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Consumers vote for aspirational lifestyle

LiveMint logoLiveMint 19-05-2014 Suneera Tandon

New Delhi: Urban Indian households are spending a bigger share of their monthly budgets on personal grooming and commuting and less on food, reflecting a change that’s in sync with the spending priorities of consumers in developed markets, suggests a report by market researcher IMRB International.

The share of groceries in total household expenditure declined from 44% in 2008 to 40% in 2013, according to the study, Wallet Monitor, which gives a peek into the changing spending priorities of consumers over the years, as they attempt to strike a balance between rising costs and growing aspirations.

Spending on categories such as children’s education, commuting and personal care products has grown in proportion.

Consumers in developed countries typically spend a lot less on groceries as a total percentage of their household budget compared with non-food items, said Hemant Mehta, senior vice-president at IMRB.

“In India, the expenditure on groceries is still the largest, but its share of total spends has been coming down over the years. We are emulating the West,” he said.

Mehta said the trend was significant considering food inflation has been high in recent years.

As prices of vegetables and fruits soared, food inflation rose to 13% in the year ended 31 March from 10% in the previous fiscal year, according to an April report by credit assessor CARE Ratings. That means spending on food would have risen in absolute terms even as its share of household budgets shrank.

On average, the total household expenditure of consumers targeted by the IMRB study increased by 29% between 2010 and 2013. Incomes rose by 31% in the same period, according to the Wallet Monitor.

The research for Wallet Monitor was conducted at the end of 2013 across 196 cities in 18 states with a sample size of 30,000 households. Housewives in the age group of 25-55 belonging to different socio-economic categories—from the lower income groups to the affluent—were interviewed for the study.

In a growing economy, consumers’ aspirations rise in proportion to their incomes, said Devendra Chawla, chief executive at Future Group’s Food Bazaar chain.

“While consumers can spend only so much on food, spends on non-food items are bound to go up. Consumers spend more on other categories such as apparel, auto and education, among others,” Chawla said.

The survey, which also captured the housewife’s attitude towards career, shopping, financial management, family and children, found that children’s education was the top priority of Indian urban households. At 15% share of the wallet, it was the second biggest item of expenditure after groceries, more than doubling from 7% in 2008.

A comparison with the findings of the Wallet Monitor survey in 2008 shows that while the share of expenditure on food has been gradually declining, categories on which households are spending more, at a rate faster than consumer price inflation, include household care and personal care products, education and commuting.

“Child’s education and looking good is gaining importance. The lifestyle changes and other commitments are taking priority,” said Mehta of IMRB.

India’s consumption story has undergone a change over the past decade as the economy grew rapidly, said Abneesh Roy, associate director (institutional equities-research) at Edelweiss Securities Ltd.

The economy, Asia’s third largest, grew at a rapid annual clip of 9% in the five years to 2009, encouraging borrowing and spending by consumers. Growth was 8.6% in 2009-10, 8.9% in 2010-11, 6.7% in 2011-12 and was the lowest in a decade in the following year—4.5%.

In the year ended 31 March, the Indian economy is estimated to have grown just below 5%. The economic slowdown, accompanied by persistently high inflation, has caused households to cut discretionary spending and move to cheaper product variants.

Economists say the long-term growth story is still intact. And a concept called affordable indulgence was the major theme that emerged from the findings of Wallet Monitor, said Deepa Mathew, who conducted the survey.

“The consumers made it very clear that they are spending and even indulging themselves, but keeping it affordable,” Mathew said.

Consumers are experimenting with alternatives while the slowdown persists. Dining in restaurants has become more expensive, so the percentage of households that claimed to eat out at least once a week fell from 49% in 2010 to a third in 2013. “Urban India retaliates by bringing the eating-out experience to kitchens. There’s an increased consumption of ready-to-eat and convenience foods with incidence of consumption rising to 23% from 13% in 2010,” she said.

The share of expenditure on ready-to-eat and convenience foods, beverages and desserts, at 21% of the total amount spent on groceries, was at par with the share of spending on cereals and pulses. Interestingly, the Wallet Monitor survey shows that the urban Indian middle-class household has maintained its savings disposition. The average household saved 10% of its income in 2013, compared with 9% in 2010. The proportion of money saved hasn’t gone down since 2008. “The Indian consumer has got the best of both worlds—his spending pattern is more akin to his Western counterpart, but unlike him he continues with his habit of saving,” said Mehta of IMRB.

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