2. Family Economics
-
Upload
mythili-karthikeyan -
Category
Documents
-
view
214 -
download
0
Transcript of 2. Family Economics
-
8/20/2019 2. Family Economics
1/9
6. FAMILY ECONOMICS -A STUDY ON THE HOUSEHOLD EXPENDITURE OF
URBAN MIDDLE CLASS WITH REFERENCE TO CHENNAI CITY
(Dr. Sambamurthy Padmavathi, Assistant Professor, Department. of Commerce,
Shri.S.S. Shasun Jain College for Women, .!agar"
An Abstract
he socio#economic and political changes in $ndia have resulted in a ne% socio economic
group called as &middle class'. hey are from different religion, caste, culture, in different
occupations %ith different status. here are ne% opportunities open to them and they have
access to better education, living, and health care %hich really differentiate the middle class
from the others. he rise in income, along %ith the rise in the population has resulted in
significant change in the spending pattern of the middle class of $ndia. ach household has a
uni)ue family economics %hich reflects in their %ay of spending and also on their budget.
his paper tries to highlight the spending pattern of the urban households there by
understanding the financial soundness of the families in order to cope up %ith the rise in the
prices. A small attempt is made to find out the total e*penditure of an urban household
to%ards household consumption e*penditure. he study also tries to identify the savings and
investments that these households are able to ma+e after paying the $. Primary data is
collected from the households of the Chennai City for the purpose of the study.
################################################################################################################
Intr!"#ct$!n
he spending behaviour of individual reflects the standard of living of the household to
%hich he belongs. he %ay a society spends to%ards the consumption e*penditure creates an
impact on the -DP of a country and thereby ma+ing the country economically po%erful
among the other nations. he family economics does not only deal %ith planning the
e*penditure budget, but also on minute aspects li+e the number of children are to be raised in
the family, is purely an economic concern. Such process of decisions reflects the lifestyle
%hich may be constructed on %hat they provide to their children. hus planning the
e*penditure of the household is very important and there has been a paradigm shift in the %ay
the middle class categorise their e*penditure.
Fa%$&' Ec!n!%$cs
he family economics is an important factor %hich decides the re)uirements of the family
%hether financial or other%ise. $t consists of maor decision of the family as to the place of
living, the +ind of employment to be chosen by each individual, the position of %omen, the
number of children to be gro%n in the family, the +ind of education to be given to the
children and includes ho% savings has to happen in the family. hus financial planning can
be %ell done only %hen the family economics is %ell understood and hence depends on the
demographic profile of a household.
1
-
8/20/2019 2. Family Economics
2/9
he term e*penditure includes the e*penses intended to be spent for the present consumption
as %ell as the amount reserved for the future consumption. *penditure may be classified into
t%o categories, namely, non#recurring e*penditure and recurring e*penditure. he non#
recurring e*penditure may be a capital e*penditure, usually incurred on ac)uiring physical
assets li+e land, house, properties, vehicle, gold, silver and other capital goods. $t may also
be incurred on investments in financial assets li+e ban+ deposits, post#office deposits, shares,
stoc+, and debentures of the corporate sector. $t is e*pected and its benefit lasts for a longer
period that such e*penditure does not form part of the regular recurring e*penditure. /or
e*ample, an e*penditure on ac)uisition of house is incurred so that the successors of the
household may find a place of comfortable living. he e*penditure on the financial assets
helps in enhancing the financial position of the household by the funds accumulated. his
accumulated fund can be utili0ed in times of need. 1ecurring e*penditure is re#occurring in
nature and it can also be called revenue e*penditure (by business entities". he e*penditure
helps the household to maintain and sustain a particular standard of living. he recurring
e*penditure is spent in the form of consumption on several items. he consumption
e*penditure on food, health, insurance premium, education, clothing, travel, communication,
leisure, vacation can be classified under the category of recurring e*penditure. he e*penses
met for the maintenance of the coo+ing stove (%hether electronic or other%ise", refrigerators,
mi*er grinders, air#conditioners belong to the category of recurring e*penditure only.
he creation of middle class may also be identified by their ability and potential to spend
to%ards various +inds of consumption e*penditure listed in their budget. $t is e*pected that by
2343, $ndia %ill surpass both the 5S and China, and %ill be the %orld's largest middle class
consumer mar+et, by 2346 $ndia could add over 7 billion people to the global middle class
Stat(%(nt !) t*( Pr!b&(%
$ndia's -DP has gro%n at an average rate of 8.28 over the years 2333#2373, and it is further
e*pected to gro% faster during the t%elfth five year plan period, according to the estimates of
the Planning Commission of $ndia. Such gro%th in the -DP also means increase in the per
capita income. he actual disposable income of the $ndian household has doubled since 769:
%hich has emerged into a middle class. he rise in the disposable income has brought about
a notable change in the spending pattern of the middle class. According to the recent
estimates of the Central Statistical ;rgani0ation,
-
8/20/2019 2. Family Economics
3/9
2373. $t is to be noted that the share of consumption in total -DP is higher than the
investments.
