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Indicus Consumer Hand Book - Introduction

Indicus Consumer Hand Book - Introduction

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Published by Indicus Analytics
This is the introductory chapter of the forthcoming book by Laveesh Bhandari of Indicus Analytics.
This chapter provides an overview into the state of the Indian economy, its growth, expenditures by households, income distribution as well as issues of ineuqlity. This is followed by an overview of some of the broad areas covered in this volume.

The idea is to provide to the student and practitioner alike, a basic overview of the key demographic and macro-economic variables that affect consumer decisions in the short and long term. The discussion that follows then seeks to tie-in the key aspects that determine and reflect consumer behaviour in India.

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 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.

Even though India’s total household income and saving can be known from National Accounts Statistics, it does not provide the same information across economic groups. Therefore, the pattern of distribution of total income and saving across households with different economic status is not known. Thus, “What share of India’s total personal disposable income comes from the richest 10% of the households?” or “Do the poorest 10% of the households save anything at all?” – these questions remain unanswered from government data. Moreover, per household income or savings, for households with different economic status is also not known. This typically requires using data from household surveys. The problem with using survey data to estimate aggregates on a all India basis is that surveys – no matter how well they have been conducted – tend to under-report incomes and expenditures. As a consequence, we require various types of quantitative excercises to correct for this under-reporting.
Consumer markets can be reported in many different ways, size of the market in terms of number of people or households, size of the market in terms of the total or aggregate disposable incomes in those markets, or the aggregate expenditure of people or households. Therev are 35 states and Union Territories in India; among cities there are more than 5000 cities and towns, but the top 100 odd cities account for a large majority of the urban population and an even larger share of household expenditures.


These and many more insights are available from a range of tables culled from some of the most repected publications on Indian consumer markets.

This is the introductory chapter of the forthcoming book by Laveesh Bhandari of Indicus Analytics.
This chapter provides an overview into the state of the Indian economy, its growth, expenditures by households, income distribution as well as issues of ineuqlity. This is followed by an overview of some of the broad areas covered in this volume.

The idea is to provide to the student and practitioner alike, a basic overview of the key demographic and macro-economic variables that affect consumer decisions in the short and long term. The discussion that follows then seeks to tie-in the key aspects that determine and reflect consumer behaviour in India.

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 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.

Even though India’s total household income and saving can be known from National Accounts Statistics, it does not provide the same information across economic groups. Therefore, the pattern of distribution of total income and saving across households with different economic status is not known. Thus, “What share of India’s total personal disposable income comes from the richest 10% of the households?” or “Do the poorest 10% of the households save anything at all?” – these questions remain unanswered from government data. Moreover, per household income or savings, for households with different economic status is also not known. This typically requires using data from household surveys. The problem with using survey data to estimate aggregates on a all India basis is that surveys – no matter how well they have been conducted – tend to under-report incomes and expenditures. As a consequence, we require various types of quantitative excercises to correct for this under-reporting.
Consumer markets can be reported in many different ways, size of the market in terms of number of people or households, size of the market in terms of the total or aggregate disposable incomes in those markets, or the aggregate expenditure of people or households. Therev are 35 states and Union Territories in India; among cities there are more than 5000 cities and towns, but the top 100 odd cities account for a large majority of the urban population and an even larger share of household expenditures.


These and many more insights are available from a range of tables culled from some of the most repected publications on Indian consumer markets.

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11/02/2014

Indicus Analytics, An Economics Research Firm

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By

Laveesh Bhandari
Indicus Analytics

Consumer Handbook - Introduction

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Introduction This chapter provides an overview into the state of the Indian economy, its growth, expenditures by households, income distribution as well as issues of ineuqlity. This is followed by an overview of some of the broad areas covered in this volume. The idea is to provide to the student and practitioner alike, a basic overview of the key demographic and macro-economic variables that affect consumer decisions in the short and long term. The discussion that follows then seeks to tie-in the key aspects that determine and reflect consumer behaviour in India. The Macro Picture During the post liberalization decade, from 1993-94 to 200304 the average annualized growth rate of India’s Gross Domestic Product was a little above 6% and has arguably since crossed the 8% 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. 2,358,503 crore and 24.6% of this income was directed into savings by the household sector. Table 1. Components of National Income at Current Prices,2003-04
Total Per Capita

