INDIA VS CHINA

S AV I N G S A N D C O N S U M P T I O N
PAT T E R N
- GROUP 9

CONSUMPTION
Consumption is the value of goods and services bought
by people. Individual buying acts are aggregated over
time and space
Consumption is normally the largest GDP component
Before Economic Reforms, consumption comprised of
approx 52% of the GDP, however after reforms, it has
grown its share to more than 62%
Many persons judge the economic performance of their
country mainly in terms of consumption level, which is
distributed in the consumption of three categories of
products, namely durable, nondurables and services

INDIA VS CHINA CONSUMPTION

As emerging economies become more affluent,
the size of the global middle class is expected to
increase, from fewer than half a million in 1960 to
4 billion in 2030
The largest number will live in China and India
Both have large populations, industrializing
economies and rising living standards
Residential water and energy use, car ownership,
personal travel, food notably meat and dairy
consumption, and waste generation all increase
with income

CONSUMPTION DEPENDS ON.

Value of goods and services bought

Largest GDP Component
Division of Consumption
Judging development level of a country
Determinants of consumption
Role of demographics in consumption
Impact on other variables
Business Cycle behaviour of Consumption

DIVISION OF CONSUMPTION

Food
Clothing
Housing
Heating and energy
Health
Transport
Furniture and appliances
Communication
Education
Entertainment

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DETERMINANTS OF CONSUMPTION
Current income
Cumulated Savings
Expectations of Future income

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IMPACT ON OTHER VARIABLES

GDP
Savings
Imports
State Revenue

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HOUSEHOLD FINAL CONSUMPTION

EXPENDITURE AS A % OF GDP

FOOD AS % OF HOUSEHOLD
CONSUMPTION EXPENDITURE

HEALTH AS % OF HOUSEHOLD
CONSUMPTION EXPENDITURE

HOUSING AS %OF HOUSEHOLD

CONSUMPTION EXPENDITURE

EDUCATION & RECREATION AS % OF

HOUSEHOLD CONSUMPTION EXPENDITURE

GOVERNMENT FINAL CONSUMPTION

EXPENDITURE AS A % OF GDP

FINAL CONSUMPTION EXPENDITURE AS

% OF GDP

CHINA CONSUMPTION PATTERN

70

60

50
Household Final Consumption
Expenditure as a % of GDP(Absolute)

40

Government Final Consumption

Expenditure as a % of GDP(Absolute)
Final Consumption Expenditure as a % of
GDP(Absolute)

30

Gross National Income, US

Dollars(Growth)

20

10

0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

INDIA CONSUMPTION PATTERN

90
80
70
60

Household Final Consumption

Expenditure as a % of GDP(Absolute)

50

Government Final Consumption

Expenditure as a % of GDP(Absolute)

40

Final Consumption Expenditure as a % of

GDP(Absolute)

30

Gross National Income, US

Dollars(Growth)

20
10
0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

SAVINGS PATTERN
National Savings comprises of:
Household Savings
Corporate Savings
Government Saving

GROSS NATIONAL SAVINGS AS % OF

GDP

GROSS HOUSEHOLD SAVINGS AS A %

OF GDP

HOUSEHOLD SAVING RATE

FACTORS AFFECTING HOUSEHOLD

SAVINGS
Demographics
Pension funds
Private home ownership
Precautionary Savings
Cultural & Habit persistent

MEDIAN AGE

CORPORATE SAVING

HIGH CORPORATE SAVINGS IN CHINA

Growing Economy makes retaining & reinvestment
attractive
No Dividend Policy
Massive subsidies for land and energy reducing the
input cost
Economic and Demographic trends
Corporate restructuring (1995-05)

 Agriculture share in GDP fell from 30% to10% during

1980-2008
Agriculture share of total employment from 70% to 40%
Urban population rose from 20 to 45%
One-child policy
Dependency dropped from 68 to 38% within a
generation resulting in working-age share of population
from 60 to 74%

Large-scale labour migration from FARMS to FACTORIES

at relatively LOW WAGE rate

CORPORATE RESTRUCTURING
Large scale labour retrenchment employemnt at
state companies was halved
Small money losing companies were shut down
altogether
Enterprise based cradle-to-grave social safety net
shrank rapidly resulted in a boost in corporate
efficiency and thus corporate savings

REFERENCES
Datamonitor.com
http://www.thehindubusinessline.com/features/inv
estment-world/article2077037.ece
www.mckinsey.com

THANK YOU!!!