6.

FAMILY ECONOMICS -A STUDY ON THE HOUSEHOLD EXPENDITURE OF

URBAN MIDDLE CLASS WITH REFERENCE TO CHENNAI CITY
(Dr. Sambamurthy Padmavathi, Assistant Professor, Department. of Commerce,
Shri.S.S. Shasun Jain College for Women, T.Nagar)
An Abstract:
The socio-economic and political changes in India have resulted in a new socio economic
group called as middle class. They are from different religion, caste, culture, in different
occupations with different status. There are new opportunities open to them and they have
access to better education, living, and health care which really differentiate the middle class
from the others. The rise in income, along with the rise in the population has resulted in
significant change in the spending pattern of the middle class of India. Each household has a
unique family economics which reflects in their way of spending and also on their budget.
This paper tries to highlight the spending pattern of the urban households there by
understanding the financial soundness of the families in order to cope up with the rise in the
prices. A small attempt is made to find out the total expenditure of an urban household
towards household consumption expenditure. The study also tries to identify the savings and
investments that these households are able to make after paying the EMI. Primary data is
collected from the households of the Chennai City for the purpose of the study.
---------------------------------------------------------------------------------------------------------------Introduction:
The spending behaviour of individual reflects the standard of living of the household to
which he belongs. The way a society spends towards the consumption expenditure creates an
impact on the GDP of a country and thereby making the country economically powerful
among the other nations. The family economics does not only deal with planning the
expenditure budget, but also on minute aspects like the number of children are to be raised in
the family, is purely an economic concern. Such process of decisions reflects the lifestyle
which may be constructed on what they provide to their children. Thus planning the
expenditure of the household is very important and there has been a paradigm shift in the way
the middle class categorise their expenditure.
Family Economics:
The family economics is an important factor which decides the requirements of the family
whether financial or otherwise. It consists of major decision of the family as to the place of
living, the kind of employment to be chosen by each individual, the position of women, the
number of children to be grown in the family, the kind of education to be given to the
children and includes how savings has to happen in the family. Thus financial planning can
be well done only when the family economics is well understood and hence depends on the
demographic profile of a household.

The term expenditure includes the expenses intended to be spent for the present consumption
as well as the amount reserved for the future consumption. Expenditure may be classified into
two categories, namely, non-recurring expenditure and recurring expenditure. The nonrecurring expenditure may be a capital expenditure, usually incurred on acquiring physical
assets like land, house, properties, vehicle, gold, silver and other capital goods. It may also
be incurred on investments in financial assets like bank deposits, post-office deposits, shares,
stock, and debentures of the corporate sector. It is expected and its benefit lasts for a longer
period that such expenditure does not form part of the regular recurring expenditure. For
example, an expenditure on acquisition of house is incurred so that the successors of the
household may find a place of comfortable living. The expenditure on the financial assets
helps in enhancing the financial position of the household by the funds accumulated. This
accumulated fund can be utilized in times of need. Recurring expenditure is re-occurring in
nature and it can also be called revenue expenditure (by business entities). The expenditure
helps the household to maintain and sustain a particular standard of living. The recurring
expenditure is spent in the form of consumption on several items.

The consumption

expenditure on food, health, insurance premium, education, clothing, travel, communication,

leisure, vacation can be classified under the category of recurring expenditure. The expenses
met for the maintenance of the cooking stove (whether electronic or otherwise), refrigerators,
mixer grinders, air-conditioners belong to the category of recurring expenditure only.
The creation of middle class may also be identified by their ability and potential to spend
towards various kinds of consumption expenditure listed in their budget. It is expected that by
2030, India will surpass both the US and China, and will be the worlds largest middle class
consumer market, by 2039 India could add over 1 billion people to the global middle class
Statement of the Problem:
Indias GDP has grown at an average rate of 7.27 over the years 2000-2010, and it is further
expected to grow faster during the twelfth five year plan period, according to the estimates of
the Planning Commission of India. Such growth in the GDP also means increase in the per
capita income. The actual disposable income of the Indian household has doubled since 1985
which has emerged into a middle class. The rise in the disposable income has brought about
a notable change in the spending pattern of the middle class. According to the recent
estimates of the Central Statistical Organization, 60% of the GDP was consumed in the year

