Earning individuals in India spend over 33% of monthly salary on EMI: Study

Salaried individuals across India allocate more than 33% of their monthly income toward paying loan EMIs, underlining the growing burden of credit-driven consumption, revealed a survey on Wednesday. 

 

Perfios, a B2B SaaS Fintech company, along with PwC India has launched an insightful report titled How India Spends: A Deep Dive into Consumer Spending Behavior. The report, based on a comprehensive study of over 30 lakh tech-savvy consumers, revealed that 39% of consumers’ total spending goes toward obligatory expenditures, followed by 32% on necessities and 29% on discretionary spending.

 

 The study encompasses a wide range of demographics across India, from Tier 3 cities to metropolitan areas, as well as income groups ranging from Rs 20,000 to Rs 1,00,000 per month.   Distribution of loan EMI payments as a percentage of total spending across income levels 

   

Lifestyle Purchases: A significant 62% of discretionary spending is directed toward lifestyle products, including fashion and personal care items.

 

There is a 6.4% increase in the average amount spent on lifestyle purchases by a person living in a metro, which is Rs 2,022, compared to that spent by a person residing in a Tier-3 city, where this figure is Rs 1,882 monthly. 

 

Some of the factors that influence the lifestyle-related shopping behaviour of people include consumer preference, brand consciousness, access to products and online shopping. The number of online shoppers is growing in India.

 

"Of all the lifestyle purchases by consumers, 20% is allocated towards fashion. This subcategory includes transactions for purchasing apparel and accessories from designated merchants.

An interesting observation is that the frequency of consumer spending on fashion shopping remains relatively consistent at about twice a month across different salary buckets. However, the actual amount spent increases threefold from entry-level earners to high-income earners," noted the study.

 

Impact of Income on Spending: As individuals' salaries increase, so do both the amount and frequency of spending on food-related expenses, such as dining out or ordering food.

 

Online Gaming: The percentage of entry-level earners (<Rs 20k) engaging in online gaming transactions stands at 22%, a figure that decreases to 12% as income rises to above Rs 75,000 per month.

 

Payment Preferences: While Electronic Clearing Service (ECS) is the most common method for obligatory spending, UPI dominates for discretionary and necessary expenses.

 

Rent and Medical Expenses: The average rent expenditure in Tier-2 cities is 4.5% higher than in Tier-1 cities, and individuals in Tier-2 cities spend 20% more on medical expenses than their Tier-1 counterparts. On average, a person in a Tier-1 city spends Rs 2,450 per month on medical expenses, while those in metro cities spend the least, averaging Rs 2,048. 

Key Takeaways:

• People spend the highest amount of money on obligatory expenditures, which accounts for 39% of their total spending, followed by 32% for necessity expenditures and 29% for discretionary expenditures.
• The percentage of people performing transactions for online gaming is highest for entry-level earners at 22%. This gradually decreases to 12% as income increases.
• The average total amount spent on house rent is 4.5% higher in Tier-2 cities than in Tier-1 cities.
• Individuals across all city tiers allocate more than 33% of their income towards paying loan EMIs.