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Kolkata has highest purchasing power

Kolkata has highest purchasing power
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First Published: Fri, Jun 19 2009. 12 30 AM IST

Updated: Fri, Jun 19 2009. 09 23 AM IST
Kolkata: An ongoing study at Indian Statistical Institute, or ISI, has revealed that Kolkata has the highest per capita purchasing power among all metros. The reason: smaller population and low poverty compared with other metros.
Household expenditure in Kolkata was found to be Rs1,822 per person per month on average, which is much higher than other metros such as Delhi, Mumbai, Chennai and Bangalore. Chennai comes second, with a monthly per capita household expenditure of Rs1,570. Hyderabad comes third, followed by Mumbai, Bangalore and New Delhi.
Data for the study was collected in 2004-05 by the National Sample Survey Organisation, or NSSO, under its so- called large sample survey of household consumer expenditure, which is conducted every five years. Under the survey, NSSO collects data on consumption of almost all household goods and services. For the first time, the data is being analysed separately for all rural and urban districts.
Also See Consumption Pattern (Graphics)
The data collected by NSSO was adjusted for regional price variations and differences in cost of living in each city, according to Buddhadeb Ghosh, associate scientist at ISI’s economic research unit, who is conducting the study.
“The formula that we used to adjust the data was discussed and agreed upon by statisticians of ISI,” he added.
Many people that Mint spoke to were initially sceptical about the study.
For instance, Jatinder S. Dhindsa, regional manager of Maruti Suzuki India Ltd in Kolkata, who said “In Delhi, Maruti sells around 12,000 cars a month, whereas in Kolkata, we sell 1,600. Kolkata is yet a very important market for our company, but it’s very surprising that purchasing power in Kolkata is higher than in Delhi or Mumbai.”
The high per capita purchasing power in Kolkata is a function of small population and low poverty “in the area that was considered as Kolkata under the study”, said Ghosh. “We only considered the area under Kolkata Municipal Corporation (KMC), where the total population is only 4.1 million. Also, poverty is very low—only 2.28%.”
To be sure, Kolkata is much bigger than the 141 municipal wards of KMC. Greater Kolkata and neighbouring Howrah—the town across the Hooghly river—combined, the city has a population of 15-16 million.
The study indicates that the area under KMC, which is roughly 185 sq. km, has largely remained the preserve of families that have been living there for generations, according to Ghosh. “However, even if Howrah and the extensions of Kolkata in the north, south and the east, were considered, the figure (for per capita purchasing power) wouldn’t be significantly lower though it wouldn’t be as high as in the area under Kolkata Corporation only,” he added.
For retail chains, Kolkata has always offered “a very strong market”, according to Sanjiv Goenka, vice chairman of RPG Enterprises, which runs Spencer’s superstores. “People here are willing to spend and we have seen reflections of Kolkata’s high consumer spending in our sales—sales per sq. ft (of store space) in Kolkata is among the highest in the country,” he said.
Venugopal Dhoot, chairman of Videocon Industries Ltd agrees with Goenka about Kolkata’s potentials.
“Kolkata is one of the best markets in the country for high end consumer durables such as plasma televisions.
Demand is also high among lower middle class people, who would typically buy, say, small television sets costing Rs3,000-5,000 (each),” said Dhoot. “However, we have noticed that in the middle-income segment, consumer spending (in Kolkata) is not that great... this is probably because the middle class in Kolkata is conservative and prefers to save more than spend,” he added.
“I wouldn’t comment on a study that hasn’t been concluded,” said Asim Dasgupta, West Bengal’s finance minister. “But yes, we know from NSSO figures that per capita consumption expenditure in Kolkata is significantly higher than the national average. In Kolkata, consumption of durables and the propensity to save are very high. In fact, consumption of durables such as refrigerator, fans and other utilities has gone up so much that we have had to revise our estimates for power consumption.”
Many companies are beginning to discover the hidden wealth of Kolkata. For instance, OSL Prestige Pvt. Ltd—the sole distributor of BMW cars in Kolkata, which in the past year has done a much better business than it had initially expected.
“The response that we received was phenomenal. We had expected to sell 50 cars between May and December last year, but we sold 70,” said Charchit Mishra, managing director of OSL Prestige.
A sales executive at the store said Kolkata has always had a lot of wealthy people, but they were shy of spending whereas in cities such as Delhi and Mumbai, spending on luxury goods, or so called conspicuous consumption, has traditionally been high.
“It’s only now that a lot of people in Kolkata, particularly the younger generation, are beginning to spend,” added this executive, who did not wish to be identified because he isn’t authorized to speak to the media.
Real estate developers tasted Kolkata’s purchasing power during the recent downturn in the economy. Whereas real estate prices in other metros such as Delhi and Mumbai crashed last year, they declined by up to 14% only in Kolkata.
“In Kolkata, there’s always been takers for properties that were priced currently,” said Abhijit Das, joint managing director of Lemongrass Advisors Pvt. Ltd, a Kolkata-based real estate advisory and broking firm, citing the example of Eden Court—a residential cum commercial project being developed at Rajarhat on the eastern fringes of Kolkata by Tata Housing Development Co. Ltd.
“They managed to sell some 200 flats in one month because the apartments were priced at Rs30-40 lakh,” he added.
Graphics by Sandeep Bhatnagar / Mint
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First Published: Fri, Jun 19 2009. 12 30 AM IST