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Business News/ Companies / The second rung of affluence
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The second rung of affluence

The second rung of affluence

Photo Pradeep Gaur/MintPremium

Photo Pradeep Gaur/Mint

According to the five income-segment classification of the Indicus urban consumer expenditure spectrum, in the second rung of affluence, or the upper middle class, among urban Indian households are those who earn between 5 lakh and 10 lakh annually. The population in these households comprise a little less than 10% of all urban households, but contribute around one-fifth of the total urban savings.

Photo Pradeep Gaur/Mint

Also See | The Upper Middle Class (PDF)

Food comprises a little less than one-quarter of the household budget; not just the basics, but vegetables, milk and milk products form important parts of the food basket. Households in this segment also like to spend on processed food, experimenting with new items in the market as families look for new tastes, variety and convenience. The largest component of the budget is, of course, miscellaneous goods and services, of which the prime components are travel and conveyance, consumer services and rent, each making up more than 12% of the total budget.

Travel is an important item to budget for in urban households, especially those who can afford to travel by air. Holiday destinations abroad, especially in South-East Asia, and within India, have to be factored in for families moving up the ladder. Packaged consumer goods expenses comprise around 10% of the budget, while clothing and footwear make up a little less than 5% of the budget.

While states in the north comprise the largest share of population in this segment, essentially because of the sheer number of people, it is the western states that come in second, with the affluent in Maharashtra and Gujarat tipping the scales. The eastern region lags behind with low incomes and smaller share in total population.

Per household expenditure on the three main components of the budget varies across regions. On average, the north and the west have the highest per household expenses on travel and conveyance, the south is at the top when it comes to rent, and the east spends the most per household on consumer services. Once again, the diversity across regions in socio-economic profiles stands out in the data on expenditure patterns in this segment.

Delhi and Mumbai, together, make up close to 20% of the expenditure in this segment, with Thane, Bangalore and Ahmedabad completing the list of top five main centres. While the other metros follow, cities such as Surat, Vadodara, Coimbatore, Nagpur, Ludhiana, Rajkot and Lucknow also make it into the top 20.

Yet, there are again differences among these top cities. For instance, Mumbai spends more in aggregate on healthcare and education in this segment than Delhi, while Delhi outstrips Mumbai when it comes to travel and conveyance, milk and milk products. Taking another example, Ahmedabad, which has significantly lower population than Mumbai or Delhi in this segment, has almost similar total spends on basic food.

When it comes to healthcare, Bangalore and Hyderabad have much lower total spends than other cities in this category. On the other hand, Chennai and Bangalore spend a relatively much higher proportion on rent compared with cities such as Pune and Ahmedabad. It is differences like these that highlight the need for much finer segmentation, both within the segment and across cities, to tap urban Indian consumer profiles effectively.

Graphic by Yogesh Kumar/Mint

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Published: 17 Jul 2011, 10:01 PM IST
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