Upward spiraling inflation has led middle income families across the country to slash 65% of spending on entertainment, shopping and eating out to manage their limited monthly budgets, findings of a recent extensive survey by apex chamber ASSOCHAM show.
Middle Income Group has curtailed its spending on such heads by nearly 65% in last 12 months due to higher inflation, interest rates and fuel costs since it pinched this group and below it the most.
The survey was conducted in a period of three months beginning January to March 2011 in major places like Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabd, Pune, Chandigarh, Dehradun etc. A little over 500 employee were selected from each city on an average. Delhi ranks first in curtailing their expenses followed by Ahmedabad, Chandigarh, Mumbai and Chennai.
Interestingly, it reveals that double digit inflation and higher cost of money virtually unaffected HIG group in the period as it did not imbalance their earnings and thereby spending. However, MIG and classes below it regulated their shopping, eating and entertainment habits by tightening their belt to make up for rising prices.
The Survey on “Impact of Inflation among the middle class”, conducted under aegis of ASSOCHAM clearly found a distinction that during single digit inflation rate of less than 7%, a MIG family on average was spending roughly a sum of INR 4000 to 6000 per month on shopping, entertainment and eating out.
This has fallen by as much as 65% spending in the last 10 to 12 months in some categories. In some categories of spending, the actual consumption expenditure has come down to less than INR 2500, adds the survey in which nearly 2000 people, belonging to this group responded on their latest spending habits after inflation exceeded beyond manageable limits.
Releasing the ASSOCHAM survey, High Income Group in urban and other part of the country remained totally immune with rising cost of economy as their income levels hardly got severed with rising cost of inputs.
ASSOCHAM nationwide survey revealed that Middle Income Group, increasingly uncomfortable with the rising level of inflation and are changing their overall shopping habits including dining out, clothing, vacations, electronics, automobiles and real estate.
Consumers' growing unease is reflected in their saving and spending habits, with many MIG indicating that they are finding ways to cut back spending now or indicating they will do so in the future.
Nearly half (49.5%) of MIG either avoid shopping altogether or shop only for those things that are absolutely needed. Moreover, 34% said that their shopping has been restricted to only necessities and splurge in their spending is totally occasional.
What are the cost-cutting recourses adopted by the MIG class? To this, nearly three in four MIG (75%) say they have cut back on everyday expenses. They save money by cutting everyday expenses, by packing their lunch, car-pooling, cutting down on gas and electricity use. This signifies that the Indian middle class is reverting back to traditional way of life silently.
The survey highlights that
1. 69% of MIG have revealed decreased spending on eating out.
2. 55% reported decrease in the amount they spend on clothing.
3. 54% indicated fall in the amount they spend on vacations.
4. 49% plan have decreased the amount they spend on home appliances; 44% for home and personal electronics; 42% for automobiles and 35% for real estate.
On an average, per month High Income Group spending on shopping, amusements including eating out are estimated over INR 10,000 to INR 20,000 per month which was almost the same when the inflation was within the limit of around 7%.
Nearly 1000 people belonging to High Income Group gave this impression to ASSOCHAM when its research team approached them to know the differential between their spending habits between moderated inflation regime and after it touched the double digit levels.
It has been revealed that the high income groups, particularly the younger lot and working couples with twin salary benefits during every weekend spend more than 30% of their income on clothes, shoes, movies, buying CDs of films and music, eating out, etc. This group’s commuting patterns mostly by cars did not witness any shift despite fuel costs going up abnormally.
The Chamber estimates also reveal that inflation has not fully impacted the urban male and females personal expenses. While the urban male spends almost INR 400 to INR 1000 per month on drinks, cigarettes, gutkha, pan etc., urban women spends around INR 300 to INR 1200 per month on cosmetics, beauty treatments etc.
