The top-end urban consumer

In India, it is not just the rural-urban divide that is striking in consumer markets, but also the diverse income segments within the urban centres. Income-wise segments can be created in many ways, the Indicus Urban Consumer Expenditure Spectrum takes five cuts – households earning less than Rs. 1.5 lakh per annum, between Rs. 1.5 lakh and Rs. 3 lakh, between Rs. 3 lakh and Rs. 5 lakh, between Rs. 5 lakh and Rs. 10 lakh and finally, households earning more than Rs. 10 lakh per annum. The top-end of urban consumers, that is the households earning more than Rs. ten lakhs per annum is a small segment, comprising around 5% of all urban households in India and around 6% of urban population. Yet despite being a small group, this segment contributes to a third of total urban consumer expenditure, making it one of the most sought after markets in India. This segment also constitutes close to half of the total urban household savings, with the highest disposable income and earning opportunities.

Also See | The highest earning segment (Graphic)

On an average, the three items that make up the largest share in the household expenses are travel and conveyance, consumer services and rent. Households in this segment can afford to own more vehicles, travel at resorts around the country or holiday abroad. The high income also makes for large expenses on consumer services, especially salaries of maids, drivers, tailoring and personal care services, telephone and other communication expenses and so on. Even within personal care services, these households would tend towards the high-end of the spectrum as they can well afford such luxuries. Apart from those who have always been in the upper income segments, the ‘old rich’ of urban India, there would be those households who have made it into this category in the last decade or so. For these ‘new-comers’, high end purchases are a sign of making it into the elite and all the latest in services, brands and gadgets are on the shopping list. The third category that makes it into the big-ticket expenditure is rent – upper income households would prefer to stay in neighbourhoods and apartment societies that are again on the top-end of urban real estate. In cities like Mumbai, renting is often still an easier alternative to owning a flat in a good locality, a reflection on the high real estate values. Paying top end rents however eat into household budgets.

The two western states of Maharashtra and Gujarat house the highest share of these rich households, with more than 10% of the urban rich Indians in this segment. Looking at the distribution region-wise, the largest share overall comes from the northern region, which also has the largest population; here it is the cities of Delhi, Chandigarh, Faridabad etc. which have a high share of rich households. While Mumbai and Delhi top the list of cities with the highest share of urban Indian rich households in this segment, apart from the other large metros cities like Ahmedabad, Surat, Vadodara, Rajkot, Nagpur, Ludhiana, Vishakhapatnam, Faridabad and Coimbatore rank amongst the top 20. There are of course differences across regions and cities. Households are on an average made up of four-five members - larger sized households in Jammu and Kashmir, Rajasthan and Bihar and smaller ones in Chandigarh, Kerala and Himachal Pradesh. In particular, Bikaner, Aizwal, Bhavnagar, Cuttack and Srinagar stand out at the top as cities with large sized households, while Salem, Kottayam, Solan and Shimla have the smallest household sizes in this segment.

The broad segment of households earning more than Rs. 10 lakhs per annum will have within it various categories of households whose expenditure and savings characteristics would vary depending on region, city, occupation and life-stage of the chief wage earner etc. While there would be even finer income cuts possible in this segment, by and large this broad segment is the one seen to be shopping in the malls, eating out often, experimenting with the new tastes and fashions and so on - this is the class all urban Indians ultimately aspire to belong to.