Changing Consumption Basket

Occupational changes and the expansion of media have made a significant change to the way the consumer lives and spends his oney. The increase in the contribution made by services is also a reflection of the new opportunities that are available to the youth in terms of job opportunities. The Indian population is today characterized by youth, who also have the spending power. There is also an easier acceptance of luxury and an increased willingness to experiment with the mainstream fashion, resulting in an increased willingness towards disposability and causing out, from apparels to cars to mobile phones to consumer durables. Occupational changes and the expansion of media have made a significant change to the way the consumer lives and spends his money. The changes in income brought about changes in the aspirations and the aspirations and the spending patterns of the consumers.

If one looks at the private final consumption expenditures for the period 1999 and 2004 -05 one finds a change in the amount spent by customers on various products. The same is indicated below:

1999 2004-05

Food 45.63 35.37

Beverages 0.78 1.58

Hotels & restaurants 1.81 2.00

Clothing & footwear 5.24 5.17

Furniture furnishings etc 3.23 3.43

Medical care and health care 4.33 6.21

Education 1.88 2.23

If one looks at the private final consumption expenditures for the period 1999-2000 to 2004-5, one finds a change in the amount spent by customers on various products.

Discretionary spending has already risen from 35 per cent of average household consumption in 1985 to 52 per cent in 2005. Changes in consumption are visible in other sectors as well. One of the fastest growing sectors in the country, telecommunications has been zooming up the growth curve at a feverish pace in the past few years. The year 2007 saw India achieve the distinction of having the world’s lowest call rates (2-3) of having the world’s lowest call rates (2-3) US cents) the fastest growth in the number of subscribers (15.31 million in 4 months), the fastest sale of a million mobile phones (1 week) the world’s cheapest mobile handset (US $ 17.2) and the world’s most affordable color phone (U(S$ 27.42). Further, the Indian telecommunication firms added 5.19 million new subscribers in April 2007, taking the total user base above 212.02 million.

Similarly, India’s fast moving consumer goods (FMCH) sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. Set to treble from US$ 11.6 billion in 2003003 to US$ 33.4 billion in 2015, the top FMCG companies clocked sales and profit growth rates of 23 per cent and 12 per cent respectively for the quarter ended September 2006, compared with the corresponding period for the previous year.

The Indian auto industry, worth US$ 34 billion in 2006, has grown at a CAGR of 14 per cent over the last five years, with total sales of vehicles reaching around 9 million vehicles in 2005-06. Presently, India is the second largest two wheeler market in the world, the fourth largest commercial vehicle market in the world, the 11th largest passenger car market in the world, and is expected to be the seventh largest by 2016.

The historical pattern in India and in most developing economies shows that as income rise, consumers tend to spend proportionality less on basic necessities and more on discretionary items. A similar change is underway in India. As millions of deprived households move into the aspirer segment, they will begin to be able to afford products and services beyond their immediate needs for food and clothing. Marketers will have to take into consideration the significant changes that are occurring in the market place in terms of spending, before evolving strategies for the market.