Under the Indicus Urban Consumer Expenditure Spectrum, the bottom of the pyramid in urban India is comprised of households that earn less than Rs 1.5 lakh per annum. This class forms the bulk of the population in cities, but contributes less than 15% of total urban income and less than 10% of total urban savings. Household sizes are typically smaller than in the more affluent classes. One reason is that there are many migrants in this segment; with little skills and low education, their earning opportunities are low, albeit they supplement family incomes in the villages. Northern states, however, have larger household sizes within the segment.
For these households, the major share of expenditure is on food, which takes up 43.6% of the budget. The basics in this category account for the largest expenditure—close to a quarter of total expenses. The next group is vegetables and fruits, while rent takes the third place at 7.7% of total expenses. Food has displaced the miscellaneous goods and services group, which has the highest share of expenses in all other income classes, pointing to bare necessities being the most crucial at the lowest level. Moreover, processed food, and milk and milk products make up a little more than 7% each of the total expenses. Interestingly, this segment contributes the most (more than 40%) to overall urban consumption of paan, tobacco and intoxicants in India.
Also See | Share of Total (PDF)
The average income per household in the western states is the highest in this segment, followed by the eastern states. The western region also has significantly higher savings per household. Interestingly, while the western states spend the highest per household in many categories, the per-household expenditure on education is the lowest. While the eastern states spend the most per household on basic food, the northern states spend the highest on an average on milk and milk products; the southern states have the highest spends on rent and entertainment.
There are wide differences in income and expenditure patterns at the district level—per-household income in Gurgaon and Gautam Budh Nagar (Noida and Greater Noida) is the highest in India in this segment, and twice that of households in Bellary and Jabalpur, the lowest in this segment.
When it comes to rent, the southern cities of Bangalore, Hyderabad, Chennai, Madurai and Coimbatore top the list, making these the most expensive cities to live in for the lowest income class. Expenses on medical care are the highest in Thrissur and Kollam in Kerala, while Dehradun, Haridwar and Kolkata are the top three urban areas for expenses on education.
Basic food takes up more than one-quarter of the household budget in more than 20 cities: Nanded, Bardhaman and Durg top this list. Close to 30 cities spend more than 10% of their total budget on milk and milk products, and Amritsar, Bikaner and Jaipur top here. There are 17 cities across the country where households in this income segment spend on an average more than 10% of total expenditure on processed food. Mumbai, Gautam Budh Nagar, Guntur, Dibrugarh, Ahmedabad and Chennai top the table here.
The largest markets at the bottom of the pyramid remain Delhi and Mumbai, which house a total of 12% of Indian urban households earning in the lowest income bracket. In fact, one-third of this population lives in 10 major cities in India—this is where earning opportunities abound for those with minimal skills and education.
Graphic Yogesh Kumar/Mint