The Consumer Class Is 500 Million Strong

ARE you among those who think that consumer durables cater only to an upper crust of 100 million people or so? Think again. The most comprehensive survey, conducted in 1987-88 by the National Council for Applied Economic Research (NCAER), suggests that consumer durables are used by income groups covering at least 500 million people – that is, virtually all groups above the poverty line. A separate study of Rajas than villages by Dr. N.S. Jodha, shows that even people below the poverty line buy durables like radios.

The NCAER data show that the top one-tenth of the population (80 million people) account for less than half the consumption of most consumer durables. This upper class includes what is usually called the middle class – the salaried, professional and medium business class. The second NCAER category – what it calls the middle 30 per cent – includes much of the organised working class. The third category is the bottom 60 per cent, which includes those below the poverty line as well as those slightly above it.

This category corresponds roughly to people with a per capita consumption below Rs. 200 per month in 1987-88. It is remarkable that the bottom 60 per cent accounts for the purchase as much as (1) 33 per cent of mechanical wrist watches (2) 22 per cent of small black and white TVs (3) 25 per cent of” sewing machines (4) 24 per cent of quartz wrist watches (5) 23 per cent of mono cassette recorders (6) 11 per cent of colour TVs (7) 13 per cent of mopeds (8) 8 per cent of motor cycles (9) 13 per cent of moulded suitcases.

Note that the top 40 per cent of the population adds up to 320 million people. The substantial consumption figures for the bottom 60 per cent suggest that people belonging to at least the top 500 million are participants in the boom in consumer durables. It is plainly false for economists to pretend that durables are only used by the pampered elite. The rich consume more, of course (that is why they are called rich). But the non rich are major consumer too, running into millions. Curbing the production of consumer durables through taxes and bans will not affect the elite (who already own such goods) but will adversely affect poorer people who are not yet owners.

The amazing fact revealed by the NCAER data is that even people with very low income are willing to scrimp and save in order to buy durables. It also seems likely that remittances from relatives in urban area and abroad are used by poor rural households to purchase durables.

The data show that rural consumers are as keen on durables as urban ones. Rural areas account for the lion’s share of purchases of items like mechanical watches (71%), Radios (72 per cent) Monocassette recorders (61%), and table fans (54%), Rural areas even account for as much as 45% of motor cycles, 48% of mopeds, 44 per cent of Quartz watches and 35 per cent of 14-inch Black and White TV sets.

The continuing boom in durables is not because every rich family is buying a second or third TV set or moped every year. The boom shows that a large number of people who could not earlier afford to buy these goods are now becoming buyers. This is a sign of rising prosperity that should be welcomed.

From the view point of industrialists, the NCAER provides welcome evidence that the demand for consumer durables is spread right across the income spectrum. Since the consumption base looks so broad, producers can be confident that demand will not tapper off after elite consumption reaches saturation point. Demand will continue to rise because many millions of people every year are getting rich enough to buy durables.

A very significant chunk of the new purchasers are from rural areas. The National Front Government wishes to focus on the needs of rural areas. The NCAER data show that rural needs include consumer durables on a rising scale. Indeed, items like motor cycles and mopeds improve mobility in rural areas and thus represent part of the rural infrastructure. They are able to negotiate kutcha roads because of their large wheels. They should really be considered infrastructural goods, not consumer durables.

Consumption of selected consumer

Goods (NACER MISH 1987-88)

Share of purchase by Income
Consumer Durable % share
rural
Share of
Top 10%
(80 m.)
Share of
Bottom 60%
(480 m.)
Share of
Middle 30%
(240 m.)
B&W TV (Regular) 40 20 41 28
B&W TV Small 35 22 44 35
Colour TV Regular 61 11 28 18
Mono two-in-one 38 23 39 61
Radio (Portable) 25 36 39 72
Table Fans 37 22 41 54
Bicycle 18 46 36 75
Mopeds 44 13 44 48
Scooters 64 8 28 28
Motor cycles 64 8 28 45
Electric Stoves 35 18 47 31
Electric Iron 39 19 42 41
Mixers 60 9 31 19
Sewing Machines 37 25 39 39
Moulded suitcases 49 13 38 24
Mech. wrist watches 26 33 42 71
Wrist watches (Quartz) 41 24 35 44

What do you think?