These Numbers Show That Indian Urban Consumers May Be Poor Compared To Their Peers In China

03/06/2016 10:19 AM IST | Updated 15/07/2016 8:27 AM IST
Yamini Chao via Getty Images
Salesgirl showing dress to woman in supermarket

An urban middle class, the kind that fuelled Chinese prosperity in the past decade, barely exists in India, according to a study by the banking firm, Goldman Sachs.

The Indian "urban middle" class population – people earning an average annual income of US$11,000 (Rs 7.4 lakh) – is 27 million or just two percent of India’s population. This group largely comprises government employees, small business owners, and working professionals in high-tech jobs or post graduate degrees.

By contrast, the Chinese middle class comprises 150 million people, who along with its super wealthy, powered the first wave of China’s consumer story between 2002 and 2012.

According to the study, titled ‘The Asian Consumer: India Consumer Close-Up’, the Indian urban consumer class (as distinct from the urban middle class) is relatively poor, earning an average of $3,200 (Rs 2.15 lakh) annually, and falls into an “urban mass” category, making up a quarter of the total workforce. The report says that it will be this 130 million-strong “urban mass” -- which includes both educated masses in non-labour intensive jobs, blue collar workers, and migrant labourers – that will propel the country's consumer growth story.

Some highlights from the report:

1) In 2015, Indian urban consumers spent most of their money on eating better and packaged food (32.8 percent), followed by expenditure on a better home (21.6 per cent), and mobile connectivity (16.4 per cent) including ground transport, cars, and phones. Within the eating better category, Indians ate the most fresh food compared to peers in China, Korea, Japan and even the US.

2) India spends just eight per cent of personal consumption expenditure on having fun. By comparison, Chinese consumers spend 9 per cent on this category that includes holidays, sports, food services and other recreational activities. The study cited affordability – rather than culture – as the main challenge.

3) India’s personal consumption expenditure per capita is just $1,012 (Rs 68,131), which is one-third of China's.

4) Unlike China where consumers showed an obsession with branded products for reasons such as making aspirational purchases, acquiring status symbols and wanting to have all things Western, Indian consumers showed a preference for value for money, and are far less likely to pay big premiums for brand equity.

5) 'Eating out' by urban Indian consumers is expected to increase – the US$19 billion Quick Service Restaurants, or the fast food segment, will be one of the best growth stories for India, thanks to India’s youthful population and continuing urbanization.

6) Housing demand far outstrips supply in India: only three million residential units were sold in the top 15 cities from 2008 to 2015 as opposed to an estimated 46 million people who graduated from college over the same period. The study cites housing affordability as a challenge and warns that single-income urban mass households will struggle to find a mortgage.

7) With the exception of weddings where Indian consumers typically spend lavishly, spending on luxury items will remain limited.

Overall, as of December 2015, India had 440 million millennials, and 390 million Gen-Z teens and children, numbers that highlight the critical importance of job creation for the country’s youth.

Like Us On Facebook |
Follow Us On Twitter |
Contact HuffPost India

Also see on HuffPost:

7 Tips for Managing Work Stress When You Get Home

More On This Topic