Economic Indicators (Refer Box 1 for definition)
Gross Domestic Product

Rs. Billion 27,600

US$ Billion 599

$ PPP terms 3,036

Rs. 25,356

US$ 550

$ PPP terms 2,789

Annualize d Growth Rate between 1993-94 and 200304 6.18

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National Income Net National Disposable Income Private Income 22,520 25,971 25,296 489 563 549 2,477 2,856 2,782 2,664 2,594 638 20,690 23,860 23,240 22,250 21,667 5,328 449 518 504 483 470 116 2,276 2,624 2,556 2,447 2,383 586 6.41 6.55 6.73 6.59 6.57 9.77

Personal Income 24,219 525 Personal Disposable 23,585 512 Income Domestic Saving of Household 5,799 126 Sector CSO and author estimates Source:

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 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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Box 1: Definitions  Gross Domestic Product: Total value of goods and services produced by a nation.

Net National Disposable Income :(Net value of all goods and services produced in a nation's economy, including goods and services produced abroad at market prices) + (Other net current transfers from rest of the world) Private Income: (Income accruing to private sector from domestic product) + (Interest on public debt) + (Current transfers from govt. administrative departments) + (Other net current transfers from rest of the world) + (Net factor income from abroad) Personal Income: (Private income) – (Saving of private corporate sector net of retained earnings of foreign companies) – (Corporation tax) Personal Disposable Income: (Personal Income) – (Direct taxes paid by households and miscellaneous receipts of govt. administrative departments) Domestic Saving of the household Sector: Financial

Income Distribution Even though India’s total household income and saving can be known from National Accounts Statistics, it does not provide the same information across economic groups. Therefore, the pattern of distribution of total income and Consumer Handbook - Introduction
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saving across households with different economic status is not known. Thus, “What share of India’s total personal disposable income comes from the richest 10% of the households?” or “Do the poorest 10% of the households save anything at all?” – these questions remain unanswered from government data. Moreover, per household income or savings, for households with different economic status is also not known. This typically requires using data from household surveys. The problem with using survey data to estimate aggregates on a all India basis is that surveys – no matter how well they have been conducted – tend to underreport incomes and expenditures. As a consequence, we require various types of quantiatiative excercises to correct for this under-reporting. Using data from NSSO, CSO, National Data Survey on Savings Patterns of Indians (NDSSPI), and a host of other databases, a team at Indicus Analytics was able to estimate the distribution of incomes at an all India level. Income and expenditure distributions rarely differ too much from each other. Comparison with Other Data We compare individual income such as National Sample Survey conducted by CSO or the Market Information Survey of Household (MISH) conducted by NCAER. In order to do that we estimated income across various quintile groups generated on the basis of the following: • Per capita income • Per earner income • Per household income The comparative results are put below in Table 3. We find that whatever be the unit, and whether economic classification of households is based on expenditures or incomes, whether at the household level or per person level, Consumer Handbook - Introduction
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the distribution of Indian households across economic groupings are similar and generally within 5 percentage range. Table 2. Pattern of Income Distribution(%) in India: 1993 to 2004
Income Shares Quintil Quintile1 e5 Or Or Bottom Quintil Quintil Quintil Top 20% e2 e3 e4 20% Per Capita NDSSP 2003-04 NSS 1993 1999 NCAER - MISH 1993 1998 NDSSP 2003-04 NSS 1993 1999 NCAER-MIMAP 1994 NDSSP 2003-04 NSS 1993 1999 NCAER-MIMAP 1994 5.2 4.0 3.8 6.3 6.3 9.5 8.6 7.5 10.1 10.5 15.1 13.4 11.8 14.2 15.3 20.0 21.2 19.6 20.8 22.2 50.3 52.9 57.4 48.6 45.7

