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Prices down, but cost of living high for Indian middle-class

India’s wholesale as well as shop-end prices kept low through 2015 in keeping with a wider global trend, as crude slipped to new lows but the middle-class is not cheering.

business Updated: Jan 04, 2016 02:21 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
Indian economy,Wholesale price index,Indian middle class
A shopper looks at prices as he inspects the quality of rice for sale at a supermarket. (AFP)

India’s wholesale as well as shop-end prices kept low through 2015 in keeping with a wider global trend, as crude slipped to new lows but the middle-class is not cheering.

The cooling prices mask a silent surge in cost of services and non-essential products, with millions of middle-class households now spending more than half their monthly budget on maintaining their living standards.

Retail prices of almost all everyday products and services – restaurant meals, movie tickets, hair cuts to lipsticks – have risen sharply, signaling India’s inability to control rising cost of living, partly stoked by growing income and aspirations.

A comparison with data of January 2013, when the government moved to a new retail inflation series, paints a worrying picture of galloping costs of living and services that has escaped policymakers’ attention.

Here’s a snapshot. The monthly price index for “prepared meals” -- a proxy not just for restaurant rates but also a cup of tea bought from a roadside seller -- has risen nearly 9% on an average over the last three years.

Deodorants, lipsticks and other lifestyle products are up by a monthly average of about 5% since January 2013. You are likely to pay Rs 360 or more for a hair cut that cost Rs 300 three years ago.

Entertainment costs such as direct-to-home charges have increased in the range of Rs 180 to Rs 250 a month. Movie tickets, too, are pricier. Official retail price data shows that “recreation and amusement” inflation has gone up by a monthly average of 5.37% since January 2013.

Likewise, official estimates show that education costs, including private tuition fees, have gone up at a monthly average of 7.29% between January 2013 to November 2015. These expenses have virtually neutralised the relief falling oil and commodity prices could have brought to the middle-class.

“We use to pay just Rs 100 to the local cable-operator whereas now DTH (direct-to-home) connection costs Rs 550 a month. Cost of train travel has also gone up by more than 30%,” said Mahesh Kalra, a retired banker who lives in west Delhi’s Paschim Vihar area.

Experts attribute soaring medical and education costs to poor state of government services.

“Primary health and primary education are essentially public services. The quality of these has been largely unsatisfactory, driving more and more people to seek private services. This has push up costs,” said Ajit Ranade, chief economist, Aditya Birla Group.

Medical costs are one of the biggest contributors to indebtedness in India.

House rents have gone up by about 25% since January 2013. Monthly retail “housing inflation”, a gauge of movement of home rentals, has gone up by an average of 8.10%.

“Housing rents have grown by around 18-20% in the last three years,” said Rohan Sharma, associate director (research & real estate intelligence service) JLL India, a real estate consulting and research firm.

The monthly rent of a three-bedroom apartment in east Delhi’s Mayur Vihar area has risen to Rs 27,000-Rs 30,000 from about Rs 23,000-26,000 per month three years ago.

Lifestyle inflation – often ignored -- is now taking up a much larger space in incomes and is growing.

(with inputs from Himani Chandna)

First Published: Jan 04, 2016 01:42 IST