A Note on Consumer Spending Patterns in India

Executive Summary

Consumer spending can be categorized into regular spends and lifestyle spends. Regular spending includes the basic necessities of life, while lifestyle spending includes spending on a computer, internet, car, cell phone, etc. Analysis of consumer spending in the past 10 years reveals that the average consumer has been spending on an increasing number of different goods. There are a number of factors affecting the consumer spending pattern in India; these include growing income levels resulting in more disposable income with individuals, changing attitudes towards consumption, changes in prices, introduction of new products, availability of credit such as loans, mortgages and credit cards, rising aspiration levels, increased literacy, growing brand consciousness and rapid urbanization.

Spending habits are different for people belonging to different sections of society. For instance, people belonging to the middle class consider basic necessities and education and spending toward the future of their children as their top priorities, followed by lifestyle goods. The rich class spends more on luxury goods and international brands. The super rich class spends on ultra luxury goods. It is observed that as disposable income increases, people prefer more of branded goods, shift to processed foods, and the expenditure on food, beverages, tobacco, and transport and communication also increases. A comparison of consumer spending habits in 2002 with those in 2007 revealed that expenditure on food, clothing and personal care has remained more or less constant, but expenditure on entertainment has increased.

Shopping habits of Indians are changing due to their growing disposable income, relative increase in the younger population, and the change in attitudes towards shopping. The emphasis has changed from price consideration to design, quality and trendiness. The desire to look and feel good is also guiding factor for customers while making their purchase decisions. Growing disposable income is also propelling demand for consumer durables and eating in restaurants among Indians. Age is also a major factor that affects the spending decisions of an individual. For instance, people in 20-24 years age group spend more on electronic / home appliances and movies, while people in the 45-48 years age group spend more on vacations.

Consumer spending is an important factor that affects the economic growth and development in a country. In the future, India and China are projected to be the powerhouses of Asia in terms of growth in consumption, wages, and GDP.

Keywords:

Consumer spending, India Economy, Growth, Financial Services Sector, Credit Card, Debit Card, GDP, Asia, China, Excise duty, Government, National Sample Survey Organization, KSA Technopak, Household Expenditure, Disposable Income

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