Top 10%

Top 5%

Top 1%

34.4 36.3 41.0 33.7 30.1

23.1 24.2 28.4 23.4 19.7

9.0 8.5 10.7 10.4 7.6

Per Earner 4.6 3.8 3.5 4.4 8.2 7.8 6.6 7.4 12.3 11.8 10 11.9 20.1 19.4 17 20.9 54.8 57.3 62.9 55.5 38.1 38.6 43.5 34.5 26.1 24.2 28.7 22.1 10 7.5 10.3 7.5

Per Household 6.1 4.1 4.0 5.7 10.5 8.7 7.9 9.4 14.9 13.6 12.2 13.4 21.9 22.3 20.6 20.7 46.5 51.3 55.3 50.9 30.6 33.7 37.9 34.6 19.6 21.5 25.1 22.7 7.3 6.9 8.9 8.0

Source: Bhalla, Surjit Singh. (2004), Reforming Personal Income Tax in India, Oxus Research & Investments, New Delhi, India.. NCAER, NDSSP: National Data Survey on Saving Patterns, NSS: National Sample Survey, NCAER-MISH: National Council for Applied Economic Research - Market Information Survey of Household and

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Indicus Estimates

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Changes in distribution over time A study by Debroy and Bhandari (2007) supports the argument that inequality is in fact increasing in India. The most used measure for inequality is the Gini coefficient, the higher the value of the Gini, the greater the inequality levels. The table below shows rural and urban inequality levels state-wise since 1983. The broad insight is, that across almost all the states, ineuqlity levels have increased. Table 3a: Gini Ratios based on per capita consumption expenditure
States/UTs Andhra Pradesh Arunachal Pradesh Assam Bihar/Jharkhand Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Karnataka Kerala Madhya Pradesh/Chhattisgarh Maharashtra Manipur Meghalaya 1983 Rural 0.294 0.192 0.256 0.287 0.256 0.272 0.264 0.222 0.303 0.33 0.295 0.285 0.269 1983 Urban 0.327 0.276 0.301 0.297 0.172 0.313 0.312 0.238 0.334 0.374 0.306 0.337 0.169 199394 Rural* 0.29 0 0.30 6 0.17 9 0.22 5 0.31 3 0.23 9 0.31 1 0.28 4 0.24 1 0.26 9 0.30 1 0.28 1 0.30 7 0.15 4 0.28 1 199394 Urban* 0.32 3 0.27 9 0.29 0 0.30 9 0.27 8 0.29 1 0.28 4 0.46 2 0.28 6 0.31 9 0.34 3 0.33 1 0.35 8 0.15 7 0.24 5 200405 Rural* 0.29 4 0.28 0 0.19 9 0.21 3 0.32 2 0.27 3 0.33 9 0.31 0 0.24 7 0.26 6 0.38 1 0.27 7 0.31 2 0.16 0 0.16 2 200405 Urban* 0.37 5 0.24 8 0.32 0 0.35 5 0.41 9 0.31 0 0.36 6 0.32 6 0.24 9 0.36 9 0.41 0 0.40 7 0.37 8 0.17 7 0.26 3

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States/UTs 199319932004200494 94 05 05 Rural* Urban* Rural* Urban* 0.141 0.187 0.17 0.18 0.20 0.24 Mizoram 3 2 1 9 0.16 0.20 0.22 0.24 Nagaland 5 1 9 2 0.267 0.296 0.24 0.30 0.28 0.35 Orissa 6 7 5 3 0.279 0.319 0.28 0.28 0.29 0.40 Punjab 2 1 4 2 0.343 0.304 0.26 0.29 0.25 0.37 Rajasthan 5 3 0 1 0.332 0.21 0.25 0.27 0.25 Sikkim 2 5 3 7 0.325 0.348 0.31 0.34 0.32 0.36 Tamil Nadu 2 8 2 1 0.24 0.28 0.21 0.34 Tripura 3 3 9 2 Uttar 0.29 0.319 0.28 0.32 0.29 0.36 Pradesh/Uttarakhand 2 6 1 7 0.286 0.327 0.25 0.33 0.27 0.38 West Bengal 4 9 4 3 Andaman & Nicobar 0.303 0.25 0.40 0.33 0.37 Islands 4 4 6 6 0.254 0.24 0.46 0.25 0.36 Chandigarh 6 8 3 0 0.244 0.25 0.32 0.35 0.30 Dadra & Nagar Haveli 9 5 5 1 0.287 0.297 0.26 0.21 0.26 0.26 Daman & Diu 1 2 4 1 0.314 0.332 0.27 0.40 0.28 0.33 Delhi 7 6 2 6 0.25 0.30 0.31 0.39 Lakshadweep 7 6 7 4 0.275 0.383 0.30 0.30 0.34 0.31 Pondicherry 4 1 8 6 0.298 0.33 0.2 0.3 0.3 0.3 All India 86 44 05 76 Source: * - Author Estimates from NSS 1993-94 & 2004-05 Consumption Expenditure Rounds. 1983 Rural 1983 Urban