Ob+(ct$,(s !) t*( St#"'
o understand the profile of middle class in Chennai City
o identify the household consumption e*penditure on various categories of e*penditure
o analyse the estimation of e*penditure on each categories of e*penditure
o find the significance of age and occupation %ith regard to $
R(s(arc* M(t*!"!&!'
Semi structure )uestionnaire %as circulated to the respondents of the Chennai City and
Simple 1andom echni)ue %as adopted to collect primary data. >uestions %ere as+ed on the
appro*imate amount that a household spends over seven categories of e*penditure identified
for the purpose. he amount spent to%ards paying the monthly instalments %as also
computed. he amount unspent %as considered as savings available for both short and long
term investment. Descriptive Statistics %ere computed to understand the percentage of
income spent to%ards each categories of e*penditure.
L$%$tat$!ns !) t*( st#"'
he household consumption e*penditure is classified in to 8 maor categories and hence a
fe% more items may also form part %hich is not considered in this study.
he results are based on the data collected from Chennai City, and hence the result may vary
%ith regard to rural and non metro cities.
he middle class is the focus of the study and hence there may be difference %hen other class
of the population are considered.
R(,$( !) L$t(rat#r(
1avi Shan+er and Debdeep De, (2377" %hile studying the changing pattern of the $ndian
ar+et, the authors observed that the demographic profile of individual has a great impact on
the pattern of spending and there by the living style or pattern automatically get influenced.
1ising per capital income, increase in literacy rate, rapid urbani0ation causes rapid gro%th.
3
-
8/20/2019 2. Family Economics
4/9
Such gro%th and development creates a different demand pattern. he rise in aspirations of
individuals increases the spending po%er %hich leads for different living patterns. he
significant acceleration in the $ndian economic gro%th has direct impact on the spending
pattern %hich has soared for the emergence of ne% middle income class. he change in the
life style of individual has reflected in the consumption of food products. here has been a
shift in the consumption pattern from carbohydrate based staples to%ards protein rich foods.
he %esterni0ed lifestyle is seen in $ndian households as the spending to%ards consumer
durables, apparel entertainment, vacations and life style related activities increases.
homas ?arghese, Chairman, C$$, !ational Committee on ar+eting 2372#724, and C;
e*tiles @usiness, Aditya @rila -roup %rites that the inherent strength is the private
consumption e*penditure %hich %ill continue to remain as the strongest pillar of the gro%thof $ndia. he spending behaviour is greatly influenced by the change in the family
consumption pattern.
1e+ha Attri (2372" states that the age group of 7:#43 years have priorities for spending on
entertainment, leisure, food (%hich include mil+ chocolates, pi00a, soft drin+s" clothing etc.
he generation of today is highly influenced by e*pensive lifestyle. he youth spend mostly
on entertainment, clothes and accessories. he desires of them ma+e them dream for big
things and lead a different +ind of lifestyle.
!eeti+a hurana %rites that the spending behaviour and spending pattern is of t%o types B
life line and lifestyle. he life line includes simple food and non# food items li+e, health,
education clothing" lifestyle spending includes processed food, entertainment, %hite goods
and the li+e.
here is the change in the attitude as live for today rather than for save for the future. All
these change indicate a shift in the culture and values of the individuals on the modern $ndia.
As the present study is on the estimation of e*penditure by the middle class based on their
e*penditure pattern, it is very much necessary that the respondents are placed in right age,
%ho earn something and have some e*perience in running a family or %ho have some
+no%ledge on the re)uirements of the family and also are a%are of the %ay the needs of the
family are satisfied. 5nderstanding the %ay a household runs its family has relevance to the
family economics.
4
-
8/20/2019 2. Family Economics
5/9
Ana&'s$s an" Int(r/r(tat$!ns
Primary data %as collected from the households of Chennai. he present study tries to
understand the spending pattern of the middle class based on their age, occupation and
household income. @ased on the income, the respondents %ere as+ed to estimate their annual
e*penses incurred. /or this purpose the e*penditure %ere grouped under 8 maor categories
of e*penditure namely, Eousing, ransport and Communication, /ood, $nsurance, Eealth,
Clothing, and ntertainment. hey %ere also as+ed to estimate their $ and %hatever is left
after paying for e*penditure and $. hey %ere as+ed to sho% ho% much they prefer to
save for short as %ell as for long term. hese are based on their mental accounting and as the
number of items or heads of e*penditure %ere only 8, it can be presumed that there must be
considerable reliability in the ans%er. hey had to add up to a total of 733 and hence much of
the overFunder estimation could be reduced. As such the outcomes of this e*ercise can be
e*amined no%.
