Consumer basket


Geographic Spread

The population of India in 2001 census stood at 1,027million with 742 million people living in rural areas and 285 million in urban areas. In terms of percentage, 73% of the population is in rural areas and 27% in urban areas. There has been an increase of 2.1% in the proportion of urban population during the decade 1991-2001.

Within the urban segment, there is a great concentration of consumers in the metros. The six metros, Kolkata, Mumbai, Delhi, Chennai, Bangalore and Hyderabad, are large by global standards. The second tier of about 7 to 8 cities also has high consumer concentration. Large cities are concentrated in the South and West zones. Only eight of the top ’23 million-plus’ cities are located in the North and East zones. There are about 3,750 towns in India. Sixty-four percent of the urban population lives in 309 such towns. The rest are scattered across the remaining 3,400 odd town. The rural consumers are spread over the 500,000 villages.

Now we draw the readers’ attention to the consumption pattern of the Indian consumer. Studies by the Center for Monitoring Indian Economy (CMIE) reveal that structural shifts have been taking place in the consumption pattern of Indian consumers in recent years and the shifts have gained greater momentum since the launch of economic reforms.

Favorable Shift in Consumption in Post-Liberalization Years:

According to CMIE, the consumption pattern of Indian households has undergone a significant change in the post-liberalization years.

Given our low per capita consumption base, food and beverages continue to account for the larger part of the households’ final consumption expenditure. But what is significant is that its share has come down sharply in the late 1990s. The share of food in total private final consumption expenditure has declined from 50.73% in 1993-94 to 42.68% in 2003-04

The change in consumption pattern, of course, has been a continuous process for the last three decades and the share of food in total final consumption expenditure has been declining steadily. It accounted for 54% of the total expenditure in the seventies about 51% in the eighties and by 2003-04 it had come down to less than 43%. Conventionally, the share of food in the household’s consumption basket always declines with the rise in income or standard of living.

The share of transport and communication in aggregate private final consumption has increased sharply from 11.26% in 1993-94 to 17.51% in 2003-04. It means that the Indian households have preferred to spend a major part of their new earnings on transport and communications, rather than on consumer goods and durables, as is generally expected.

Another significant change of the nineties has been the increasing consciousness about medical care and health services. Its share in aggregate consumption has increased from 3.38 to 4.25% in 1998-99. The share of consumption towards furniture and household appliances increased from 3.05% in 1993-94 to 3.25% in 1998-99.

In recent times, Indian families are also spending more and more on their children education. In the ten years between 1993-94 and 2003-04, the private final consumption expenditure on education has increased by over 55% against a 31% increase in total private consumption expenditure during the same period prior to 1993.

Changes in Lifestyle and Buying Habits:

Significant changes in lifestyles and buying habits of Indian consumers currently include Convenience foods and ready-to-eat foods, modern gadgets like vacuum cleaners and cooking ranges which have gained entry into households. With the nuclear family, there is also a shift in the woman’s attitude to cooking and the meals she serves. Teenagers are also becoming influencers of change in their family’s meal patterns.

The average Indian is now spending his money more liberally than ever before. Yesterday’s luxuries are fast becoming today’s necessities. Data from the NCAER National Survey of household expenditure on consumer durables and consumer softs pointedly suggests that conventional notions of what are luxury goods and what is an essential commodity are fast changing. The change has been stimulated to an extent by exposure to media, especially TV. The media gives him exposure to the lifestyles of the well-to-do, as well as the modern products that are used by them.