This is the introductory chapter of the forthcoming book by Laveesh Bhandari of Indicus Analytics.
This chapter provides an overview into the state of the Indian economy, its growth, expenditures by households, income distribution as well as issues of ineuqlity. This is followed by an overview of some of the broad areas covered in this volume.
The idea is to provide to the student and practitioner alike, a basic overview of the key demographic and macro-economic variables that affect consumer decisions in the short and long term. The discussion that follows then seeks to tie-in the key aspects that determine and reflect consumer behaviour in India.
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 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.
Even though India’s total household income and saving can be known from National Accounts Statistics, it does not provide the same information across economic groups. Therefore, the pattern of distribution of total income and saving across households with different economic status is not known. Thus, “What share of India’s total personal disposable income comes from the richest 10% of the households?” or “Do the poorest 10% of the households save anything at all?” – these questions remain unanswered from government data. Moreover, per household income or savings, for households with different economic status is also not known. This typically requires using data from household surveys. The problem with using survey data to estimate aggregates on a all India basis is that surveys – no matter how well they have been conducted – tend to under-report incomes and expenditures. As a consequence, we require various types of quantiatiative excercises to correct for this under-reporting.