Est$%at$!n !) E0/(n"$t#r(
Tab&( 1
Aggregate Average Expenditure in Percentage Based on Ageof the Respondents
EXPENDITURE AGE CATEGR!
"#$%& !ears
%&$'& !ears
A(ove '& !ears
Average Expenditure in
PercentageHOUSING 22.39 20.34 16.89
TRANSPORT &COMMUNICATION 11.14 10.78 10.76FOOD 13.85 13.72 16.04INSURANCE 7.12 7.2 7.56HEALTH 5.79 5.37 5.37
CLOTHING 5.88 5.81 5.77ENTERTAINMENT 3.75 3.76 3.48EMI 6.59 8.52 9.33SHORT TERM SAVINGS 12.02 12.51 13.21LONG TERM SAVINGS 11.47 11.99 11.59TTA) "&& "&& "&&
able 7 reveals that the e*penditure on housing, transport and communication decreases %ith
age %here as the e*penses on food increases %ith age. he e*penditure on insurance, health,
clothing entertainment is spent in the same pattern. $t is %orth noting that the $ gets
increased %ith the age. $t can be inferred that the loan ta+en by the middle class does not getrepaid before :3 years and thus the accumulated interest and the loan is repaid even after the
5
-
8/20/2019 2. Family Economics
6/9
age of :3. @ut it is interesting to note that irrespective of the e*penditure above they are able
to save 24= of the income to%ards savings and investment.
F$#r( 1
Aggregate Average Expenditure in Percentage Based on *ource of Earnings of the Respondents
0
10
20
30
40
50
60
E!"#$"#%#"'( P")*#++)'(+ ,)-
Categories of Expenditre
Average Percentage
F%"# 1/ "##'(+ !'! !# S'('"# ' !# P")*#++)'(+ +$# 2 )"# ) !#
#$#!%"# ) )%+ '+ ''+! !# #!"#$"##%"+ ) +$# 18.7 )(.
#"#'+ !# #!"#$"##%" +$#+ 1.5 )"# ) T"'+$)"! ' C)%'!)
'+ )$'"# !) !# )!#"+. T# #!"#$"##%"+ ) +$# )"# ) #$#!%"# )
H#'(! ' I+%"'# !' !# )!#" !). T# EMI $''-(# - +'('"# ' !#
$")*#++)'( + )"# # )$'"# !) !# #!"#$"##%"+. H#"# '(+) ! +
)-+#"# !'! ""#+$#!# )* !# )%$'!)+/ !# (# ('++ + '-(# !) +'#
23 )* !#" )#.
6
-
8/20/2019 2. Family Economics
7/9
Tab&( 2
Aggregate Average Expenditure
EXPENDITUREA"#'!#P#"#!'#
HOUSING 20.41 TRANSPORT &COMMUNICATION 10.86FOOD 14.17INSURANCE 7.2HEALTH 5.4CLOTHING 5.74ENTERTAINMENT 3.73EMI 8.12SHORT TERM SAVINGS 12.53LONG TERM SAVINGS 11.84
TTA) 100
able 2 presents the aggregate of average e*penditure at the three levels of income. $t sho%s
that
-
8/20/2019 2. Family Economics
8/9
communication, 8.2= on $nsurance, :.8G= on Clothing,:.G= on Eealth and 4.84= on
ntertainment. After spending they have 9.72= of their income committed to%ards payment
of $ there by leaving 2G.48= to save and invest.
his study brings out the fact that the urban middle class prefer to spend more on proper
housing to have a place for comfortable living and are ready to spend more on all e*penses
%hich may ta+e care of their health %hich is the reason for spending more on housing, food,
health care and insurance.
C!ncs$!n
he $ndian iddle Class is +no%n for savings from the household budget. here is a saying
that What can be saved from itchen cannot be saved from any%here else. he fast
spreading consumerism, attractive Departmental Stores, Super ar+ets and the introduction
of all play a vital role in persuading the consumers to buy even if there is no utility derived
from such consumption. Another factor %hich forces the middle class to ac)uire personal
assets is the installment buying, net ban+ing, credit cards, and debit cards. hus the maor
part of the income is spent to%ards consumption and still the middle class could save 24=. $t
is really the need of the hour. his domestic savings %ill considerably increase the -DP of
the country to ma+e it stronger and ma+e $ndia developed nation by 2323.
B$b&$!ra/*'
Adrian /urnham, 7666, he saving and spending habits of young people, Journal of
Economic Psychology, ?olume 23, pp.
-
8/20/2019 2. Family Economics
9/9