With the rise of India’s middle class population, discretionary spending is gradually getting more prominence in the consumption basket, finds a recent Consumer Consumption Insights white paper published by Hansa Cequity — a domestic customer marketing company.
The white paper states that the share of discretionary spending is expected to contribute 56 per cent of Indian household expenditure by FY21. Estimates show food (including processed food) & beverage (42 per cent), education (7 per cent), conveyance (7 per cent), medical (5 per cent) and durable goods (6 per cent) would find the top spot in household consumption expenditure for 2021.
The white paper also forecasts some key changes with respect to the rural-urban spend. It predicts that in rural areas expenditure on conveyance, education and medical is on the rise, whereas in urban areas conveyance, personal care and medical will account for large part of non-food expenditure in urban areas. This signifies that a larger portion of the household’s income will be spent on self-care, self-development, and education. It also predicts motorcycle/ scooter, mobile phone handset and other durables to show a substantial rise by 2025-26.
The white paper, however, found that credit cards are still lagging behind in the payment choice. Undoubtedly, cash and debit cards are the preferred choice. High interest rates, pre-screening requirements, security fears by households are some of the reasons for this lag. This leaves a lot of space for mobile payment system (using mobile as card), mobile wallets and other innovative channels of payment (pre-paid, EMI cards by big hypermarkets, retail brands).
According to various estimates in the market, India’s internet population is expected to reach half a billion by 2018. This presents a huge opportunity for companies to target, segment, interact with their present and future customers. This makes it very important for companies to analyse their customer’s social media preferences to influence them online for their final spending decisions.