This document discusses consumption patterns among low-income urban households in India that earn less than Rs. 1.5 lakh per year. It finds that these households spend the majority (43.6%) of their budget on food, primarily basics. They contribute significantly to consumption of paan, tobacco and intoxicants. Spending varies widely between regions - western states have higher incomes and savings while northern states spend more on milk. There are also differences between cities, with some having higher rents, medical costs, or food expenditures. The largest populations of low-income households are in Delhi and Mumbai.

1. Published: Mint dated 29h August, 2011
The heterogeneity
that characterizes
the modern Indian
consumer has
created a maze
that marketers
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In this fortnightly
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Analytics will
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Indicus Consumer Data Products

2. Under the Indicus Urban Consumer Expenditure Spectrum, the bottom of the
pyramid in urban India is comprised of households that earn less than Rs. 1.5 lakh
per annum. This class forms the bulk of the population in cities, but contributes
less than 15% of total urban income and less than 10% of total urban savings.
Household sizes are typically smaller than in the more affluent classes. One
reason is that there are many migrants in this segment; with little skills and low
education, their earning opportunities are low, albeit they supplement family
incomes in the villages. Northern states, however, have larger household sizes
within the segment.

3. For these households, the major share of expenditure is on food, which takes up
43.6% of the budget. The basics in this category account for the largest
expenditure—close to a quarter of total expenses. The next group is vegetables and
fruits, while rent takes the third place at 7.7% of total expenses. Food has displaced
the miscellaneous goods and services group, which has the highest share of
expenses in all other income classes, pointing to bare necessities being the most
crucial at the lowest level. Moreover, processed food, and milk and milk products
make up a little more than 7% each of the total expenses. Interestingly, this segment
contributes the most (more than 40%) to overall urban consumption of paan, tobacco
and intoxicants in India.

4. The average income per household in the western states is the highest in this
segment, followed by the eastern states. The western region also has significantly
higher savings per household. Interestingly, while the western states spend the
highest per household in many categories, the per-household expenditure on
education is the lowest. While the eastern states spend the most per household on
basic food, the northern states spend the highest on an average on milk and milk
products; the southern states have the highest spends on rent and entertainment.
There are wide differences in income and expenditure patterns at the district level—
per-household income in Gurgaon and Gautam Budh Nagar (Noida and Greater
Noida) is the highest in India in this segment, and twice that of households in Bellary
and Jabalpur, the lowest in this segment.

5. When it comes to rent, the southern cities of Bangalore, Hyderabad, Chennai,
Madurai and Coimbatore top the list, making these the most expensive cities to live
in for the lowest income class. Expenses on medical care are the highest in Thrissur
and Kollam in Kerala, while Dehradun, Haridwar and Kolkata are the top three urban
areas for expenses on education.Basic food takes up more than one-quarter of the
household budget in more than 20 cities: Nanded, Bardhaman and Durg top this list.
Close to 30 cities spend more than 10% of their total budget on milk and milk
products, and Amritsar, Bikaner and Jaipur top here. There are 17 cities across the
country where households in this income segment spend on an average more than
10% of total expenditure on processed food. Mumbai, Gautam Budh Nagar, Guntur,
Dibrugarh, Ahmedabad and Chennai top the table here.The largest markets at the
bottom of the pyramid remain Delhi and Mumbai, which house a total of 12% of
Indian urban households earning in the lowest income bracket. In fact, one-third of
this population lives in 10 major cities in India—this is where earning opportunities
abound for those with minimal skills and education.