This of course has many ramifications for consumer markets. Greater inequality levels reflect that the higher economic segments are rising relatively faster than the lower ones.

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But it is not that the poorest segments are necessarily becoming worse off, as the following discussion shows. For both rural and urban India, the highest increase in average per earner income has been for the relatively poor (the bottom 20%) and the relatively rich (the top 20%), with the middle (particularly the third quintile) becoming squeezed. This is a trend that is more marked for urban India than for rural India. Table 4b, which shows the shares of the quintiles in total income, reinforces the picture. The share of the top 20% in total income has increased, particularly sharply for urban India. However, subject to some differences between rural and urban India, the squeeze in incomes has primarily been for the second, third and fourth quartiles, not so much for the bottom 20%. The squeeze is also more for urban India than for rural India. Table 3b: Average annual per capita income for wage and salary earners (in constant 2004-05 prices)
Quintiles 1993-94 2004-05 Annualized growth b/w 1993-94 200405 9.8% 9.0% 8.8% 9.0% 10.4% 9.7% 10.3% 8.8% 8.1% 9.2% 11.9% 10.5%

RQ1 – Lowest 20% in rural areas RQ2 RQ3 RQ4 RQ5– Highest 20% in rural areas Total UQ1 – Lowest 20% in urban areas UQ2 UQ3 UQ4 UQ5 – Highest 20% in urban areas Total

Rural Income Quintiles 4,226 8,347 12,262 17,203 43,827

11,808 21,562 31,032 44,496 129,945

17,172 47,767 Urban Income Quintiles 7,889 23,285 18,854 32,258 55,041 109,979 44,802 47,771 75,890 145,628 378,040 134,113

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Source: Author Estimates from NSSO 1993-94 and 2004-05 Employment & Unemployment Rounds. Notes: Since survey data typically under-report incomes and expenditures the reported incomes have been appropriately adjusted using the ratio of reported aggregate expenditures in NSSO and total household expenditures in NAS, as the adjustment factor. The percentage change pattern is not affected significantly due to this adjustment though the quantum is. All figures are in 2004-05 prices calculated on the basis of CPI-AL for rural and CPI-UNME for urban, at the state level. RQI/UQ1 refers to bottom-most quintile in rural/urban areas and RQ5/UQ5 refers to upper-most quintile in rural/urban areas.

The point being made is that increasing inequality does not mean that poverty is rising, there is incrotovertible evidence that poverty levels in India have been falling in almost all the states. Currently, among the larger states, J&K, Punjab and Himachal have the lowest poverty levels. Among the smaller states, Meghalaya, Manipur and Mizoram follwed by Arunachal tend to have poverty levels in the single digits. Orissa, Bihar, UP and MP have amongst the highest poverty levels amongst the larger states. Note that these states also tend to have low inequality levels, indicating that overall these states are poor with high levels of deprivation. Table 4: State-wise Poverty Ratios (%)
States 50th Round (1993-94) Large States 41.40 28.63 54.92 35.45 37.02 25.02 25.02 32.89 61st Round (2004-05) Percentage point change b/w 1993-94 & 2004-05 -21.02 -18.80 -12.94 -12.66 -12.29 -11.45 -10.23 -8.55

Assam Himachal Pradesh Bihar + Jharkhand* Tamil Nadu West Bengal Haryana Kerala Karnataka

