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Consumer Market Trends

Consumer Market Trends

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Published by Indicus Analytics
During the post liberalization decade, from 1993-94 to 2003-04 the average annualized growth rate of India’s Gross Domestic Product was a little above 6% and has arguably since crossed the 7% mark on a long term basis. This has brought about a considerable increase in India’s personal disposable income. As a result, both saving and consumption expenditure in the household sector has had considerable growth. During 2003-04, India’s total personal disposable income was Rs. 23,585 billion and 24.6% of this income was directed into savings by the household sector. By 2008-09, our estimates show that India’s total annual personal disposable income has grown to Rs 36,059 billion (about 52% being urban) and the annual savings have grown to Rs 9,239 billion, at present.
High growth has contributed to greater incomes for Indian households, which in turn has enabled Indian households to both save and spend more. We have in the past few years observed that household sector savings have in fact grown by far more than any of the other macro-indicators. This is of course a desirable outcome. Greater incomes do imply greater expenditures in the short term, but greater savings (if translated into good quality investments) ensure long term growth of the economy, employment opportunities, and household incomes.
During the post liberalization decade, from 1993-94 to 2003-04 the average annualized growth rate of India’s Gross Domestic Product was a little above 6% and has arguably since crossed the 7% mark on a long term basis. This has brought about a considerable increase in India’s personal disposable income. As a result, both saving and consumption expenditure in the household sector has had considerable growth. During 2003-04, India’s total personal disposable income was Rs. 23,585 billion and 24.6% of this income was directed into savings by the household sector. By 2008-09, our estimates show that India’s total annual personal disposable income has grown to Rs 36,059 billion (about 52% being urban) and the annual savings have grown to Rs 9,239 billion, at present.
High growth has contributed to greater incomes for Indian households, which in turn has enabled Indian households to both save and spend more. We have in the past few years observed that household sector savings have in fact grown by far more than any of the other macro-indicators. This is of course a desirable outcome. Greater incomes do imply greater expenditures in the short term, but greater savings (if translated into good quality investments) ensure long term growth of the economy, employment opportunities, and household incomes.

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Published by: Indicus Analytics on Mar 13, 2009
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08/18/2010

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Indicus Analytics, An Economics Research Firm www.indicus.net
Consumer Market Trendsfor India – Incomes andSavings
Amit Sinha
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High growth has contributed to greaterincomesfor Indianhouseholds, which in turn has enabled Indian householdsto both save and spend more.We have in the past few years observed that householdsectorsavingshave in fact grown by far more than any of the other macro-indicators. Greater incomes do implygreaterexpendituresin the short term, but greatersavings ensure long term growth of the economy,employment opportunities, and household incomes.Among thekey citiesof India, our research shows that the2nd rung of cities are the biggest savers – thebeta cities (11
th
to 30
th
in terms of market size) save as much as32% of their income, whereas thetop 10 citieshave asavings rate of under 22%.During the post liberalization decade, from 1993-94 to2003-04 the average annualized growth rate of IndiasGross Domestic Product was a little above 6% and hasarguably since crossed the 7% mark on a long term basis.This has brought about a considerable increase in India’spersonal disposable income. As a result, both saving andconsumption expenditure in the household sector has had
 
 
Indicus Analytics, An Economics Research Firm www.indicus.net
considerable growth. During 2003-04, India’s totalpersonal disposable income was Rs. 23,585 billion and24.6% of this income was directed into savings by thehousehold sector. By 2008-09, our estimates show thatIndia’s total annual personal disposable income has grownto Rs36,059 billion(about 52% being urban) and theannual savings have grown to Rs9,239 billion, at present.High growth has contributed to greater incomes for Indianhouseholds, which in turn has enabled Indian householdsto both save and spend more. We have in the past fewyears observed that household sector savings have in factgrown by far more than any of the other macro-indicators. This is of course a desirable outcome. Greaterincomes do imply greater expenditures in the short term,but greater savings (if translated into good qualityinvestments) ensure long term growth of the economy,employment opportunities, and household incomes.Income DistributionA study by Debroy and Bhandari (2007) supports theargument that inequality is in fact increasing in India. Themost used measure for inequality is the Gini coefficient,the higher the value of the Gini, the greater the inequalitylevels. The study looked at rural and urban inequalitylevels state-wise since 1983. The broad insight is thatacross almost all the states, inequality levels haveincreased.This of course has many ramifications for consumermarkets. Greater inequality levels reflect that the highereconomic segments are rising relatively faster than thelower ones.Increasing inequality does not mean that poverty is rising,there is incontrovertible evidence that poverty levels inIndia have been falling in almost all the states. Currently,among the larger states, J&K, Punjab and Himachal have
 
 
Indicus Analytics, An Economics Research Firm www.indicus.net
the lowest poverty levels. Among the smaller states,Meghalaya, Manipur and Mizoram follwed by Arunachaltend to have poverty levels in the single digits. Orissa,Bihar, UP and MP have amongst the highest poverty levelsamongst the larger states. Note that these states alsotend to have low inequality levels, indicating that overallthese states are poor with high levels of deprivation.A comparison of the State level GDP growth and povertyreduction shows that indeed, those states that have hadhigher levels of growth have been able to reduce povertylevels much more than those with lower GDP growth. Thisis an important learning for policy and marketers alike.Indeed, greater growth is a very good predictor of the risein consumer buying power.
Thetop 112 citiesaccount for about 200 million Indianswhich is more than 60% of urban India. These citiesconstitute a market of consumers whose combined annualincomes are Rs 13,261 billion. Their combined savings areRs 3,516 billion which is about 26.5% of income.The large cities have a significantly lower savings rate.The top 10 cities have a savings rate of under 22%,whereas the gamma and delta cities (82 in number) havesavings rate around 29%. Clearly the EMI culture hasn’tpercolated down to too many cities in India. Aninteresting piece of statistics is that the 2nd rung of citiesare the biggest savers – thebeta citiessave as much as32% of their income and reinforce the old adage thatsavings and investment are the route to growth.The Southerners are by far the largest savers with asavings rate of over 31%. The West (it includes Rajasthanand MP) has the lowest savings rate of just 23%. WithinWest, Gujarat is a high saver with 27% savings rate

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