Bottom of the pyramid market stands at $1.2 trillion

Saturday, April 28, 2007

The base of the economic pyramid (BOP) in India representing the masses is an over $1.2-trillion market, making up the biggest chunk of the global $5-trillion BOP market excluding China, says a study by IFC and World Resources Institute (WRI).

The term ?bottom of the pyramid? was coined by management guru CK Prahalad to describe the poor and the underserved section of the market. The BOP market in India, about $1.205 trillion, in purchasing power parity terms, makes up 84.8% of the total $1.42-trillion national household market.

The BOP population of 924.1 million people ? 78% of them in rural areas? makes up about 95% of the country?s population. The IFC-WRI study that used data from national household surveys in 110 countries, the BOP was defined as all those with incomes below $3,000 in local purchasing power. China was not part of the study.

?CK (Prahalad) coined the term and he backed it by interesting stories about the market. This study provides statistics and analysis of how big the BOP market is and what is its buying power,? said WRI vice-president (innovation) Allen Hammond.

In India, BOP accounts for 88.1% of the total national household expenditure on food, 87.2% of energy expenditure, 85.3% of health spend, 78.8% of household goods expenditure and 52.6% of the country?s spend on information and communication technology.

Of the global BOP market, Asia makes up the biggest chunk with a $3.47 trillion market, followed by Latin America ($509 billion), Eastern Europe ($458 billion) and Africa ($429-billion).

Sector-wise, food is the biggest BOP market ($2.8-trillion), followed by energy ($433 billion), housing ($332-billion), transportation ($179 billion), health ($158-billion), ICT ($51-billion) and water ($20 billion). Compared to the BOP, the mid-market segment- those with incomes between $3,000 and $20,000- represents a $12.5 trillion market globally.

Source: Economic Times of India (link opens in a new window)