ANALYSIS ON CHANGING CONSUMPTION PATTERNS IN INDIA
AND TESTING THE SIMILARITIES WITH ENGEL’S LAW OF CONSUMPTION
Consumption is an essential part of
human life. Consumption is seen right from the ancient period in all the parts
of the world. Humans buy, eat, use and take advantages of different things. But
as the time progressed, the consumption pattern of people changed and is
creating a threat for our nature and environment. As the time progressed,
people are becoming aware of the negative impacts on environment due to their
consumption patterns and hence are trying to use a sustainable development
approach.
Consumer patterns change for both micro
and macro reasons. At the micro level, changes are attributable to individual
consumer's changing tastes. At the macro level, such changes occur because of
structural shifts in the environment. This affects our behaviour, lifestyle,
values and needs which implicate the change of our consumption patterns, which
can vary between and within different countries and cultures based on specific
sets of value-systems (Karwala, 2005).
Consumption patterns are one of the most
important drivers of development patterns in the industrialised and developing
countries like India. Consumption patterns of Indian consumers are being
changed rapidly and tremendously. Industrialisation, easy purchase and
investment options given by shopkeepers, increase in income levels, lifestyle
changes, increased need for societal recognition, increase in access to new
technologies are some of the factors which are contributing to changes in the
consumption patterns.
An economic theory (Engel’s
law of Consumption) introduced in 1857 by Ernst Engel talks about the
consumptions patterns at household level. This law gives three statements:
Statement 1: As income increases, the proportion of
income spent on food decreases though the actual amount of money spent on food
increases. This law does not suggest that money spent on food falls with
increase in income, but instead consumers increase their expenditures for food
products (in % terms) less than their increases in income.
Statement 2: The proportion spent on personal
expenses, cultural wants, recreation, education, health etc. increases as
income increases.
Statement 3: The proportion spent on shelter,
clothing, lighting and fuel remains practically unchanged whatever the income
may be.
For example, a family spends 12,500 (25%)
of their income on food at an income level of 50,000. If their income increases
to 1,00,000, it is not likely that they will spend 25,000 (25%) on food, but
will spend a lesser percentage while increasing spending in other areas.
The aim of this article is to assess the fit between
a secondary data available on “Share of each sector in Household Total
Consumption, by Consumption Segment (%)” and assumptions of Engel’s law of
consumption. Following are the statistics which gives information about the
secondary data gathered:
Source: World Bank Report on Share of
each sector in Household Total Consumption, by Consumption Segment (%), 2010
The results comprised of the consumption patterns
for different products in (a) General population in India comprising of all the
income levels (b) Lowest income group (c) Low income group (d) Middle income
group and (e) Higher income group. The products included food and beverages,
Housing, transport, education, personal care, financial services, clothing and
footwear, energy, water utility, health, ICT and other items/ facilities.
The results for the general population showed that
majority of the income was spent for purchase of food and beverages, followed
by satisfying housing needs, purchasing other miscellaneous items/ facilities
and for fulfilling energy requirements. A little lesser percentage of income
was spent for transport, followed by health expenses, clothing and footwear,
education, ICT and personal care.
The result for the lowest income population showed
that majority of the income was spent for purchase of food and beverages,
followed by purchase of other miscellaneous items/ facilities, fulfilling
energy requirements, purchasing clothing and footwear and satisfying housing
needs. A little lesser percentage of income was spent for health expenses,
transport, education, personal care and ICT.
It means that in lowest income group levels,
families try to spend maximum amount of income earned for their basic survival
i.e., for food. Later other basic needs for living like clothing, energy
requirements and other miscellaneous needs are satisfied. A there may be a less
amount of income left out for other needs, the amount spend for healthcare and
education are also neglected in lowest income family. Hence, many studies say
that people living with less income are uneducated and die easily as they do
not have much amount for their health care. These results obtained support the
statements given in Engels law of consumption.
The result for the low income population showed
that majority of the income was spent for purchase of food and beverages,
followed by satisfying housing needs, purchase of other miscellaneous items/
facilities, transport, education, fulfilling energy requirements, purchase of
clothing and footwear and healthcare. A little lesser percentage of income was
spent personal care and ICT.
