Faster rise of higher income fuels the Indian consumption story
Drawing data from the Income Tax department and BNP Paribas, The Economic Times has reported that there was a 25% rise in the number of those earning Rs 20 lakh a year
Like pictures, numbers often tell a thousand words. Crunching Income Tax data from 2012 till FY21, BNP Paribas has said in a note scanning the income pyramid of those filing ITRs has revealed that while the people earning between Rs 10-20 lakh a year and above Rs 20 lakh rose rather handsomely, the number of people earning less than Rs 5 lakh annually fell steeply, courtesy the pandemic.
Drawing data from the Income Tax department and BNP Paribas, The Economic Times has reported that there was a 25% rise in the number of those earning Rs 20 lakh a year. The number of persons with income between Rs 10 lakh and 20 lakh a year also rose by 24%.
However, those at the bottom of the pyramid – earning less than Rs 5 lakh a year – fell by as much as 20%.
As a result, the proportion of ITR filers with higher income has gone up down the years.
The data revealed that between 2012 and 2021, the IT filers earning more than Rs 10 lakh have risen by 20%. The rise has been a far sober 4.5% when considering the number of those with income less than Rs 5 lakh.
In FY12, as much as 80.7% of those who filed ITRs earned less than Rs 5 lakh annually. The share went down to 54.5% in FY21. The share of IT filers earning between Rs 5 lakh and Rs 10 lakh in FY12 was 13.8% and it rose to 33.1% in FY21.
Significantly, the use of cars rose much faster than motorcycles and scooters. Between 2012 and 2023, the sale of four-wheelers rose by 53%. The sale of two-wheelers was far more moderate – 22%. It is clear that the price of an average car is many times of that of a two-wheeler. There is also a yawning gap between the operational and maintenance costs of these two modes of transport.
While in FY12 the number of four-wheelers sold in the country stood at 2,544,000, the number rose to 3,890,000 in FY23. The numbers of motorcycles and scooters sold in FY12 and FY23 were 1.34 crore and 1.63 crore respectively. In this time window, the highest number of two-wheeler sales took place in FY19 when 2.12 crore units were purchased by Indians. The highest number of cars were sold in FY23.
BNP Paribas said in its note that the faster rise of the number of persons earning more is expected to benefit vehicle manufacturers, jewellers, insurers, multiplexes, hospitals and sellers of financial instruments such as mutual funds.
The recent phenomenon of a faster consumption of premium cellphone handsets and bigger apartments compared to cheaper handsets and affordable dwelling units also corroborates this finding.
The lure of the Indian consumer has proved to be so strong that a Bloomberg report has calculated that global giants are spending $3,600 a second on cricket World Cup advertisements.