20. 38 9. 83 41. 98 22. 79 24. 73 13. 57 14. 80 24. 34

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Jammu & Kashmir Uttar Pradesh + Uttarakhand* Gujarat Andhra Pradesh Maharashtra Rajasthan Madhya Pradesh + Chhattisgarh* Punjab Orissa 13.18 40.79 24.20 21.82 36.99 27.46 42.57 11.27 48.69 Small States 37.00 21.29 29.38 15.54 14.93 4.26 1.68 5. 06 33. 03 16. 96 14. 79 30. 59 21. 44 38. 92 8. 14 46. 61 9. 90 3. 11 14. 33 3. 35 10. 92 1. 69 -8.12 -7.77 -7.24 -7.03 -6.40 -6.02 -3.65 -3.13 -2.09

Arunachal Pradesh Meghalaya Sikkim Manipur Goa Mizoram Nagaland

-27.10 -18.18 -15.05 -12.19 -4.01 -2.57

-1.68 Tripura 21.29 30. 9.23 52 All India 35.86 27. -8.38 47 Source: Estimates by Amaresh Dubey from NSS 2004-05 Consumption Expenditure Rounds. Notes: * - Undivided States

A comparison of the State level GDP growth and poverty reduction shows that indeed, those states that have had higher levels of growth have been able to reduce poverty levels much more than those with lower GDP growth. This is an important learning for policy and marketers alike. Indeed, Consumer Handbook - Introduction
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greater growth is a very good predictor of the rise in consumer buying power. Figure 1: Poverty reduction and GSDP growth between 1993-94 and 2004-05 (Large States)

% Growth in GSDP

7

Kar

WB HP

Guj

Har Ker

6

AP Raj Mah

5

TN JK Ori Pun MP UP Bih

4

Asm

3 0

5

10

15

20

Percentage point reduction in poverty

Notes: Bihar includes Jharkhand, Madhya Pradesh includes Chhattisgarh and Uttar Pradesh includes Uttarakhand.

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The above data use state level insights. (See Debroy and Bhandari (2007)) But if we bring occupation also into the analysis, a highly interesting set of insights are derived. There is an interesting link between the percentage reporting themselves as self-employed and the level of inequality. This is partly obvious from the following figures. About 52% of the Indian work force reports itself as selfemployed. Table 6 below shows Gini coefficients across employment categories. Gini coefficients are lower for the self-employed category. Stated differently, self-employment is a dampener on inequality and it is also probably the case that in countries where inequality has not shot up, a facilitating environment has been created for selfemployment to thrive and foster. This is also true of India in the inter-State comparison, a proposition reinforced by Figure 2, which plots the percentage of self-employed in States against the level of inequality. In States where selfemployment is high, inequality tends to be lower. In other words, higher levels of inequality are observed when there is greater dependence on wage based occupations.

Table 5: Gini coefficients across employment categories
Employment Categories All India Rural All India Urban All India Total Self Employed Rural Self Employed Urban Self Employed Total Employed Rural Employed Urban GINI based on incomes of salaried/ wageearmers– 2004-05 0.305 0.376 0.363 0.294 0.362 0.333 0.313 0.384

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Employed Total 0.394

Agriculture (self-employed+ 0.281 employed)- Rural Self employed agriculture- Rural 0.284 Employed agriculture- Rural 0.233 Source: Author estimates from NSS 2004-05 Employment & Unemployment Round.

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Figure 2: Percentage Self Employed Households and Gini (based on NSS 2004-05 Consumption Expenditure Round)
45.00

40.00

35.00 Gini (expenditure based) 30.00 25.00 20.00 30.00 35.00 40.00 45.00 50.00 55.00 60.00 65.00 70.00 75.00 80.00 % Indiv. in Self Employed Households

Table 6: Average annual income growth across education categories for wage and salary earners (in constant 2004-05 prices)
General Education Not literate Literate below primary Primary Middle Secondary 1993-94 13,171 18,220 21,377 28,144 46,634 2004-05 32,3 62 42,7 09 49,9 62 62,2 71 103,6 Annualized growth b/w 199394 & 2004-05 8.5% 8.1% 8.0% 7.5% 7.5%