2010. It is to be noted that the share of consumption in total GDP is higher than the
investments.
Objectives of the Study:
To understand the profile of middle class in Chennai City
To identify the household consumption expenditure on various categories of expenditure
To analyse the estimation of expenditure on each categories of expenditure
To find the significance of age and occupation with regard to EMI
Research Methodology:
Semi structure questionnaire was circulated to the respondents of the Chennai City and
Simple Random Technique was adopted to collect primary data. Questions were asked on the
approximate amount that a household spends over seven categories of expenditure identified
for the purpose. The amount spent towards paying the monthly instalments was also
computed. The amount unspent was considered as savings available for both short and long
term investment. Descriptive Statistics were computed to understand the percentage of
income spent towards each categories of expenditure.
Limitations of the study:
The household consumption expenditure is classified in to 7 major categories and hence a
few more items may also form part which is not considered in this study.
The results are based on the data collected from Chennai City, and hence the result may vary
with regard to rural and non metro cities.
The middle class is the focus of the study and hence there may be difference when other class
of the population are considered.
Review of Literature:
Ravi Shanker and Debdeep De, (2011) while studying the changing pattern of the Indian
Market, the authors observed that the demographic profile of individual has a great impact on
the pattern of spending and there by the living style or pattern automatically get influenced.
Rising per capital income, increase in literacy rate, rapid urbanization causes rapid growth.

Such growth and development creates a different demand pattern. The rise in aspirations of
individuals increases the spending power which leads for different living patterns. The
significant acceleration in the Indian economic growth has direct impact on the spending
pattern which has soared for the emergence of new middle income class. The change in the
life style of individual has reflected in the consumption of food products. There has been a
shift in the consumption pattern from carbohydrate based staples towards protein rich foods.
The westernized lifestyle is seen in Indian households as the spending towards consumer
durables, apparel entertainment, vacations and life style related activities increases.
Thomas Varghese, Chairman, CII, National Committee on Marketing 2012-123, and CEO
Textiles Business, Aditya Brila Group writes that the inherent strength is the private
consumption expenditure which will continue to remain as the strongest pillar of the growth
of India. The spending behaviour is greatly influenced by the change in the family
consumption pattern.
Rekha Attri (2012) states that the age group of 15-30 years have priorities for spending on
entertainment, leisure, food (which include milk chocolates, pizza, soft drinks) clothing etc.
The generation of today is highly influenced by expensive lifestyle. The youth spend mostly
on entertainment, clothes and accessories. The desires of them make them dream for big
things and lead a different kind of lifestyle.
Neetika Khurana writes that the spending behaviour and spending pattern is of two types
life line and lifestyle. The life line includes simple food and non- food items like, health,
education clothing) lifestyle spending includes processed food, entertainment, white goods
and the like.
There is the change in the attitude as live for today rather than for save for the future. All
these change indicate a shift in the culture and values of the individuals on the modern India.
As the present study is on the estimation of expenditure by the middle class based on their
expenditure pattern, it is very much necessary that the respondents are placed in right age,
who earn something and have some experience in running a family or who have some
knowledge on the requirements of the family and also are aware of the way the needs of the
family are satisfied. Understanding the way a household runs its family has relevance to the
family economics.

Analysis and Interpretations:

Primary data was collected from the households of Chennai. The present study tries to
understand the spending pattern of the middle class based on their age, occupation and
household income. Based on the income, the respondents were asked to estimate their annual
expenses incurred. For this purpose the expenditure were grouped under 7 major categories
of expenditure namely, Housing, Transport and Communication, Food, Insurance, Health,
Clothing, and Entertainment. They were also asked to estimate their EMI and whatever is left
after paying for expenditure and EMI. They were asked to show how much they prefer to
save for short as well as for long term. These are based on their mental accounting and as the
number of items or heads of expenditure were only 7, it can be presumed that there must be
considerable reliability in the answer. They had to add up to a total of 100 and hence much of
the over/under estimation could be reduced. As such the outcomes of this exercise can be
examined now.
Estimation of Expenditure:
Table 1
Aggregate Average Expenditure in Percentage Based on Age
of the Respondents
EXPENDITURE
AGE CATEGORY
18-30
30-50
Above 50
Years
Years
Years
Average Expenditure in
Percentage
HOUSING
22.39
20.34
16.89
TRANSPORT &
COMMUNICATION
11.14
10.78
10.76
FOOD
13.85
13.72
16.04
INSURANCE
7.12
7.2
7.56
HEALTH
5.79
5.37
5.37
CLOTHING
5.88
5.81
5.77
ENTERTAINMENT
3.75
3.76
3.48
EMI
6.59
8.52
9.33
SHORT TERM SAVINGS
12.02
12.51
13.21
LONG TERM SAVINGS
11.47
11.99
11.59
TOTAL
100
100
100

