In nouveau riche India, even the poor show off

Raman Kathuria's job is to make sure that his local Mercedes-Benz dealership never underestimates the Indian consumer again. When the car brand first came to India 11 years ago, it sent only its oldest and most pared-down models to the country – thinking that Indian buyers were not ready for true luxury.

The result: After a good first year, word got out and sales dropped by nearly two-thirds. Now, manager Mr. Kathuria imports Mercedes's top models from Germany, custom designed for Indian consumers with massaging leather seats and infrared dashboard displays for nighttime driving. After import taxes, the cars cost nearly $250,000 each.

While its materialistic glamour revolution is still in its infancy, the new capitalist India is all about keeping up with the Kumars. At all socioeconomic levels, Indian shoppers are becoming more "aspirational," using their new wealth to buy status in a country where social cachet is a vital commodity.

Fifty years of postindependence socialist policies allowed few imports and yielded consumer goods that were usually scarce and shoddy. But the new, open capitalist mentality seems to fit India like a tailored Burberry glove. In this strongly stratified society, where the differentiations of caste, class, religion, and birthplace still linger, consumerism can in some ways act as a means of maintaining clear lines.

"India tends to be very status-conscious," says Raman Mangalorkar, a consumer market analyst in Mumbai (Bombay) for the consultancy A.T. Kearney. "A subtle hierarchy gets established in one's mind … and people use these symbols to put themselves in different levels of standing."

As India's middle class grows and becomes more acquainted with the outside world, it is increasingly seeking to emulate the perceived buying habits of wealthy Westerners. That has meant the spread of Hugo Boss stores and a run on plasma TVs.

Varun Mirchandani, for example, who owns a Delhi electronics store, has shunted the old color televisions into the far corner of his store. Two years ago, 90 percent of his sales at the Rhythm Corner electronics store were color TVs. Now, 65 percent are plasma.

"From the guy at the bottom moving from buying soap to buying shampoo to the guy at the top trying to act like his global counterpart, this is the first time that Indians have been able to afford discretionary spending," says Subbu Narayanswamy, a Mumbai-based analyst for the consulting firm McKinsey & Co.

In a recent study, he charted the following trends:

•Overall Indian consumption will triple by 2025, and 80 percent of the spending will come through income growth.

•Spending across all economic segments is up 40 to 50 percent.

•The global class of consumers, who buy top-branded and luxury items is expected to grow tenfold by 2025 to 23 million.

As recently as the 1980s, Indians could buy only one of two kinds of cars – a Fiat or an Ambassador – and they often had to wait several years for delivery. Now, the head of BMW Asia says the defining characteristic of Indian consumers is their desire to buy every available feature, no matter what its purpose.

"What the Indian consumer wants is the latest technology, and in the premium car segment they're looking for a fully loaded car," says Linus Schmeckel. "They don't like to be seen as second-class consumers."

Even this reporter's housekeeper, Asha Maya Tamangi is occasionally given to extravagance. She can nearly touch every wall of her apartment from her bed, and when she visits her parents in Nepal each summer, the trip involves a four-hour flight, a 14-hour bus ride, and two days of trekking through the Himalayas.

But when she needed to buy a mobile phone recently, simplicity just wouldn't do. She wanted to use it to listen to the radio, to take pictures of friends, and especially to make videos of her parents that she could bring back to New Delhi.

So she spent $170 – almost the equivalent of two month's wages – to get a phone far better than even her employer's.

At the highest end of the market, the trend is still small. Mercedes's Kathuria estimates that he sells 150 fully loaded imports a year; BMW's new India plant will make about 1,700 units annually for the domestic market. But the trend is upward.

"Spending power is going up by the day," says Kathuria, estimating that sales are growing by 10 to 12 percent a year. "Consumers are becoming very demanding – they want the best."

The same is true across all economic levels. Praman Kapur cannot yet afford a fully loaded Mercedes, but he has spent more than $2,000 in his quest to get his modest Skoda sedan to do zero to 60 m.p.h. in six seconds. He even had a used Mercedes for a while, which included a button that would lower the car five inches to make it more aerodynamic. "I had never seen this stuff in India," he exclaims.

Now, he hears that BMW will soon introduce a mid-class roadster that he could customize according to his exact specifications. "I've been closely looking at that," says Mr. Kapur, who works in real-estate and construction.

"If they're buying something at Rs. 60,000 ($1,500), they might stretch it to Rs. 80,000 ($2,000)," he says.

Even Indians on working-class wages are not excluded, and mobile phones are a favorite status symbol. Mr. Mangalorkar of A.T. Kearney recalls the time a bellboy cam up to him in a hotel lobby and asked him about his sleek BlackBerry phone. "He would not be able to use half the features on that phone," Mangalorkar says. "But they want all the bells and whistles."

It is hardly an unusual situation. Anil Choudhary is the manager of an electronics store, but he jokes: "My housekeeper is using a better mobile phone than me."

For her part, Tamangi is happy with her purchase. She even lent her phone to a friend, who used it to take pictures of her two daughters, who are enrolled in a boarding school a two-day journey away. But she is nervous: "If it is lost, it will be very sad, because it is very expensive."