India’s Key Economic Indicators
The note is based on a recent personal financial survey carried out by Money9. The facts emanating from this report are startling. The purpose of this note is to capture the key findings and analyze their implications for India’s overall economy.
Earnings
Key Facts - All India
a) Average Household/Family Size — 4.2
b) Total Population - 140 Cr (1.4 Billion)
c) Total Number of Households - 33.3 Cr (333 Million)
d) Average Numbers of Earners/Household - 1.6
e) Average Household Dependancy - 2.6 (Includes Adults & Kids)
f) Average Household Earnings/Month - Rs 23000Earnings/Month - Household Level
a) Aspiring Class (< Rs 15 K) - 46 % (153 Million)
b) Low Middle Class (Rs 15 - 35K) - 40% (133 Million)
c) Middle Class (Rs 35 - 50 K) - 8% (27 Million)
d) High Class (> Rs 50 K) - 6% (20 Million)
Findings —
a) Though India is a youth-centric economy its dependency ratio is very high — 86.66 Cr (866 million) people are dependent on 53.33 Cr (533 million) people for survival.
b) India’s average household earnings are even less than the monthly minimum wage that has been set by the government ( Rs 500 x 30 = Rs 24K < 23 K).
c) India is a country that is embedding within itself three countries — Uganda (90 Cr); Malaysia (40 Cr); USA (10 Cr).
d) India’s 86% of households are ineligible to pay Income Tax. Hence, the GOI’s incentives for promoting savings are only leveraged by just 14% of households (20 Million people).
Expenses
The survey list 28 asset classes, out of which it identifies 10 key assets and maps them to the household segments for the purpose of consumption.
10 Key Assets:-
Basic-
1. Electricity
2. Celing Fans
3. LPG stove
4. Mobile Phones
Comfort-
5. Two -wheeler
6. Refrigerator
7. Colour TV
Luxury
8. Car, Jeep or Van
9. Air Conditioner
10.Washing MachineWithin Household Class — % spend of the type of assets
Across Household Class — % spend on the type of assets
Findings —
a) 97% of India’s household spending (apart from food) is limited to the 7 key assets.
b) Companies selling luxury items cater to only 10 million households (42 million people).
c) 60% of India’s GDP is driven by the consumption of households, and therefore a small increase in consumption-led demand can have a huge impact on our GDP.
Break Up of India’s GDP (Constant)— Last Four Quarters
a) Since 60% of India’s GDP is consumption-driven, even a small increase in India’s household income can make a huge difference in India’s overall growth and prosperity.
b) High-technology MNCs making in India, can not rely on the demand generated by the local market as it is too less.
c) Even domestic companies' investments are directly linked to the size of local demand. The lower the demand, the lesser will be the investments.
Savings
Key Facts (Whether they save)
a) India's Overall households who save - 70%
b) High Class (> Rs 50 K) - 90%
c) Middle Class (Rs 35 - 50 K) - 87%
d) Low Middle Class (Rs 15 - 35K) - 82%
e) Aspiring Class (< Rs 15 K) - 57%Key Facts (Where they save)
a) Banks - 64 % of India's households
b) Post Office - 21% of India's households
c) Life Insurance - 19% of India's households
d) Gold - 15% of India's households
e) NDFC - 7% of India's households
Findings —
a) Indians understand the need to save, quite unlike some other economies.
b) Significant jump in saving rate as one moves up the ladder from Aspiring Class to Low Middle Class — From 57% to 82%.
c) Most households (64%) save on instruments that dilute their value, as the returns on them are low.
Investments
The investments are classified as putting money in stocks, mutual funds, property, etc.
Key Facts (Whether they invest)
a) India's Overall Households who invest - 22%
b) High Class (> Rs 50 K) - 45%
c) Middle Class (Rs 35 - 50 K) - 34%
d) Low Middle Class (Rs 15 - 35K) - 31%
e) Aspiring Class (< Rs 15 K) - 13%Key Facts (Where they invest)
a) Property/Land - 18% of India's households
b) Mutual Funds - 6% of India's households
c) Stocks Markets - 3% of India's households
d) ULIP - 3% of India's households
Findings —
a) Most households like to invest in only properties/lands which are one of the highest taxed assets.
b) Investments in stock markets and MF is very low (moderately taxed), but the public narrative is all anchored around their growth when 90% of Indian households have nothing to do with them.
c) The potential of growth in investment in financial assets like stocks and MF is very large if the households are properly educated about managing these asset classes.
Loans
The loans are active in nature from Banks or NBFCs.
Key Facts (Whether they take loan)
a) India's Overall Households who take loan - 11%
b) High Class (> Rs 50 K) - 14%
c) Middle Class (Rs 35 - 50 K) - 9%
d) Low Middle Class (Rs 15 - 35K) - 16%
e) Aspiring Class (< Rs 15 K) - 8%Key Facts (What type of loans)
a) Personal - 6% of India's households
b) Home - 5% of India's households
c) Gold - 3% of India's households
d) Business - 1% of India's households
e) Auto - 1% of India's households
f) Education - 1% of India's households
g) Consumer - 0% of India's households
Findings —
a) Maximum numbers of India’s households save (70%) than taking loans (11%).
b) The impact of lowing bank rates (repo etc) negatively impacts 64% of the Indian households vs positively helping just 11%.
c) Most Indian households take personal loans (6%) with high-interest rates.
d) India’s overall debt space is not very high.
e) Wherever there is a fall in interest rates the impact is on a large section of Indian households (64%) due to a fall in the Bank's savings and FD rates.
f) Even the households in the bottom of the earning category are taking loans and these mostly will be at a very high-interest rate.
Conclusion
a) 50% of the Indian household’s contribution to the GDP is very low. Assume 80% of their yearly income is spent on consumer goods and services then it translates to just Rs 22 Lakh Cr. This is just 15% of total India’s GDP contribution driven by private sector consumption of Rs 153 Lakh Cr (at Current Prices).
b) 50% of Indian household income is less than the minimum wage floor set by the govt. This means that the GOI is not able to guarantee employment even at the minimum wage set by it.
c) Most MNCs (dealing in high-value products) are only here to serve the 10 million households (42 million people). The rest of the 1.35 billion are not getting benefitted from their service.
d) 86% of Indian household does not come under the bracket for the need for paying income tax. Hence, all incentives given by the government to promote savings are only benefiting the remaining 14%.
e) 64% of Indian household saves in Banks and are therefore negatively impacted when the interest rates are set too low. These households’ savings are most impacted by the rise of inflation.
f) Only 22% of Indian households invest in financial instruments, and most (18%) in properties where the taxation is very high. Investments in stock markets in very low (3%).
g) Only 11% of Indian households take loans, and 6% of the household are indulging in high-cost personal loans. Hence, the narrative of rising loan rates due to increases in Bank rates by RBI largely addresses only a small segment of households.
It is clear from the above that most of the narratives in the press/media about the impact of government policies are largely addressed towards a small section of households who are reasonably well compared to a large section of the Indian population.
