Biting inflation, coupled with costlier fuel, education and health insurance premiums has eroded the real incomes of middle-class India, with savings dropping by a massive 40 % in the last three years, says ASSOCHAM. While poor households are unable to maintain their consumption levels, middle income families find their purchasing power dip fast, thus leaving far less surplus.
The survey was conducted during January - March 2013 in Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, Chandigarh and Dehradun, among others.
Net financial savings by Indians, including deposits with banks and non-banking finance companies, cash, stocks, debentures and small savings have fallen a lot due to rising household liabilities. A majority of people are cutting back spending and are trying to save by value-for-money buying. One in four is trying to increase his income and would like to switch to a better-paid job, take up a second job or work extra.
Moreover, high inflation is putting enormous pressure on companies in terms of higher input costs, coupled with demands for higher salary hikes. 82 % respondents say that the salary hike last year was not in line with the cost of living, which has gone up by 45 % and thus expect bigger increments. Besides, 82 % respondents in metros believe that they have been falling behind financially and their living standard has been affected by at least 25 %.
To cope with inflation, most people are slashing expenses wherever possible by buying cheaper goods and postponing little small luxuries like an LCD TV, a bigger car and a religious pilgrimage. Obviously, discretionary expenses have been stopped altogether.