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High-income class expanding fast: NCAER report

17-July-2004
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High-income class expanding fast: NCAER report

According to a soon-to-be-published report of the National Council for Applied Economic Research, Delhi (NCAER), the `India Market Demographic Report for 2002', India's high-income class is expanding fast, middle-income classes are bulging in size, especially in rural India, and the low-income class is shrinking rapidly.

Over the past 15 years or so (i.e., the post-reform period), the rate of growth in the upper-income class was much higher, compared to the corresponding decline in the size of the low-income class.

The growth of the top most income class after 1995-96 has been about 19 per cent. There was a significant negative growth of the urban low-income class in south and west India, followed by north India. A decline of over 15 percentage points in the share of low-income households was observed in Karnataka, Punjab, Haryana, Kerala and Tamil Nadu.

During the 1990s, the rural segment of the FMCG market grew steadily, at over three per cent. The urban market expanded faster. Consumer finance is the key to future market growth, because the income boom of the mid-1990s has played itself out, the latent demand that surfaced in the mid-1990s has been exhausted. A `ready made' consumer market for durables no longer exists.

The `per cent per year' growth in financed purchases of `white goods' over various periods of time is as shown in Table 1.

Households prefer high-priced to low-priced durables, despite the extra cost, because of superior product utility and feature values.

The income distribution of households classified by the occupation of the head of the household is as shown in Table 2. The percentage of households headed by salary earners in various income classes in 1999-2000 is as shown in Table 3. The salaried income category has consistently contributed to the growth in consumer markets. During 1999-2000, when consumer markets were said to be on a revival track, within the bounds of a slowed economy, it was the salaried households that accounted for a very high share in consumption. Not because of their increased income, but rather on account of their high propensity to consume, high level of awareness and an efficient leveraging of their household budgets. The (`organised') services and industrial sectors are the most likely growth providers in the years ahead because these sectors sustain as many as 35 million salaried class households.

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