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Rural India's increasing discretionary power
Oct 24, 2013

As and when people make more money, they begin to spend it on items that are not essential for basic survival. This seems to be happening in rural India currently. As per The Mint, there has been a structural change in rural demand over the past few years, with one such change being the growing importance of discretionary spending. If one sees the chart displayed below, it does indicate that spending on non-food items has now surpassed the spending that rural India does on food items. Items such as durable goods, entertainment, clothes, footwear, consumer services (such as telephone and repairing charges) are just some of the aspects that have increased over time. Given the strong monsoons this year, this trend is expected to widen in favour of the non-food expenditure. In view of the large size of the population that resides in rural parts of the country, this could be a huge market for companies targeting such customers. Even minor changes in percentage terms could throw up big opportunities in terms of value.

One point that however needs to be taken into consideration here is the role of schemes such as NREGA and the construction boom until a few years ago played a big role in terms of providing jobs to rural India, thereby allowing them to earn and supplement their traditional agricultural income.

This Chart Of The Day was published in The 5 Minute WrapUp - Sensex breaches the 21k mark yet again. But now what?

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