India is witnessing a durables revolution

India is witnessing a durables revolution
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First Published: Tue, May 19 2009. 12 48 AM IST

Updated: Tue, May 19 2009. 12 48 AM IST
Consumer durables include not just white goods, such as refrigerators, air conditioners and cars, but also goods such as furniture and kitchen appliances.
The largest markets for durables are naturally states with large population. Yet, Maharashtra leads on account of higher income, followed by West Bengal and Uttar Pradesh. Interestingly, Kerala and Gujarat, states with considerably smaller populations, make it to the top five states in markets for consumer durables, with better income levels and infrastructure distribution.
Also See Consumption Patterns (Graphics)
At a finer geographical level, the largest markets for durables are naturally in the larger cities, where greater incomes and population numbers warrant greater expenditure and also typically ensure better and greater supply.
However, it is not that the poor do not consume such items. There are many essentials included in the durables category, such as utensils, basic furniture, etc. Consequently, total durables expenditure is defined by the income, size and location of a household, not to mention household preferences.
Location, therefore, matters a lot. Areas that have better power availability make it feasible to use white goods; consequently, rural areas tend to have lower penetration of durables for the same level of income.
At the same time, even if incomes are higher, smaller homes are less able to purchase more durables. To take an extreme case, a household living in an urban slum would tend to have fewer durables than a household with similar incomes in a rural area, or in a non-slum urban area.
Similarly, we find that households that have greater education levels and those where there are a greater number of older persons tend to spend more on durables.
Per household annual expenditure on durables, therefore, reflects many of these forces that work in tandem. Goa has among the highest per capita incomes in the country, insignificant slum population, greater education levels, etc. Not surprisingly, it has among the highest durables expenditure on a per household basis.
The district of Ludhiana in Punjab comes next, driven mainly by its high incomes in both urban and rural areas. Households in Himachal are not surprising entrants into this league—a large part of Himachal’s youth reside in the plains, repatriating their surpluses to those at home. The easy availability of electricity, the colder climate and better infrastructure, all enable its households to derive the full benefits that durables offer.
Mumbai, Kolkata and other larger cities tend to be lower in this categorization despite their higher incomes simply because they have large slum populations; hence, on a per-household basis, they show up as lower even though they remain the largest market for consumer durable purchases.
As incomes increase, media reach increases, electrification spreads and education levels rise, we expect the demand for durables to expand significantly. Moreover, as rural roads are able to connect the hinterlands across the country, the costs of supply will also fall.
In other words, a great durables revolution is currently occurring in the country, and whether India grows at 6% or 8% a year, this spread of household durables is likely to see a continued growth at a rate far greater than overall consumption expenditure.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and markets. Your comments are welcome at demandcurve@livemint.com
Graphics by Ahmed Raza Khan / Mint
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First Published: Tue, May 19 2009. 12 48 AM IST