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General Education Higher Secondary 1993-94 2004-05 Annualized growth b/w 199394 & 2004-05

02 139,6 8.7% 00 Graduates & 85,515 270,1 11.0% above 03 Total 24,980 73,1 10.3% 45 Source: Author Estimates from NSSO 1993-94 and 2004-05 Employment & Unemployment Rounds. Notes: Since survey data typically under-report incomes and expenditures the reported incomes have been appropriately adjusted using the ratio of reported aggregate expenditures in NSSO and total household expenditures in NAS, as the adjustment factor. The percentage change pattern is not affected significantly due to this adjustment though the quantum is. All figures are in 2004-05 prices calculated on the basis of CPI-AL for rural and CPI-UNME for urban, at the state level. 55,789

Table 7 shows the average annual income growth across education categories and highlights the lack of education/skills as perhaps the single most important source of income differentials. The impact of reforms in creating greater opportunities is not the issue; the issue is related to the ability of the available human resources to benefit from such opportunities. The poor educational regime both at the primary and higher levels is aiding the other forces that push towards increasing inequalities. Differences in relative growth aside, it is quite apparent that economic growth has led to high levels of income growth across the board. This has created greater opportunitiesfor all kinds of marketers, whether oriented at the bootm of the pyramid, or at niche commodities aimed at the higher income segments. This Volume This volume contains the following sections, each of which reflects an integral and important aspect of consumer markets in India. These are briefly reviewed .below Consumer Handbook - Introduction
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Consumption and National Accounts: The national accounts provide an overview of the Indian economy and how it is growing over time. A good aggregate picture is found in the estimates of India’s GDP, national income, and how these translate into savings and expenditures. High growth enables households to both save more and spend more, as the Indian experience since the 1990s has shown. IN fact savings are growing more rapidly than any other macroindicator. However when compared with China, our achievements are not as impressive. Consumer Demography is the cornerstone around which most marketers build their strategies. This section provides insights into age distribution and the famed demographic dividend that India is enjoying, and going to benefit from in the next few decades. It shows the historical growth of population and how India’s population density is rising rapidly. For instance, India had a population density that was about twice that of China in 1961, but is much higher now. Life expectancy is also rising though slowly. The section also looks at family structures, and marriage status, apart from the overall population break-ups to provide a better overview of the state of Indian demography. Education is an important aspect that reflects a range of insights on incomes and expenditures. Greater education levels affect long term incomes, and the trends there are quite apparent across time. Rural areas typically have lower education levels and so do females. However, we find that among the younger age groups the male-female differences have narrowed over time, having tremendous implications on not only economic variables but also lifestyles. The youth will drive the India of tomorrow and today’s youth are far better educated than the older age groups.

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The affluent and Income distribution is perhaps the most important determinant of market potential. We find that though the lowest income groups are the largest in terms of numbers, in terms of aggregate incomes it is the higher income groups that together earn much more. This in turn impacts the range of commodities that are available for the better off vis-à-vis the poor. Incomes also affect the savings potential, and though all income groups have positive savings, it is the highest income groups that not surprisingly save the most. The richest Indians in terms of incomes tend to be located in a few metros – Mumbai and Delhi being the most popular residences, and it is expected that if the IT boom continues Bangalore will catch up very fast. The Affluent sections have the highest incomes and the highest savings rate as well. They are more likely to be in urban areas, and save as much as a third of their incomes. This is true across both rural and urban areas. With greater economic growth, the number of affluent will grow much faster than that of the lower economic classes. For marketers of premium products, therefore the importance of this segment will only rise. Asset penetration and Activities and assets and Household Characteristics of a range of household items are best understood through their usage of household amenities including electricity and LPG. We find that hough a large number of households do have this access, many remain uncovered. Whether it is toilets or access to LPG or even basic electricity, there is a large segment of the population that is yet to access these services. Moreover, few number of rooms, lack of a kitchen also affect the ability of households to use many durables. As incomes gorw and government programs deepen the spread of electricity, and as the relative prices of durables reduce, such items will penetrate more and more into the Indian market.

