Middle, lower middle classes bearthe brunt as food prices triple

Bangalore third costliest city, employers face higher pay hike demands

August 23, 2012 08:35 am | Updated 08:35 am IST - BANGALORE:

Bangalore is the third among the costliest metro in the country even as a majority of households’ actual spending power on non-food items fell by over 65 per cent in the last three months with the steep rise in the prices of fruits, vegetables and essential commodities.

While everyone has been feeling the pinch of price rise in the recent months, it was officially brought on record by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), which did a countrywide survey under the aegis of ASSOCHAM Social Development Foundation.

Releasing the results to the media, it said that over 88 per cent of middle and lower income group families find it difficult to manage the household budget.

The uncertainty of the monsoon has only tightened their belt further.

Monsoon jitters

The survey, “Rising prices widen gap between the rich and the poor”, in which 5,000 employed individuals participated, said that jitters over a bad monsoon have jacked up vegetable and fruit prices by 300 per cent, from the farm to the dining table.

The survey was conducted in June and July in Bangalore, Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, Chandigarh and Dehra Dun. Delhi was ranked the costliest city as far as the price rise was concerned, followed by Mumbai, Bangalore, Ahmedabad and Kolkata.

ASSOCHAM Secretary General D.S. Rawat said that the amount available for food and discretionary spending for an average middle income family earning Rs. 35,000 a month, is not more than Rs. 15,000.

The family spends about Rs. 6,000 to Rs. 8,000 for housing (loan EMI/rent), another Rs. 5,000 on vehicle loan, Rs. 7,000 to Rs. 10,000 on children’s education and FMCGs, and Rs. 3,000-Rs. 5,000 on insurance premiums.

In a squeeze

While 72 per cent of working parents said that it was very difficult to afford two children in this scenario, even two-income families said that they struggled to cope. Over 82 per cent respondents spent a bulk of their income on essential commodities, fuel, home loan, education and insurance premiums safeguarding their children’s future, followed by lifestyle goods.

The survey also revealed that high inflation has been putting pressure on companies not just in terms of high input costs but also demands for higher salary hikes.

“The salary hike last year was not in sync with the cost of living, which has gone up by 40-50 per cent. Right from vegetables to petrol prices, everything has gone up so much and [our] savings [have fallen by 50 per cent],”said 72 per cent of the respondents.

Upper classes

Mr. Rawat said: “While consumption attitudes may be severely affected in middle and lower middle class families, life continues as usual for high income groups. They seem to have been least affected as there is nearly no change in their spending habits.”

Despite record food production of 252 million tonnes this year, prices remain high and food inflation hovers around 10.5 per cent. The survey mentioned that the food prices for the rural population rose by 9.87 per cent and 10.18 per cent for urban population.

Edible oil

One of the sharpest rises was for edible oil, mainly on account of depreciation in the exchange rate, as India is a net importer of the commodity. Many households have been forced to increase their food expenditure at the expense of non-food expenditure, Mr. Rawat said.

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