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Amit Sinha
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Tuesday, 11 November 2008 15:56 |
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The heterogeneity of India is well reflected in the savings patterns. There are no clear regional patterns. However, it is evident that the economically vibrant cities are lower in savings rate........
The top 112 cities account for about 200 million Indians which is more than 60% of urban India. These cities constitute a market of consumers whose combined annual incomes are Rs 13.26 billion. Their combined savings are Rs 3.5 billion which is about 26.5% of income. However there is considerable heterogeneity in the income and savings pattern across these cities.If we look at four classes of cities (by size), we get the following picture: | | Total Income (Rs billions) | Total Savings (Rs billions) | Savings/ Income Ratio | | Alpha (Top 10) | 5,912 | 1,296 | 21.9% | | Beta (11th to 30th) | 2,887 | 931 | 32.2% | | Gamma (31st to 50th) | 1,774 | 519 | 29.3% | | Delta (The balance 62) | 2,688 | 771 | 28.7% | | Top 112 cities | 13,261 | 3,516 | 26.5% |
The large cities have a significantly lower savings rate. The top 10 cities have a savings rate of under 22%, whereas the gamma and delta cities (82 in number) have savings rate around 29%. Clearly the EMI culture hasn’t percolated down to too many cities in India. An interesting piece of statistics is that the 2nd rung of cities are the biggest savers – the beta cities save as much as 32% of their income and reinforce the old adage that savings and investment are the route to growth.If we look at the same set of data through the regional prism, we get the following picture: | | Total Income (Rs billions) | Total Savings (Rs billions) | Savings/ Income Ratio | | East | 2,011 | 522 | 25.9% | | West | 5,167 | 1,191 | 23.0% | | North | 2,849 | 797 | 28.0% | | South | 3,233 | 1,007 | 31.1% |
The Southerners are by far the largest savers with a savings rate of over 31%. The West (it includes Rajasthan and MP) has the lowest savings rate of just 23%. Within West, Gujarat is a high saver with 27% savings rate whereas Maharashtra saves only 18%. Madhya Pradesh is a very high saver with savings rate of 38%.Contrary to popular wisdom, the North is not exactly spendthrift, they are second only to the South in savings rate.What do the figures look like for some of the major cities? | | Total Income (Rs billions) | Total Savings (Rs billions) | Savings/ Income Ratio | | Mumbai | 1,608 | 216 | 13.4% | | Delhi | 1,264 | 289 | 22.8% | | Bangalore | 602 | 192 | 31.9% | | Urban Areas in Thane | 569 | 132 | 23.2% | | Pune | 446 | 111 | 24.9% | | Ahmadabad | 429 | 109 | 25.3% | | Chennai | 393 | 88 | 22.2% | | Kolkata | 350 | 68 | 19.3% | | Surat | 318 | 82 | 25.8% | | Hyderabad | 295 | 87 | 29.3% |
Mumbai has the lowest savings rate. Delhi, Kolkata and Mumbai’s neighbours are also low savers. Bangalore and Hyderabad are high savers, much higher than average. The heterogeneity of India is well reflected in the savings patterns. There are no clear regional patterns. However, it is evident that the economically vibrant cities are lower in savings rate as compared to their regional brethrens which reinforces the theory that consumerism is one of the key pivots of the recent surge in economic growth and erosion in consumer confidence will impact economic growth negatively. Source: Free Wheeling
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