In India, once upon a time, spending on luxury was the last thing in the mind of a middle-income consumer. Now, with the rise in per-capita income, the consumption patterns are starting to change. While clothing and footwear, as a whole, still fall under residual expenditure, Indians are spending more on luxury, quite in sync with their European or American counterparts.
According to the Economic Survey 2007-08, by the economic division of the ministry of finance, the country is spending more on luxuries. The expenditure on luxuries, including entertainment and durable products, is more than that on food and beverages.
Although the gourmet food market is growing, the survey says that food and beverages had the lowest growth rate ever, clocking around three per cent during the 10th Five Year Plan. In 2001-02, the market share of this particular segment was 48.1 per cent, which declined to 42.1 per cent in 2007-08.
The report further reads that the change in expenses in the clothing and footwear category, according to experts, is because of the fact that middle-class houses in India consider them to be a part of residual expenditure.
Counting numbers, the survey says that per-capita private final consumption expenditure has increased as the country has experienced a rise in per-capita income. As compared to the ‘90s, when per-capita income grew only at around three per cent, 2007-08 saw it doubling, to around 5.3 per cent per year.
The survey also says that the rise in consumption is a gradual and steady process, and is driven by the growing rate of income in the country.
The survey brings good news for luxury retailers, since, if generalised, Indian consumers will continue to make more money and spend on luxuries – the way they are doing at present.