SMALL CITIES ACCOUNT FOR 65% OF PC SALES

By Nazia Vasi, The Times of India, February 23, 2005

MUMBAI: The personal computer (PC) market in India's small cities
accounted for 65 per cent of total PC sales, registering a growth of 73
per cent. The top four cities accounted for the remaining 35 per cent
sales during the first half of fiscal 2004-05.

India's small city potential has been realised by big PC manufacturers as
the next driver for growth. As the megapolises get PC-saturated, our
smaller towns and cities provide a large untapped market.

The Indian PC market showed a subsequent increase from 10.2 lakh PCs in
1998-99 to cross 30.3 lakh PC units in India, according to IMRB.

The IT market in small cities witnessed a leap in sales from 7 per cent in
1998-99 to 45 per cent in 2003-04. Sales grew 42 per cent in small cities,
accounting for half the PCs sold in first six months of fiscal year as
compared to 46 per cent in first half of 2002-03. Small cities also
account for close to 50 per cent of household PC market, up from 6 per
cent in 1999-00.

During 2004-05, the small-city market is expected to further grow to 15.4
lakh PC units of the total 38.5 lakh units and this is expected to balloon
to 60.22 lakh units of total 1.02 crore unit PC market by 2009-10.

The top four cities in India constituted 67 per cent , or 6.7 lakh, units
of the total 10.2 lakh unit IT market in 1998-99, while they constituted
only 39 per cent , or 12.9 lakh, units of the total 30.3 lakh units in the
PC market during 2003-04. This year, the number of PCs in India's four
major cities is expected to be 14.6 lakh units, as against 26.5 lakh units
in 2009-10.

The huge spurt in PC sales is attributed predominantly to the drop in PC
prices making them affordable to the middle-lower income bracket in
smaller cities. The price sensitive Indian market has responded like never
before to the entry-level drop in prices, growing the small medium and
home enterprises significantly, said an analyst. The fall in excise and
customs duty resulted in a price reduction of 8-12 per cent .

Industry insiders attribute the turnaround in PC sales to increased
consumption by industry verticals such as telecom, banking and financial
services, manufacturing, retail and IT enables services - especially BPO
services, which are rapidly spreading to smaller cities. The consumption
of notebooks in small cities' business segments grew 253 per cent during
the first half of 2003-04, accounting for 27 per cent of the total market.

E-governance and digital divide programmes of the central and state
government have further aided in spurring the growth of PCs. Manufacturers
are targeting education PCs, and providing agriculture data, weather and
markets info to farmers and traders.

"PC penetration has reached the middle-to-lower rural classes, price
reductions and interest-free loan schemes are what's forging growth in
small cities" said Devita Saraf, ED (marketing), Zenith Computers.