India: Lower, middle income groups cut spending by 65%
Friday, 04 May 2012 | 00:00
Due to high food inflation, middle and lower income groups (MIGs and LIGs) in India have been forced to slash 65 per cent of spending on entertainment, shopping, vacations, electronics, automobiles and real estate. A survey by the apex business body Assocham says they have reduced eating out to manage monthly household budgets .
The survey, conducted in March-April in the four metros and some other cities, suggested that the average monthly expenditure has increased from Rs 2,000 to Rs 6,000 and expenditure on food, as a percentage of monthly household expenditure, has gone up from 40 per cent to 100 per cent.
Consumption of individual food items show a significant reduction as well, particularly in case of rice, wheat, yellow daal, onion, tomato, butter, milk ,sugar and fruits and vegetables, and the number of households consuming milk at least twice a day has also reduced.
The growing food budget has forced households to cut costs in other areas such as healthcare and transportation. Over 75 per cent of the surveyed households now go to government hospitals or doctors instead of private doctors or hospitals. Seventy eight per cent have decreased spending on eating out, 65 per cent on clothing and 77 per cent on vacations.
Similarly, 49 per cent have decreased their spend on home appliances, 44 per cent on home and personal electronics, 42 per cent on automobiles; and 35 per cent on real estate.
Those belonging to the MIG have curtailed expenses on such heads by nearly 65 per cent during the last 6 months due to rise in inflation, interest rates and fuel costs. With food and education of children eating up most of their incomes, the saving is likely to come down heavily, reveals the survey done on 200 employees selected from each city as samples. The Delhiites topped in curtailing their expenses followed by Mumbai, Ahmedabad, Chandigarh, Kolkata, Chennai and Dehradun, said Mr D S Rawat, Secretary-General, Assocham.
The survey reveals that food inflation impacted the most consumers in metros and other major cities vis-à-vis tier-III and semi-urban areas due to sudden hike in the fruits, vegetables and milk prices and that the rise in inflation and per capita income was disproportionate.
Consumers' growing unease is reflected in their saving rate and spending habits, with many in MIGs and LIGs indicating that they are finding ways to cut back spending now or will do so. Around 69 per cent of the respondents have cut down in their saving rate.
Nearly half of MIG members either avoid shopping altogether or shop only for absolute necessities; 76 per cent said that their shopping has been restricted to only necessities and splurge in their spending is occasional.
About 88 per cent of the respondents said they have cut back on everyday expenses and save money by avoiding outside food, car-pooling, cutting down on gas and use of electricity.
The urban male's expenses of Rs 500-Rs 2,000 per month on drinks, cigarettes, gutkha, pan, etc has come down by 20 per cent while the urban women have also cut down monthly expenses on cosmetics, beauty treatments etc from Rs 1,500-2,000 to Rs 500-1,000.
Over 87 per cent said their monthly grocery bills have jumped from Rs 3,000 to about Rs 7,000/ to 8,000 in the last two years.
Source: The Hindu Business Line