Indian middle class continues to shine

Monday, September 10, 2007

Indian middle class continues to shine

The Indian middle class is prospering with around 70 million households earning anywhere between Rs 80,000 and Rs 18 lakh per annum. These comprise 34 per cent of the slightly over 200 million middle class households.

However, the income profile shows a classical pyramid-shaped society with only 600,000 households earning above Rs 18 lakh (Rs 1.8 million) per annum, according to the Mr and Mrs India survey by brokerage firm CLSA Asia Pacific Markets.

Market researchers, however, believe the household income is massively understated -- a baggage of the era of controls and usurious taxes. Independent studies suggest that 1.6 million households earn over Rs 40 lakh (Rs 4 million), and 100,000 people own assets worth around Rs 4 crore (Rs 40 million).

Almost 91 per cent of the middle class homes own mobile phones, 72 per cent own two-wheelers, 70 per cent own homes and 19 per cent own four-wheelers, notes the CLSA study.

The survey covered 1,616 middle income households in 16 state capitals, spread equally across the four metros. The survey reveals that the Indian middle class continues to retain its conservative image but households are increasingly aspiring to a modern lifestyle and optimism is high.

According to the survey, children continue to be the main focus of Indian families, and aspirations in terms of education and career choices are running very high.

Rising prices, children's education and medical costs, however, are key concerns. The survey, done along with Mindscape, the consumer insights division of Technopak, noted Mr & Mrs India appeared more conservative, have fewer loans and own less goods.

For instance, an average family of 4.3 people live typically in a 900 sq ft apartment, 71 per cent own properties, but only 9 per cent have a mortgage, 100 per cent households have TVs and 20 per cent have credit cards. Household savings are low at 13 per cent of annual income, mainly to meet emergency needs, healthcare and education costs.

Over 84 per cent have not taken loans, and only 11 per cent have invested in equities. Land and properties account for 51 per cent of wealth with 30 per cent held in cash and deposits.

Half of the households have seen their income rise in the past 12 months, of which one-third saw income rise more than 20 per cent while 63 per cent respondents expect their income to increase in the next 12 months.

http://www.rediff.com/money/2007/sep/10middle.htm