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Increase in income of middle-income group in the country in 2021-22



Consumer sentiment continues to strengthen in India from June 2021 onwards. The Consumer Sentiment Index (ICS) has risen 31.9 percent between June 2021 and February 2022. The index has gained 8.2 per cent in the first three weeks ended March. Thus, after the second wave of the covid epidemic hurt consumer sentiments, the index has seen a spectacular rise. During the second wave, consumer sentiment declined by 15.5 per cent between March and June 2021. The continued uptrend after June has made up for the loss.


The uptick in consumer sentiment is due to households whose income has increased compared to a year ago. Contributions have also been made from families that feel their incomes will increase in the coming year. There has also been an increase in the number of households who feel that this is a better time to buy consumer durables than a year ago. But a matter of concern has been that this optimism was not reflected equally in the views of all the families of the country. People were not very enthusiastic about the Indian economy in the short and long term.


It is worth noting that between June 2021 and February 2022, consumer perception has improved more among poor households. In fact, the importance of improving perceptions in these households has been somewhat undermined because the perception of poor households was hit hardest during the second wave of the COVID-19 pandemic. That is, their perception has improved from a very low level. Consumer sentiment grew by 49.5 per cent in households earning less than Rs 1 lakh per annum. Earlier, it had declined by 28.7 per cent. While this is a great improvement, it doesn't make much sense in terms of the perception of total families in India. The proportion of these households is low and their share in the Indian consumer market is small. Prior to the pandemic, in 2019-20, the share of these households in the total number of households was 9.8 percent and the share of all households in the total income was 3.1 percent. The share of this group increased during the Covid pandemic in 2020-21 as the economic situation at the macro family level deteriorated during this period. Its share in total households and their income increased to 16.6 per cent and 5.7 per cent, respectively. There was no significant change in these ratios in the year 2020-21.


In the year 2021-22, the number of families with an annual income of 1 lakh to 2 lakh rupees seems to be decreasing. Earlier, in 2017-18 and 2020-21, the share of such families used to be 44-45 percent in the total households of the country. But in the first half of 2021-22, their stake has come down to 25 per cent. Their share in the total income also came down from 31 per cent to 14 per cent. Consumer sentiment for this group increased by 31 percent between June 2021 and February 2022.


It seems that many families are now falling into the higher income bracket from the Rs 1-2 lakh income bracket. This is evidenced by the fact that in the first half of 2021-22, the number of households in this range has decreased, but the number of households falling in the low income category has remained unchanged while the number of households in the high income category has increased. In the first half of this year, signs of improvement in household income were evident. The figures for the remaining months are yet to come. But a steady improvement in consumer sentiment indicates that household income may continue to improve in the second half of 2021-22 as well. Consumer sentiment for households with an annual income of 2 lakh to 5 lakh grew by 28.3 percent between June 2021 and February 2022. This income segment has become the most important segment of the Indian consumer market. Their share in the total households in the country is 50 percent and their share in the income of the total families is 56 percent. Till recently, their share in the total households used to be 33 per cent and 45 per cent in the total income. In absolute terms, the Consumer Sentiment Index is at the highest level in this income group as compared to other income groups.


The Consumer Sentiment Index among households earning Rs 5 lakh to Rs 10 lakh annually rose by 8.1 per cent since June 2021. Families falling in this income group were not affected in the second wave of the Covid epidemic. Their perception stabilized but did not go down like other groups. The proportion of such families is relatively small. Their share in all the households is only 7.1 percent but their share in the income of the total households is 19.7 percent. The number of households earning more than one million annually in India's total consumer market is small. In the first half of 2021-22, their share in the total households in the country was 0.9 percent and the share in the total income was 5.2 percent. In the second wave, consumer sentiment of such households had come down by 3.9 per cent. The improvement since then has not been encouraging with 1.2 per cent. Consumer sentiment for this group peaked in December 2021 but declined in both January and February 2022. About 75 percent of the income of such a group goes towards savings. The sentiments of this group seem to have been affected due to the fall in the stock market. The income of the middle-income group is improving and this is also reflected in their strengthening perception.

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