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Expenditure on food and other items reflect how different types of household differ in their consumption habits. It is well known that poorer households spend a larger share of their total budget on food and within food on cereals. Specific food items are consumed differently by different kinds of households; a large proportion of the Indian population is non-vegetarian, a very large proportion consumes green leafy vegetables on a regular basis, in some cases consumption habits differ between men and women and are very similar in the case of some items. Finance and Investment is a critical aspect for better understanding savings behaviour of Indian households. A large proportion of Indian households save in banks, post offices, insurance linked schemes, informal instruments and so on. The greater the education the greater the dependence on formal instruments such as commercial bank savings accounts. Increasingly equity and mutual funds are becoming more and more popular. The growth of these items is very well reflected in the growth of the investments by these organizations. Forecasts and Projections of economic variables provide a picture into how things are going to unfold in the foreseeable future. This in turn helps us to better understand the actions that need to be taken today for being well placed in the future. India’s population will continue to grow before starting to stabilize in the next few decades. Its GDP is also expected to continue its rapid upward trajectory through the next few decades. International comparisons show how India’s growth is expected to be vis-à-vis other large developing countries. Indices are created by aggregating many different quantitative variables. Each index seeks to reflect certain aspect of the state or city that it seeks to rate. We find that Consumer Handbook - Introduction
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certain locations are among the best to reside in, but are not necessarily the best to invest in. Such ratings and rankings make it easier for the decisionmaker to prioritise their actions. Access to Media, Internet and Telecom usage is growing rapidly in the country, and is expected to eventually penetrate into every household in the country. Greater penetration of media, and telcom, it is well known changes households in many ways and affects a range of household activities; households getting access to internet for instance have been known to change their banking habits, entertainment habits, social communications and networking as well as a range of other lifestyle changes. Consumer markets can be reported in many different ways, size of the market in terms of number of people or households, size of the market in terms of the total or aggregate disposable incomes in those markets, or the aggregate expenditure of people or households. Therev are 35 states and Union Territories in India; among cities there are more than 5000 cities and towns, but the top 100 odd cities account for a large majority of the urban population and an even larger share of household expenditures. These and many more insights are available from a range of tables culled from some of the most repected publications on Indian consumer markets.

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Amount (Rs.Thousand)

30 0 20 5 20 0 10 5 10 0 5 0 0 -5 0

14

21

28

34

40

46

53

59

66

72

78

84

90

H se old Pe n ile b se on e om st t s ou h rce t s a d con ic au
Per Capita Incom e Per Capita Sav ings

Consumer Handbook - Introduction

96

1

7

22

Indicus Analytics, An Economics Research Firm
www.indicus.net

Pe H se old Ex e d u r ou h p n it re
700000

Expenditure (Rs.Thousand)

600000 500000 400000 300000 200000 100000 14 21 28 34 40 46 53 59 66 72 78 84 90 96 0 1 7

Pe n ile rce t s
Per Household Expendit ure

Consumer Handbook - Introduction

23

Indicus Analytics, An Economics Research Firm
www.indicus.net

600,000,000,000

H se old Con m t Ex e d u ou h su p ion p n it re

500,000,000,000

400,000,000,000

Amount (Rs.)

300,000,000,000

200,000,000,000

100,000,000,000

41

46

51

56

61

71

76

H se old Pe n ile ou h rce t s
Cons. Serv ices, taxes, entertainm rent, fuel, toiletries andother m ent, isclleneous expenses Education Medical Clothing &Footw ear Durables High V alue Food Basic Food

Consumer Handbook - Introduction

24

96

11

16

21

26

31

36

66

81

86

91

0 1 6

Indicus Analytics, An Economics Research Firm
www.indicus.net Pe n a esh reof e p n it reon d re tit m b e ch p rce t rce t g a xedu iffe n e s y a e n ile
100%

%sh reof e p n it re a xedu

80%

60% 40%

100%

20%

0% 1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91

H se old Pe n ile ou h rce t
Cons. Services, ent ainm , rent fuel, t ries and Misc. ert ent , oilet Educat ion Medical Clot hing &Foot ear w Durables High Value Food Basic Food

Consumer Handbook - Introduction

97

25

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