Indian consumption patterns shift

13 February 2013

NEW DELHI: A rise in disposable incomes has led to a change in Indian consumer spending habits, latest GDP figures show.

Data for 2011-12 indicates that the percentage of income being spent on clothing and footwear declined to 6.4% compared to 7.1% a year earlier.

Similarly, the share taken by food was down to 29%, whereas eight years ago it stood at 34%.

By contrast, the proportion of expenditure allocated to hotels and restaurants increased sharply, by a reported 20.3%.

"In 2011-12, consumers cut back on things that didn't matter on a daily basis," Rima Gupta, executive director at TNS Consult, the market research firm, told The Economic Times. "Hence, segments such as apparel, footwear and other lifestyle products saw growth slowing down."

Madan Sabnavis, chief economist with Care Ratings, suggested that it was the lower income groups who had cut down on clothing expenditure, while higher income groups, who have been relatively unaffected by inflation and economic slowdown, continued to spend heavily on eating out, travel and communications.

His comments were given weight by a recent study from Credit Suisse which noted "contrasting perceptions of fortunes across the income scale".

The same study showed an increase in demand by Indian consumers for unbranded products during 2012 as they sought to save money. This was particularly evident in clothing and footwear, with brands such as Bata and Jockey seeing declining demand.

Elsewhere in the Indian economy, the auto industry is expecting its worst performance in ten years, as car sales fell in January for the third month in a row, down 12.5%.

Data sourced from The Economic Times/Business Standard/Credit Suisse; additional content by Warc staff