Warc Blog

Indian middle class cuts spending

21 June 2013
NEW DELHI: Two-thirds of India's middle income consumers are cutting back on the amount they spend on foreign brands as household budgets are hit by inflation and a depreciating rupee, a new survey has said. 

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) surveyed around 200 employees in each of a number of major cities, and found that monthly bills had risen 15-20% among middle income earners.

As a consequence of higher petrol and food prices, 65% of respondents indicated they would decrease their spending on foreign brands.

Some 49% were cutting back spending on home appliances, while 44% were doing the same for home and personal electronics.

The Indian car industry, already struggling as sales have fallen for seven months in a row, will not take any confidence from the revelation that 32% of this income group were reducing spending on automobiles.

Outside the home, 78% said they had cut spending in international food chains and a similar proportion were cutting back on foreign vacations, which were estimated to be 15-20% more expensive because of the falling value of the rupee.

ASSOCHAM noted that more Indian tourists were travelling to non-dollar destinations or alternatively sticking to domestic trips.

Overseas Indian students are also being hit, with many facing an effective 15% increase in fees thanks to the weakening rupee.

A particularly local factor impacting household income was the effect of the depreciation of the rupee on gold sales.

"Despite the effort by the government to control gold imports, the Indian middle income group is bound by societal traditions and continues to buy gold even at higher prices which have increased the prices of gold due to rupee weakening", said Mr. D S Rawat, Secretary General ASSOCHAM.

Data sourced from ASSOCHAM, Financial Times; additional content by Warc staff

 
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