Indicus Analytics, An Economics Research Firm
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Consumer Market Trends
for India – Incomes and
Savings
Amit Sinha
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High growth has contributed to greater incomes for Indian
households, which in turn has enabled Indian households
to both save and spend more.
We have in the past few years observed that household
sector savings have in fact grown by far more than any of
the other macro-indicators. Greater incomes do imply
greater expenditures in the short term, but greater
savings ensure long term growth of the economy,
employment opportunities, and household incomes.
Among the key cities of India, our research shows that the
2nd rung of cities are the biggest savers – the beta cities
(11th to 30th in terms of market size) save as much as
32% of their income, whereas the top 10 cities have a
savings rate of under 22%.
During the post liberalization decade, from 1993-94 to
2003-04 the average annualized growth rate of India’s
Gross Domestic Product was a little above 6% and has
arguably since crossed the 7% mark on a long term basis.
This has brought about a considerable increase in India’s
personal disposable income. As a result, both saving and
consumption expenditure in the household sector has had

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considerable growth. During 2003-04, India’s total
personal disposable income was Rs. 23,585 billion and
24.6% of this income was directed into savings by the
household sector. By 2008-09, our estimates show that
India’s total annual personal disposable income has grown
to Rs 36,059 billion (about 52% being urban) and the
annual savings have grown to Rs 9,239 billion, at present.
High growth has contributed to greater incomes for Indian
households, which in turn has enabled Indian households
to both save and spend more. We have in the past few
years observed that household sector savings have in fact
grown by far more than any of the other macro-
indicators. This is of course a desirable outcome. Greater
incomes do imply greater expenditures in the short term,
but greater savings (if translated into good quality
investments) ensure long term growth of the economy,
employment opportunities, and household incomes.
Income Distribution
A study by Debroy and Bhandari (2007) supports the
argument that inequality is in fact increasing in India. The
most used measure for inequality is the Gini coefficient,
the higher the value of the Gini, the greater the inequality
levels. The study looked at rural and urban inequality
levels state-wise since 1983. The broad insight is that
across almost all the states, inequality levels have
increased.
This of course has many ramifications for consumer
markets. Greater inequality levels reflect that the higher
economic segments are rising relatively faster than the
lower ones.
Increasing inequality does not mean that poverty is rising,
there is incontrovertible evidence that poverty levels in
India have been falling in almost all the states. Currently,
among the larger states, J&K, Punjab and Himachal have

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the lowest poverty levels. Among the smaller states,
Meghalaya, Manipur and Mizoram follwed by Arunachal
tend to have poverty levels in the single digits. Orissa,
Bihar, UP and MP have amongst the highest poverty levels
amongst the larger states. Note that these states also
tend to have low inequality levels, indicating that overall
these states are poor with high levels of deprivation.
A comparison of the State level GDP growth and poverty
reduction shows that indeed, those states that have had
higher levels of growth have been able to reduce poverty
levels much more than those with lower GDP growth. This
is an important learning for policy and marketers alike.
Indeed, greater growth is a very good predictor of the rise
in consumer buying power.
The key cities
The top 112 cities account for about 200 million Indians
which is more than 60% of urban India. These cities
constitute a market of consumers whose combined annual
incomes are Rs 13,261 billion. Their combined savings are
Rs 3,516 billion which is about 26.5% of income.
The large cities have a significantly lower savings rate.
The top 10 cities have a savings rate of under 22%,
whereas the gamma and delta cities (82 in number) have
savings rate around 29%. Clearly the EMI culture hasn’t
percolated down to too many cities in India. An
interesting piece of statistics is that the 2nd rung of cities
are the biggest savers – the beta cities save as much as
32% of their income and reinforce the old adage that
savings and investment are the route to growth.
The Southerners are by far the largest savers with a
savings rate of over 31%. The West (it includes Rajasthan
and MP) has the lowest savings rate of just 23%. Within
West, Gujarat is a high saver with 27% savings rate

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whereas Maharashtra saves only 18%. Madhya Pradesh is
a very high saver with savings rate of 38%.
Contrary to popular wisdom, the North is not exactly
spendthrift. They are second only to the South in savings
rate.
Mumbai has the lowest savings rate. Delhi, Kolkata and
Mumbai’s neighbours are also low savers. Bangalore and
Hyderabad are high savers, much higher than average.
The fastest growing cities in terms of market size, during
the last two years are Silvassa, Gandhinagar, Bokaro,
Surat, Thiruvallur, Agartala, Chandigarh, Thanjavur,
Kohima, Noida. Our estimates show that these cities grew
at between 15-23% per annum during the period 2006 to
2008. The slowest growing cities (from the top 112) also
grew at 7-8% per annum during the same period.

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