Rural consumers spending more than urban peers

Divergence between rural and urban India continues to widen, with rural population's spending capacity remaining higher than their urban peers in almost all categories of spending, says a report.

"Rural consumers are spending more, and penetration gaps between urban and rural consumers for discretionary items such as automobiles, branded goods and even monthly outgo on mobile connection have come down," said Credit Suisse in a report titled 'India consumer survey 2014'.

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The report further said despite the higher growth in spending in rural areas, the fall in savings rate is more drastic in urban areas, showing the effect of lower income increase and higher inflation on urban consumers.

The survey also highlighted that more rural people saw their incomes increase last year and even more expect this trend to continue this year.

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According to the survey, the declining trend of consumer optimism observed in the last two years shows some signs of improvement and that the declining trend in discretionary consumption seems to be bottoming out.

"More people believe this is a good time for making big-ticket purchases, and also expect inflation to decelerate," it said.

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"There is also a reversal of the down-trading trend in discretionary items we observed in last year's survey-a sign that declining growth in discretionary items may be bottoming out," the report said.

However, Credit Suisse believes it is still early to say whether the cycle has turned and things will pick up from here on.

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The survey shows there has been a sharp fall in consumers wishing to buy unbranded items.

"Indians are among the lowest consumers of items such as beer, spirits, meat and cigarettes, have the lowest access to the Internet, and while  improvement is seen on these parameters based on this year'ssurvey, there is still a long way to go,” the report mentioned.

"This, combined with the greater participation of rural population especially those at the bottom of the pyramid, bodes well for the country's consumption story," the survey concluded.