Delhi and Mumbai alone account for a fifth of the country's total surplus income. The country's top 20 cities, including both Delhi and Mumbai, account for just 10 per cent of the country's population but 20 per cent of its savings, 30 per cent of its income and as much as 60 per cent of its surplus income (see Table).

Most of these top 20 cities have similar income structures (2-5 per cent of households in the lowest income quintile and 45-55 per cent in the topmost income quintile).

Income levels across them differ quite significantly (eight megacities have an average household income of Rs 354,000 in 2007-08 as compared to around Rs 283,000 for seven boom towns), but thanks to a greater propensity to spend in the smaller towns, average annual expenditure levels are broadly similar across these 20 cities - Rs 177,000 per household in megacities versus Rs 160,000 in boom towns.

These are the findings of The Next Urban Frontier: Twenty Cities to Watch, an NCAER-Future Capital Research (of the Future Group) jointly written by Rajesh Shukla and Roopa Purushothaman. Eight megacities like Delhi/Mumbai/Kolkata are the largest cities in terms of population and consumer markets, seven boom towns like Surat/Kanpur/Coimbatore represent the next set of large population cities with high expenditure levels; and five niche towns like Faridabad/Ludhiana/Jalandhar have smaller population but spend much more than cities of comparative size. The propensity to consume is around 50 per cent in Delhi versus 70 per cent in Coimbatore, for instance.

Track these cities  (Importance of India's top 20 cities)
They account for most savings and consumption Figures in %, 2007-08
Share of total	Rural	Mega- cities	Niche cities	Boom towns	Other cities
Population	70.50	7.40	0.70	1.80	19.70
Income	56.00	24.60	1.70	4.50	13.10
Expenditure	63.90	16.40	1.30	3.40	15.00
Surplus Income	32.50	49.00	2.90	7.90	7.70

 

But have low usage of financial products Households owning these products, in %
	Megacities	Niche Cities	Boom towns
Car/Jeep	15.6	23.1	15.3
Colour TV	69.3	74.1	60.1
Refrigerators	64.2	65.8	56.7
LIC [Get Quote] policies	42.6	36.8	47.4
Loans outstanding	17.2	12.5	18
Credit cards	8.5	2.4	9.7

The study points out that by 2015-16, more than half the households in these 20 cities will be middle class (defined as households with annual incomes of $6,000-$30,000) as compared to around 20 per cent in 1998-99; and the share of low-income households could fall to around 7 per cent from around 35 per cent in 1998-99.

The share of the rich, with annual incomes of more than $30,000, will rise from negligible in 1998-99 to around 10 per cent by 2015-16.

Interestingly, while households in these cities are fairly big users of items like colour TVs [Get Quote], refrigerators and even own LIC policies, the degree of financial participation is very low.

As compared to around 65 per cent of households that own a colour TV and a refrigerator and 43 per cent who have insured their lives, in the case of megacities, just 17 per cent have loans outstanding (of this, the proportion using organised banks will be even smaller) and those owning credit cards is half of even this at 8.5 per cent.

Things are not much better when it comes to the boom towns, where between 60 and 65 per cent of households own colour TVs and fridges, 47 per cent own LIC policies but just 18 per cent have loans outstanding and under 10 per cent a credit card.