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Demystifying the middle class

Demystifying the middle class


In the five segments of urban households classified by household income, the middle class can be categorized as households earning 3-5 lakh per annum. This is a larger segment that the two higher-income segments detailed earlier in this series and comprises more than 10% of the urban Indian households and population. These households contribute around 13% of the total urban expenditure and savings, much lower than the richer segments.

The shift down in income is also reflected in the changing composition of the consumption basket—these households spend a larger share on food than the richer segments. The top priority—basic food—takes up close to 10% of total expenses on an average, with vegetables just a little lower. These two are followed by milk and milk products in the order of importance in the food basket. Obviously, rising prices of these commodities hurt this income group much more than the richer urban households.

Also see | The Middle Class (PDF)

Interestingly, the share of paan, tobacco and intoxicants begins to inch up in this segment as consumption increases relatively. The share of miscellaneous services comes down as other more basic needs have to be fulfilled. So, we find a higher share for packaged consumer goods in this income segment’s consumption compared with the higher income groups.

The top components of household consumption remain travel and conveyance, consumer services and rent. But all of them have significantly lower shares than in the richer segments, as food begins to dominate budgets. These three also have a much lower expense per household on an average compared with the higher segments. There are some regional differences though—when it comes to travel and conveyance, the western states, on an average, spend more, and the southern states spend marginally more per household on consumer services. The southern states also spend significantly more on rent on an average in this segment.

Expenditure in this segment is relatively more evenly spread out across the country; Mumbai, Delhi and Thane make up the three main centres followed by Ahmedabad and Bangalore. There are of course differences in the way households spend across cities. For instance, smaller cities such as Jabalpur, Nagpur, Bhopal, Ernakulam, Agra, Indore and Udaipur spend more on travel and conveyance, while Allahabad, Aizawl, Jabalpur, Chennai, Mumbai and Kolkata have higher shares of spend on consumer services than other cities.

When it comes to the third largest component of the household budget, rent, households spend relatively more in Tiruchirappalli, Kancheepuram, Bangalore, Chennai, Thiruvallur and Hyderabad. Basic food takes up a higher share of the total budget in Bilaspur, Durg and Cuttack, while households in Mangalore and Chandigarh spend a higher share on processed food. Education takes up more than 10% of the expenses in Adilabad, Kurnool, Chandigarh, Kanpur and Dehradun and medical expenses are relatively higher in households in Medinipur, Hugli, Kollam, Sangrur and Kolhapur.

Looking at average household expenditure, cities again exhibit different consumption patterns within this group. Per-household expenses on medicare are lowest in Bangalore and Delhi, among the 10 main cities, and highest in Kolkata. Medical expenses in Delhi are, on average, half of that spent in Mumbai, while Kolkata households spend twice that of households in Chennai spend. Expenses on education are lowest in Surat and Ahmedabad, highest again in Kolkata. Bangalore and Chennai have much higher rent expenses per household, and Ahmedabad spends the lowest.

Within this income segment, there would be various types of households and the different education and occupational profiles of the chief wage earner as well as the different life stages and family structures would dictate the actual levels of income, savings and the type of consumption. Finer segmentation would, therefore, go a long way in understanding the nuances of the Indian urban consumer.

Indicus Analytics Research graphic by Yogesh Kumar/Mint

This fortnightly feature is brought to you by research firm Indicus Analytics Pvt. Ltd

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Published: 31 Jul 2011, 09:19 PM IST
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