the 110 per cent import duty. The company's expectations have been surpassed with 80 units ordered in three months. Segway, the two-wheeled personal transporter, has just launched in India. Aston Martin plans to sell in India by the end of this year.

While the robust vehicle sales numbers are bad news for the environment, they are good news on many other levels. For a long time and for a variety of reasons, Indians, particularly south Indians, refused to buy luxury cars, especially foreign ones. In Bombay, the rich feared being targeted by underworld dons who would use their licence plate numbers to find them. In South India, driving a Mercedes or a BMW was considered obscenely ostentatious - something that people from good families simply would not do. In Delhi and Punjab, the opposite rule held. As my Punjabi friend says: "Punjabis like to show off their wealth. What's the point of being worth millions and driving a local car? If you've got it, you might as well flaunt it with a BMW." The increase in the number of luxury cars on Indian roads signifies that more Indians are getting wealthier or at least wealthy enough to afford luxury cars; it also implies that people prefer to spend their money rather than hoard it. Lastly, it reflects the exuberance or joie de vivre of a young nation that is just coming to terms with its affluence. Whether this exuberance is irrational is still up for the markets to decide.

It is not just foreign-made luxury cars that have to contend with complicated equations with the Indian consumer. The same applies to the cheapest of Indian models. When the Tata Nano launched a couple of years ago, priced at less than 100,000 rupees (Dh8,080), the global press lauded the vehicle as an engineering marvel. "Meet the world's cheapest car," said The New York Times, comparing its price tag to the "price of the optional DVD player on the Lexus LX 470 sport utility vehicle".

Indians reacted quite differently, though. The urban elite who had their BMWs and Fords wondered whether Indian roads could withstand the invasion of the Nanos.

"It is no doubt a great achievement for Tata. But do we really need this car on the Indian roads?" asked oneNew York Times reader in a comment on the story, echoing the feelings of many. "As is, the Indian roads are choking with cars, gridlocks - what about the pollution and the air quality with emission from all these cars. The air quality in some of the metropolitan cities is horrendous. People are wasting hours stuck in traffic jams, wasting petrol and contributing to the air pollution. What we need is more public transportation - not more cheap cars."

On talk shows, liberal pundits called such remarks elitist. Who's to say that the poor can't buy cars? they demanded. Most of the people complaining against the Nano already owned two or three cars, they said. The same argument could apply to the West versus India on a number of issues. The West wants India to skip the conspicuous consumption stage that it went through. It wants less pollution and more stringent standards. The Indian car industry is under pressure from western watchdog agencies as well as local consumers. And still the cars keep selling.

Today, there are about 14 million cars on India's roads, 50 million two and three-wheelers, and about 8 million buses and trucks. As the car expert Murad Ali Baig wrote last year: "We do not have too many vehicles. We have too few roads. India today has just 14 cars per 1,000 people as compared to 19 in Pakistan, 64 in Thailand, 500 in Europe and Japan, and 740 in the USA."

Everyone agrees that India needs more and better roads, better public transport and fuel-efficiency norms. No one is sure how to achieve this. This month, Jairam Ramesh, the environment minister, got into the fray by declaring at a UN conference that the "use of vehicles like SUVs and BMWs in countries like India is criminal". The car lobby immediately took umbrage; the German ambassador quickly pointed out that the BMWs his country manufactured had excellent fuel efficiency and emissions. SIAM approached the government with a "cash for clunker" scheme that would get older, polluting vehicles off India's roads. The government promised to look into the scheme.

As an ardent environmentalist, I think the Indian government should ramp up its effort in public transportation. The Delhi Metro is a great start, but such a service should be operating in every Indian city and town. Until then, I don't think it is anyone's business whether the average Indian consumer can or should buy a car. Come on, your typical Amar, Akbar and Antony Indian is just getting a chance to enjoy his economy's GDP growth. Cut him some slack before sermonising, or sending the moral police down.

Shoba Narayan is a journalist based in Bangalore and is the author of Monsoon Diary