2009, COVER STORY, MARCH 2009, SPECIALS

THE URBAN CONSUMER : How India Earns!

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But for the ongoing slowdown, the economy has been experiencing a free run for the last few years, and so are the earnings of Indians. A visit to a Mall or a superstore will give you a glimpse of the amount of money Indians have in their pockets. Market researchers believe that household income is massively understated — baggage of the era of controls and usurious taxes. Independent studies suggest that 1.6 million households earn over Rs 40 lakh per annum and about 100,000 people possess more than Rs 4 crore in assets. The Pitch-IMRB UrbanScape 2009 Study has found certain facts, which could be of interest to any market enthusiast, on the latest earning aspects of urban India.
Household Income Surges
One of the most prominent trends has been a visible rise in the urban income levels.    The average monthly income of households (MHI) of urban India has witnessed a good 10 percent rise during the period of 2005-07 and stands at Rs 8,682. Looks like Urban India has finally broken loose of the shackles of poverty and is readying itself to construct a new market dynamics. But this is not enough to cheer up. Still, as high as 40 percent homes have to be satisfied with an MHI below Rs 5,000.

Nonetheless, the below Rs 5,000 income bracket has seen a 11 percent CAGR decline while the above Rs 10,000 income bracket has risen up by 19 percent. Good news for corporate India, as it releases more fire power in the hands of prospective customers. Indian middle class is growing fast. It is not the same what it was just a decade back. It is fairly dynamic, educated, liberal, and  thus forms the pillars of this vibrant  as well as resurgent economy.

Single-Income Earners Dominate
While the distribution and socio-economic mobility of the Socio-Economic Classes (SECs) has somewhat stagnated, household income has shown a rise across SECs. In SEC A, a 61 percent of households have single bread winners. Across the SECs, 55-61 percent households have single bread winners. But a downward stroll in the SEC lane presents a different trend. As we move down, a rise in the number of Income earners per family is noticed and vice versa. A rise in the number of multiple earners per family in the lower SECs doesn’t necessarily reflect their economically more affluent nature, rather poverty can be a factor in pushing more members of the same family into work.

In case of SEC D, 45 percent households are with more than one earning member as against 38 percent of SEC A.

Huge Dependence on Wages & Salaries
Indians mostly rely on salaries. Over 50 percent of our GDP comes from the service sector, which has, to the delight of policy makers, acted as a shield against the current slowdown since its not much affected by the global recession. India, according to the Mid Year Review of the economy presented to Parliament recently, will be relatively immune to global financial crisis due to the high share of services in its GDP. Boosted by the phenomenal IT and ITES growth engine and the numerous stimulus packages announced by the government in recent past, the service sector has somewhat been able to exorcise the ghosts of slowdown.

Pitch-IMRB Study finds that only 31 percent of the urban populace earn their livelihood from business or related activities. The spectre of the service sector rules the roost in the urban landscape and claims a lion’s share of the urban income pie. Wages and salaries account for 75 percent of the urban income. While rents from houses account for 10 percent; dividends/interests hold a 2 percent of the income pie; pensions, off-suits of the services, contribute 11 percent of the total income, again signifying the dominance of the service sector in the overall income of  urban India. This is a pointer towards a   complex but high level of planned monthly family expenses.
Loan Penetration Low, but Rising

Although loans constitute a major feature of a fast moving society, yet the rate and percentage of loan penetration in urban India has not been encouraging. Hence, it offers an excellent but mammoth scope for growth in this segment. Our Study finds that in 2007, 40 percent of the households didn’t want to be in any kind of debt compared to 49 percent in 2005. Out of the total 65,671,000 urban households, only 18 percent were found to be with some kind of loan  liabilities. However, the loan  exposure rose by 4 percent over 14 percent of the base year 2005.

Going class wise, SEC D/E exhibits a slightly lower incidence of availing loans, while SEC A has shown a moderate 2 percent rise from 17 percent to 19 percent in loan penetration, and SEC B and C have skewed a higher 6 percent each to arrive at 20 percent to beat the all India average rate by 2 percent. This amply illustrates the higher thirst for loans among the upwardly mobile middle class compared to the SECs at the top and bottom rung of the class ladder. To be marketwise, overall, a poor loan exposure rate obviously doesn’t board well for late payment merchandising.

Southerners Lead the Loan Uptake
Unlike other geographical regions, the IT-infested Southern zone exhibits a better appetite for loan uptake and leads the loan penetration with 25 percent, a 6 percent rise over its 2005 position. An indicator of the more agile and perhaps, more forward-looking South.

While the Industrially affluent West zone is a near second with a penetration rate of 20 percent, Eastern zone came up with 18 percent. The cow-belt represented by the North, as it does in other such demographic parameters, accounts for only a miniscule penetration of seven percent.

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