Table 1 reveals that the expenditure on housing, transport and communication decreases with
age where as the expenses on food increases with age. The expenditure on insurance, health,
clothing entertainment is spent in the same pattern. It is worth noting that the EMI gets
increased with the age. It can be inferred that the loan taken by the middle class does not get
repaid before 50 years and thus the accumulated interest and the loan is repaid even after the
5

age of 50. But it is interesting to note that irrespective of the expenditure above they are able
to save 23% of the income towards savings and investment.
Figure 1

Aggregate Average Expenditure in Percentage Based on Source of

Earnings of the Respondents

Average Percentage
Entrepreunerial

60
50
40
30
20
10
0
Professionals

Job

Categories of Expenditre

Figure 1, reveals that the Salaried and the Professionals spend 2% more on the
expenditure on housing as against the entrepreneurs who spend 18.7% only.
Whereas the entrepreneur spends 1.5% more on Transport and Communication
as compared to the others. The entrepreneurs do spend more on expenditure on
Health and Insurance than the other two. The EMI payable by salaried and the
professional is more when compared to the entrepreneurs. Here also it is
observed that irrespective of the occupations, the middle class is able to save
23% of their income.
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Table: 2
Aggregate Average Expenditure
Aggregate
EXPENDITURE
Percentage
HOUSING
20.41
TRANSPORT &
COMMUNICATION
10.86
FOOD
14.17
INSURANCE
7.2
HEALTH
5.4
CLOTHING
5.74
ENTERTAINMENT
3.73
EMI
8.12
SHORT TERM SAVINGS
12.53
LONG TERM SAVINGS
11.84
TOTAL
100

Table 2 presents the aggregate of average expenditure at the three levels of income. It shows
that 67.5% of the income is spent towards 7 categories of expenditure, 8.12% is reserved for
towards paying the monthly installments and 24.37% is available for short as well as long
term savings.
Findings:
It is observed that the expenditure on housing and transport decrease as age increases. This
could be inferred that the commitment towards paying heavily on the housing gets reduced
when they reach 50 years and the cost of transport also gets reduced. The increase in the
expenditure on Health increases with age which is evidence that special care is taken on the
food consumed at the older age.
It is noticed that occupation plays an important role on the spending pattern. The
entrepreneur spends less on the housing and more on transport. The entrepreneurs are very
particular in investing in the business rather than on acquisition of personal assets. He needs
to get connected with society as he spends more on transport and communication. More than
all these, the entrepreneur has to take insurance policy on his own, he has to spend more on
food ,health and insurance too. This is quite evidenced by the data presented in the bar
diagram above.
It is observed that based on the income earned, the middle class spend a maximum of 20.41%
towards housing followed by 14.17% towards food, 10.86% towards transport and
7

communication, 7.2% on Insurance, 5.74% on Clothing,5.4% on Health and 3.73% on

Entertainment. After spending they have 8.12% of their income committed towards payment
of EMI there by leaving 24.37% to save and invest.
This study brings out the fact that the urban middle class prefer to spend more on proper
housing to have a place for comfortable living and are ready to spend more on all expenses
which may take care of their health which is the reason for spending more on housing, food,
health care and insurance.
Conclusion:
The Indian Middle Class is known for savings from the household budget. There is a saying
that What can be saved from Kitchen cannot be saved from anywhere else. The fast
spreading consumerism, attractive Departmental Stores, Super Markets and the introduction
of Mall play a vital role in persuading the consumers to buy even if there is no utility derived
from such consumption. Another factor which forces the middle class to acquire personal
assets is the installment buying, net banking, credit cards, and debit cards. Thus the major
part of the income is spent towards consumption and still the middle class could save 23%. It
is really the need of the hour. This domestic savings will considerably increase the GDP of
the country to make it stronger and make India developed nation by 2020.
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