Middle class accounts for bulk of urban spending

What we find is that it is the middle bulge of expenditure by the middle class that accounts for the bulk of India’s urban consumer expenditure

The bottom of the pyramid is the buzzword that has captured the hearts and minds of academics and marketeers alike. Though large in numbers, the consumer spend by this segment is quite low.What we find is that it is the middle bulge of expenditure by the middle class that accounts for the bulk of India’s urban consumer expenditure. About 61% of total urban income comes from households that can be classified as middle class—earning be-tween Rs75,000 and Rs 5 lakh a year.This segment comprises the lower middle-class earning between Rs75,000 and Rs1.5 lakh a year (10% of total urban income is from this category), the middle-class earning between Rs1.5 lakh and Rs2 lakh a year (29% of income share) and the upper middle-class earning between Rs3 lakh and Rs5 lakh a year (22 % of urban income).By market size, the largest urban middle-class markets are in the main cities, with Delhi in first place, followed by Mumbai, Ahmedabad, Bangalore, Chennai, Kolkata and Pune. There are also other attractive markets that are in the second rung and whose middle class spends between Rs5,000 crore and Rs10,000 crore a year.

Source: Market Skyline of India

Demand Curve

This group of urban areas includes those that benefit from proximity to the metros—Rangareddy to Hyderabad and Tiruvallur to Chennai. West Bengal has three districts in this list, Burdwan, Howrah and Hoogly, whose large population is a significant factor in expenditures by the middle class.There are other cities as well that are more than just suburbs of larger cities. Jaipur is not only the capital of Rajasthan, it is also the gateway to a large but thinly spread market in the interiors of the desert state. Nagpur is among India’s most cosmopolitan cities with people from Gujarat, Andhra Pradesh, Madhya Pradesh and also the east, found in large numbers. The fact that it is the closest to being at the geographic centre of the country helps a bit.Nashik has risen on the back of its cooperative movement and the technologically progressive farmers in its vicinity. Rajkot is the capital of erstwhile Saurashtra, an important centre for small and medium enterprises. Baroda was known as the cultural and educational capital of Gujarat and though it has since the 1970s lost this position, its large industrial base continues to power consumer spending.The size and expanse of the great Indian middle class does not follow any standard patterns and theories. It is created via a combination of agriculture, industry, human capital, good infrastructure or trade.The story of every so-called tier-2 town is different, but there is one thing they have in common with each other—large middle-class expenditure.Demand Curve is a weekly column by research firmIndicus Analytics Pvt. Ltd on consumer trends and markets.

Source: Market Skyline of India

What we find is that it is the middle bulge of expenditure by the middle class that accounts for the bulk of India’s urban consumer expenditure