Strengthening the middle class economy
India has been called the country of villages for a long time. Even today, a large population of the country lives in rural areas, but the heartbeat of the economy now seems to be rapidly shifting towards cities. Times of India quoted PRICE and Tata Sons as saying that the country’s top 100 cities, in which less than 20 percent of the country’s total population lives, are alone generating 31 percent of India’s total consumption. Not only this, these cities are also generating more than one-third of the total income of the country. This figure not only shows the increasing economic power of cities, but also shows that the center of India’s economy is gradually shifting from villages to cities.
The biggest reason behind this change is employment. Jobs like IT, finance, manufacturing, e-commerce, startup and service sectors have grown rapidly in big and medium cities. Every year lakhs of people are migrating from villages and small towns to cities in search of better employment and higher income. Its impact is directly visible on the income and spending capacity of cities.
These 6 cities handle consumption
The six big cities of India, Delhi, Mumbai, Bengaluru, Kolkata, Chennai and Hyderabad, have the biggest contribution in the total consumption of the country. These six cities together handle about 46% of the country’s total consumption and about two-thirds of the urban consumption. Among these too, Delhi-NCR has emerged as the biggest consumption hub. The annual consumption here is about Rs 12,03,552 crore. This is almost equal to the combined consumption of Mumbai and Bengaluru, which together comes to about Rs 12,79,968 crore. A major reason for the huge consumption of Delhi-NCR is its population. About 75 lakh families live here, whereas in Mumbai this number is about 46 lakh families. Families of Delhi-NCR spend around Rs 3,15,216 crore every year on transportation alone. This amount is bigger than the entire consumption market of cities like Pune or Ahmedabad.
Increasing share of middle class
According to the report, less than 20% of the country’s population lives in the top 100 cities of India, but these cities generate more than one-third of the country’s income and account for 31% of the total consumption. In the report, income and consumption have been divided into four categories.
- Big Six- Cities with population of more than 1 crore, where the average annual income is Rs 23 lakh.
- Boomtown- Cities like Ahmedabad, Jaipur, Surat and Pune, where the population is between 25 lakh to 1 crore and the average annual income is Rs 17 lakh.
- Breakout Cities- Cities with population of 15 lakh to 25 lakh, where the average annual income is Rs 14 lakh.
- Frontier Cities- Cities with population of 5 lakh to 15 lakh, where the average annual income is Rs 12 lakh.
According to the report, in the last 10 years the share of middle-income families (with annual income of Rs 6 lakh to Rs 36 lakh) has increased from 29% to 53%. It is estimated that by 2030 their share in the top 100 cities will increase to 60%. At present Hyderabad is at the forefront in this matter.
At the same time, the share of high-income families with annual income of more than Rs 36 lakh has also increased from 3% to 12% in the last 10 years and is expected to reach around 20% by 2030. Delhi, Mumbai and Pune are at the forefront in this category, while cities like Raipur, Tuticorin and Kannur are growing fastest in terms of increase in the number of middle-income and high-income families. By 2030, low-income families will almost disappear in the top 100 cities, the share of families with annual income less than Rs 1.5 lakh is estimated to reduce to just 0.3%.
Will villages be left behind?
The question is also whether villages and small towns will be left behind in this race? Digital connectivity, better roads, online education and e-commerce have given new possibilities to small towns and rural areas as well. Many companies are now increasing investment in tier-2 and tier-3 cities. Due to this, economic activities may become decentralized to some extent in future. Still, the picture is clear at the moment. India’s economic story is now not just about farms and villages, but also about malls, metros, startups, offices and urban consumers. Even though the country’s population is still predominantly rural, consumption, income and investment figures show that the center of economic power is rapidly moving towards cities.
A large share of India’s consumption, income and investment is increasingly concentrated in urban areas, while agriculture and the rural economy still remain the basis of livelihood for millions of people. About 64% of India’s population still lives in rural areas. The contribution of agriculture to GDP is about 15-16% but its share in employment is still quite large. Rural consumption is still important for sectors like FMCG and two-wheelers.
Also read- FSSAI action on energy drink companies, know how big is their business
