Given that rural India today contributes 56 per cent to total national income, 57 per cent to total expenditure and 33 per cent to surplus income, marketers are more than justified in reaching out to rural households, writes Rajesh Shukla in ‘How India Earns, Spends and Saves: Unmasking the real India’ ( >www.sagepublications.com ).
The book cites NCAER (National Council for Applied Economics Research) data on how product ownership is on the rise, in rural households. Such as, that nearly 74 per cent of all black-and-white televisions, 46 per cent of colour televisions, 29 per cent of refrigerators, 54 per cent of two-wheelers, and 44 per cent of telephone instruments have been purchased by these households.
While there is a marked difference between rural and urban areas in the ownership of pressure cookers (38 per cent vs 80 per cent) and fans (48 per cent vs 89 per cent), the latter because of poor availability of electricity in villages, the difference is not that stark in the case of watches (76 per cent vs 88 per cent), and bicycles (69 per cent vs 53 per cent).
Routine vs non-routine expenditure
An average Indian household spends about 60 per cent of its income on routine expenditure, with food accounting for about half of routine expenditure. Other items in the ‘routine’ category are housing, health, transport, education, clothing, and durables.
The non-routine or unusual expenditure adds up to about 14 per cent of total household income in rural areas, as compared to about 12 per cent for the country as a whole.
Ceremonies and rituals gobble up almost half of the unusual expenditure, and a quarter goes to medical emergencies.
Rural households spend more on ceremonies (55 per cent) than urban ones (45 per cent), while urban families have a much higher spend on education (13 per cent) than their rural counterparts (4.7 per cent), informs Shukla.
Age and education of chief earner
In a chapter on ‘earning pattern’ the author discusses the correlation between age of chief earner and level of earning. Though India’s demographic profile is getting younger, it is the higher age groups that earn more, one learns. “Average household incomes, at the all-India level, rise from Rs. 47,745 per annum in the case of households where the chief earner is below 25 years old, to Rs. 55,830 in the 26-35 years age group, and maintaining an upward trend reaches the level of Rs 80,964 per annum in households where the chief earner is above 66 years old.”
Another factor influencing incomes is education coupled with opportunity. Which explains why the levels of earning vary significantly with the level of education as well as location, that is, rural versus urban, the author observes. “For instance, at the aggregate level, annual earnings range from Rs 37,062 for illiterate chief earner households to Rs. 1,34,539 for graduate households.”
Woefully, about 42 million households in the country, constituting 21 per cent, have as their chief earners one with no formal education or an illiterate. “There are more such households in rural areas (26 per cent) compared to urban areas (8 per cent). The largest chunk of Indian households (74.8 million, 36.4 per cent) belongs to the category where the chief earner is a matriculate (Class 10).”
Financial vulnerability
Most consumers in India do not work in the organised sector and their wellbeing cannot be discerned from salary and wages data maintained by corporate houses, notes Rama Bijapurkar in her foreword to the book. Only 37 per cent of urban and 11 per cent of rural Indian households have a chief wage earner earning a regular salary/ wage; and only in the top 20 cities is the salaried percentage close to half, she adds.
“In reality, most consumers are financially vulnerable. A quarter of them have loans outstanding; in case of a major drop in income, there is lack of sufficient savings to sustain them for even a year. What makes them spend is a financial (mis)optimism that something, somehow would work out.”
Yet, as Bijapurkar reminds, these people collectively account for the fourth largest economy in the world in purchasing power parity terms, and their consumption is a significant driver of India’s economic growth.
Shifts in patterns
A section titled ‘understanding income distribution puzzle’ concedes that the fast- changing consumerism in India over the last two decades has made life ever more perplexing for marketers, analysts and policymakers who have been trying to understand the changing dynamics of the Indian marketplace. “For instance, two decades ago, ownership patterns of consumer durables by the highest socio-economic group (SEC-A) consumer and the lowest group (SEC-C) consumer would have been succinctly distinct.
Not so anymore,” writes Shukla. He also finds that the efficacy of income distribution based on arbitrary absolute household income cut-offs and the use of qualifying labels like ‘low-medium-high’ is alone no longer effective over a long period of time, when the economy is rapidly in transition. “To illustrate, in NCAER’s income distribution of 1985-86, those that were classified as ‘low income group’ have declined significantly as of 2007-08 and expected to cease in the near future…”
Recommended reference material that avid marketers will find to be of value.
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