Middle class driving luxury segment

By agencies   |   Tuesday, 28 June 2005, 07:00 Hrs
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NEW DELHI: The Indian middle class is not just growing at a rapid pace, it has also become the segment driving consumption of "luxury" goods like cars and air-conditioners, according to a survey by the National Council for Applied Economic Research.

While the middle class, which the survey defines as households with annual incomes between Rs 200,000 and Rs 1 million, at 2001-02 prices, accounted for barely 5.7 percent of all Indian households in 2001-02, it already owned 60 percent of all the cars and ACs in the country and 25 percent of all TVs, fridges and motorcycles.

Read that with the projection that the middle class will account for 13 percent of India's population by 2009-10 and you can see why the NCAER sees huge growth potential in the market for cars and mobikes.

The study predicts that the market for cars will grow at 20 percent a year, while bikes will clock growth of 16 percent per annum till 2009-10. Fridges and color TV makers can hope to cash in on the boom too, with projected growth rates in the range of 10 percent to 11 percent.

The market for radios, electric irons, bicycles and wristwatches too will grow, though by a more modest 7-9 percent a year.

On the flip side, black & white TVs, scooters and mopeds may be hit with the report suggesting that demand for these goods will actually decline.

While the number of millionaire families was 5,000 in 1995-96, they increased to 20,000 in 2001-02. By the end of the decade, there'll be 140,000 such households," says the survey.

Also, most of the deprived (85 percent) and the aspirers (60 percent) will be concentrated in rural areas by the end of the decade, while three fourths of the rich and two-thirds of the middle class will be found in cities.

The report is based on extensive surveys covering 300,000 households across 858 villages and 660 towns and cities all over India.

It covered a list of 20 durables, seven consumables and a host of services including mediclaim, life insurance and credit cards.

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