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Buying habits

Buying habits
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First Published: Tue, Dec 11 2007. 11 24 PM IST

Updated: Tue, Dec 11 2007. 11 24 PM IST
Reading the consumer’s mind and making sense of his spending habits is never an easy task. This is one of the reasons why marketers have such voracious appetites for consumer surveys and fancy reports.
All those who are betting on Indian consumer trends would do well plough through new data published on Monday by the Asian Development Bank (ADB). It tells us that household spending on consumer goodies in India is about 28% lower than the regional average—a reflection of the fact that average Indian incomes are lower than those of most other countries in the region.
ADB data also show that the Indian consumer today is relatively more likely to buy non-durables rather than durables; spent on transport rather than communications; on health rather than education. Looking at comparative spending patterns in richer Asian countries such as Taiwan or Singapore suggests that these patterns may shift, as India grows richer.
A fair bit of attention has already been focused on the big findings of the International Comparison Programme (ICP), a huge project that, as the name suggests, tries to compare national economies across the world.
The comparisons are based on purchasing power parity (PPP). ADB is handling the Asian end of this research project, which is important because this is the first time that China has taken part in such an endeavour.
The headlines have focused on the macro findings, especially the fact that India and China lag behind the regional averages as far as per capita income goes. This despite their impressive growth records in recent years. Last month, Carnegie Endowment for International Peace scholar Albert Keidel said the new comparison programme would eventually show that China’s economy is 40% smaller than what is currently assumed.
These are grand debates— and important ones. But there are other nuggets to be mined as well. ADB has sliced the data into the individual consumption and investment components of national economies. This is where it gets really interesting.
The average Indian consumer spends HK$3,234 a year in nominal terms and HK$8,506 in real terms. (The Hong Kong dollar is the currency used for Asian PPP comparisons; it is the so-called numeraire currency.)
As a result, the index of India’s per capita final consumption expenditure is 72, as against a regional average of 100. China is 87, Pakistan 102, Thailand 223 and Singapore 772.
That’s not surprising, given that Indian incomes are lower than that in these countries. But the micro data tell us a lot more. Take one issue: The relative importance of expenditure on consumer non-durables and durables. Indians consume less than the average Asian. But are they more likely to buy stuff such as soaps and shampoos or gadgets such as television sets and washing machines?
ADB offers index values. As against an overall index value of 72 for consumption expenditure, the index for non-durables is 84, while that of durables in as abysmal 29. In other words, India is closer to the regional average when it comes to spending on soaps and shampoos, but it is way behind when it comes to buying television sets and washing machines.
Curiously, the picture is reversed in China. Here, the index value for durables spending is far higher than that for non-durables. However, as countries climb the income ladder, the importance of durables seems to increase.
Local national income data does show that consumption baskets are changing in India. People are spending less on food and essentials than before; discretionary spending is rising. Marketers have devoured such data.
They would do well to pick a few morsels from the new ADB data as well.
Are Indian consumption patterns changing? Write to us at views@livemint.com
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First Published: Tue, Dec 11 2007. 11 24 PM IST