Consumers cutting down on food expenses: report

New Delhi, June 26 (PTI) - Even as surging food prices
continue to add to inflationary pressures, a new survey has
found that consumers have cut down considerably on their
spending on food items in the last two years.

According to a study by research and consultancy firm
Indicus Analytics, consumers are now spending 31 percent of
their total income on food as compared to 35.1 percent in
2006.

In comparison, the consumers are now spending larger
share of their income on items like rent, medical expenses,
recreation, transport and education. The shares of spending on
clothing and consumer goods have also gone down in this
period.

Indicus Analytics attributed the change in demand
patterns to rising per capita income, increased literacy and
rapid urbanisation which has caused rapid growth.

"The rising aspiration levels, increase in spending power
has led to a change in the consumption pattern," the report
said.

According to the study, share of F.M.C.G. products has
gone down to 5.3 percent from 5.4 percent in 2006, while that
of consumer durable goods is unchanged at 3.7 percent.

Besides, the consumers are now spending 55.2 percent on
miscellaneious goods and services, up from 50.9 percent two
years ago, but that on clothing and footwear has dropped to
4.7 percent from 4.9 percent.

While the consumer market has grown by 19 percent during
the last two years, there has been a decline in proportion
spent on basic food including cereals and bread, pulses,
sugar, oils, fruits and vegetables, potato, milk and milk
products, meat, egg, fish, coffee, tea, spices, other foods,
beverages, pan and tobacco.

"Gains have been made in miscellaneous goods and services
which include among others hotels and restaurants, utilities,
rent, medical expenses, recreation, personal transport and
education," the report said.

Essential items such as food, beverages, rent and fuel
accounted for 82 percent of consumption in 1950-51, which
reduced to 78 percent after 20 years, it said adding by
1990-91, these items accounted for 64 percent of consumption.

During last 17 years, the trend has accelerated further
and today essential items account for under 40 percent, still
high by developed country standards but significantly down
from earlier periods, the Indicus Analytics report said.

The research firm has predicted that India is beginning
to see first signs of a long-term consumption boom as a result
of rising disposable incomes, higher life expectancy, rapid
urbanisation and changing lifestyles.

The report also said consumer finance has slowed down
owing to high interest rates.

"The outlook is gloomy in the near term in spite of high
availability as high interest rates have hit the affordability
road block. The key industrial segments impacted are auto and
white goods, which account for a substantial proportion of
consumer finance."

The durables sector has witnessed a sluggish growth for
over a year and the interest rates are likely to further
dampen the spirits, it warned.

A 5-10 percent hike in prices of consumer durables is too
expected, as companies will be forced to pass on some of the
high input costs to consumers. F.M.C.G. companies are also
feeling the pinch of the oil price hike and retailers expect
prices to rise by about five percent on account of higher
freight charges. PTI