According to the five income-segment classification of the Indicus urban consumer expenditure spectrum, in the second rung of affluence, or the upper middle class, among urban Indian households are those who earn between Rs. 5 lakh and Rs. 10 lakh annually. The population in these households comprise a little less than 10% of all urban households, but contribute around one-fifth of the total urban savings. It is the upper-income segments that form the big savers of the country, with high-disposable incomes, making them attractive markets for financial products. They are also the spenders in the high value category, contributing to about 17% of urban consumer expenditure in India. While this share is approximately the same as the lowest two income segments, being a relatively smaller segment, expenditure per household would be relatively higher. Moreover, the type of goods and services consumed would, of course, be quite different across the income segments.

1. Published: Mint dated 18h July, 2011
The heterogeneity
that characterizes
the modern Indian
consumer has
created a maze
that marketers
would like to
unravel in order to
target their
products and
services precisely.
In this fortnightly
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Analytics will
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2. According to the five income-segment classification of the Indicus urban consumer
expenditure spectrum, in the second rung of affluence, or the upper middle class,
among urban Indian households are those who earn between Rs. 5 lakh and Rs. 10
lakh annually. The population in these households comprise a little less than 10% of
all urban households, but contribute around one-fifth of the total urban savings.

3. It is the upper-income segments that form the big savers of the country, with high-
disposable incomes, making them attractive markets for financial products. They are
also the spenders in the high value category, contributing to about 17% of urban
consumer expenditure in India. While this share is approximately the same as the
lowest two income segments, being a relatively smaller segment, expenditure per
household would be relatively higher. Moreover, the type of goods and services
consumed would, of course, be quite different across the income segments.

4. Food comprises a little less than one-quarter of the household budget; not just the
basics, but vegetables, milk and milk products form important parts of the food
basket. Households in this segment also like to spend on processed food,
experimenting with new items in the market as families look for new tastes, variety
and convenience. The largest component of the budget is, of course,
miscellaneous goods and services, of which the prime components are travel and
conveyance, consumer services and rent, each making up more than 12% of the
total budget.

5. Travel is an important item to budget for in urban households, especially
those who can afford to travel by air. Holiday destinations abroad, especially
in South-East Asia, and within India, have to be factored in for families
moving up the ladder. Packaged consumer goods expenses comprise
around 10% of the budget, while clothing and footwear make up a little less
than 5% of the budget.
While states in the north comprise the largest share of population in this
segment, essentially because of the sheer number of people, it is the
western states that come in second, with the affluent in Maharashtra and
Gujarat tipping the scales. The eastern region lags behind with low incomes
and smaller share in total population.

6. Per household expenditure on the three main components of the budget varies
across regions. On average, the north and the west have the highest per
household expenses on travel and conveyance, the south is at the top when it
comes to rent, and the east spends the most per household on consumer services.
Once again, the diversity across regions in socio-economic profiles stands out in
the data on expenditure patterns in this segment.
Delhi and Mumbai, together, make up close to 20% of the expenditure in this
segment, with Thane, Bangalore and Ahmedabad completing the list of top five
main centres. While the other metros follow, cities such as Surat, Vadodara,
Coimbatore, Nagpur, Ludhiana, Rajkot and Lucknow also make it into the top 20.

7. Yet, there are again differences among these top
cities. For instance, Mumbai spends more in
aggregate on healthcare and education in this
segment than Delhi, while Delhi outstrips Mumbai
when it comes to travel and conveyance, milk and
milk products. Taking another example,
Ahmedabad, which has significantly lower
population than Mumbai or Delhi in this segment,
has almost similar total spends on basic food.
When it comes to healthcare, Bangalore and
Hyderabad have much lower total spends than
other cities in this category. On the other hand,
Chennai and Bangalore spend a relatively much
higher proportion on rent compared with cities such
as Pune and Ahmedabad. It is differences like
these that highlight the need for much finer
segmentation, both within the segment and across
cities, to tap urban Indian consumer profiles
effectively.