The results showed that there are slight changes in
consumption levels for different products between lowest and lower income
groups. Even in lower income group families, maximum amount of income earned
was spent for their basic survival i.e., for food. Later other basic needs for
living like housing, transport, education, healthcare, clothing, energy
requirements and other miscellaneous needs are satisfied. We can see that in
low income group allocation of income for transport, healthcare and education
increased. But the income allocation for fulfilling energy requirements
decreased. So as the standard of living increased people are trying to
understand the importance of healthcare and education.
These results obtained partially supported the
statements given in Engels law of consumption which says that as income
increases, people spend more on education, health etc. But the statement which
says that though income increases, expenses on housing, clothing and energy may
remain the same is not satisfied as the results in this study showed that
amount of expenses spent on clothing and energy decreased when compared to
lowest income group. The results also showed that the amount spent on housing
expenses increased in the lower income group compared to the lowest income
group.
The results showed that there are changes in
consumption levels for different products among lowest, lower and middle income
groups. In middle income group families, majority of the amount of income
earned was housing needs, followed by purchase of foods and beverages, other
miscellaneous needs, transport, health and education. Later other needs like
energy demands, ICT, clothing and personal care are satisfied. We can see that
in middle income group allocation of income for housing needs increased
tremendously compared to other earlier income groups. The amount spent for
Education, and transport increased and the amount spent on education and energy
demands decreased. It does not mean that middle income people are uneducated or
does not give importance to education but just the percentage allocation is
decreased. The use of ICT is maximum among all the groups.
These results obtained support the statement given
in Engels law of consumption which says that as income
increases, the proportion of income spent on food decreases though the actual
amount of money spent on food increases. The statement which
says that though income increases, expenses on education is increased is also
satisfied. But the statement which says that the proportion spent on housing
may not change if income increases is not on par with the results.
The results showed that there are changes in
consumption levels for different products between all the other income groups
compared to higher income group. In higher income group families, maximum
amount of income earned was spent for housing and transport. As the income
increased people may try to spend more on luxurious homes and costly transport
facilities to save time. Later other miscellaneous and food needs are
satisfied. Small amount of income is allotted to education, healthcare,
clothing, energy requirements, ICT and personal care.
These results obtained partially supported the
statements given in Engels law of consumption which says about the amount spend
on food as income increases. But the statement which says that
as income increases, expenses on education and health is not supported by the
results. The result regarding the case of amount allocation for housing is also
opposite to the statement given in Engels law.
The observations show that in almost all
the income groups personal care is not given that much of care. The importance
given to ICT also is not given much importance. As income increased the use of
ICT also increased. The amount allocation for ICT is more in middle income
group families. This may be due to the relation between education and use of
ICT. As middle income group allocate good amount of income to education, may be
the use of ICT for education purposes might be more.
This article
aimed to study the Consumption patterns in India with relation to Engel’s law
of consumption showed some similarities between the results and the statements
of the law. The results may not have matched completely with the law as the law
was given in much time earlier from now and the consumption patterns
tremendously changed from that time to the present times. But the statement
regarding the food expenses was strongly supported in all the income groups.
Further analysis can also be done to compare with results of secondary data
with other economic models.
References:
· Karwala,
Sebastian. 2005. Changing Consumption Patterns – Sustainable Management. Link:
http://mentoring.com.pl/Changing_consumption_patterns.pdf
· Shuani.
2010. Engle’s Laws of Consumption – Explained! Link : http://www.yourarticlelibrary.com/economics/engles-laws-of-consumption-explained/47913/
· World Bank
Report. 2010. Share of each sector in Household Total Consumption,
by Consumption Segment (%). Link: http://datatopics.worldbank.org/consumption/market
By:
M, Milcah Paul , Research Scholar, Dept. of RMCS, College of Home Science, Saifabad, Hyderabad
Dr. D. Ratna Kumari, Professor, Dept. of RMCS, College of Home Science, Saifabad, Hyderabad
No comments:
Post a Comment