The surging economy has turned the tide for Indian households – the number of high-income households exceeded that of low-income by the end of 2009-10, according to a study conducted by the Centre for Macro Consumer Research (CMCR), a division of the National Council of Applied Economic Research’s (NCAER). The study report titled ‘How India Earns Spends and Saves’ is based on a survey of 4.4 lakh households across 24 states carried out by the National Survey of Household Income and Expenditure (NSHIE) in 2004- 05.

The report pegs the number of low-income households (less than Rs 40,000 annual income) at 41 million, while that of the high-income (more than Rs 1.8 lakh annual income) at 46.7 million. The rest, earning between Rs 40,000 and Rs 1.8 lakh, comes under the middle-income category, numbering 140.7 million.

This means that 62% of Indian households come under the middle-income group. The influence of the middle-class was highlighted by the report when it pointed out, “Their growing clout becomes even more apparent when one looks at the ownership patterns of households goods. Nearly 49 per cent of all cars are owned by the middle class, compared to just 7 per cent by the rich.” The Indian middle-classes are the proud owners of 53% of air-conditioners and 46% credit cards sold in the country.

“The wheel of fortune continues to spin in India, with each level of household income set to move a notch higher by the end of the decade,” the report observes on the rising incomes.

Another fact revealed by the study report is that the country’s young workforce is the driving force behind the surging economy as well as the changes witnessed in the income patterns. This sizeable (25%) wage-earning population from the age group of 26 to 35 years forms the chief earners in 68% households and accounts for 61% of income earned in the country.

A survey by consultancy firm Nielson unveils the positive wave that is sweeping the country. Indians top the list of global citizens who are optimistic about their job prospects and personal finances in the coming 12 months. The Nielsen Global Consumer Confidence Report has an overwhelming 92% Indians thinking that they would land their dream jobs within the year.

The report also reveals the fact that 71% Indians believe that this is a ‘good’ time to buy, while 14% consider that this is an ‘excellent’ time for purchases. India stands first in the consumer confidence index for the current quarter, April-June 2010. While India amassed 129 points (a two point increase from last survey), the second position is occupied by Indonesia and Vietnam with 119 points each.

India and Indians should thank the healthy growth the country’s economy witnessed, despite the recessive times. Piyush Mathur, president, the Nielsen Company India said, “The positive attitude of Indians comes on the back of a robust GDP growth (9 per cent) in the April-June quarter of 2010. For the fiscal 2009-10, India’s economy grew by 7.4 per cent due to higher-than-anticipated growth in the agriculture, mining and manufacturing sectors.”

The Nielson survey to gauge confidence, concerns and spending patterns of people worldwide is based on the answers given by 27,000 internet users spread over 48 countries. Indians scored the most on all parameters – job prospects, personal finances and spending outlook.

Rising food prices feature among the top concerns for Indians, while job anxieties and financial worries are relegated to the background. Terrorism, children’s education, parental welfare and global warming also are bothering Indians.

After releasing the discussion paper on Direct Tax Code (DTC) in August 2009 for public feedback, a revised version of the same was released by the government on Tuesday. The revised DTC has covered some of the issues in the original that attracted widespread criticism.

The new Direct Tax Code is expected to change the income tax calculation of corporate as well as individual assessees. The discussion paper says, “The indicative tax slabs and tax rates and monetary limits for exemption and deductions proposed in the direct tax code will be calibrated while finalizing the legislation.” This may lead to higher tax rates than that proposed in the original draft. However, for individual assessees, the retention of exemption on savings and home loans has brought cheers.

Due to public outcry, the government has amended the DTC to the effect that withdrawals from pension funds, provident funds and life insurance schemes will not be taxed. However, there are still some points that lack clarity. The DTC paper says, “approved pure life insurance products and annuity schemes will also be subject to EEE (exempt, exempt, exempt) method of tax treatment’. This leaves the fate of unit-linked insurance plans (ULIPs) in doubt.

The new wealth tax will cover financial assets such as stocks and mutual funds as well. This is bound to be tougher for individuals. The dividing line between long-term and short-term investment is blurring with the new DTC proposal. With no great distinction between capital gains tax for both, investors will lack the motivation to go in for long-term investments, which is against government policy.

The DTC bill is slated to come up in Parliament in the coming monsoon session. The DTC will come into effect from April 2011 and will replace the Income Tax Act of 1961.

While green activists are crying hoarse over global warming and soaring temperatures, making this summer one of the worst in the recent times, FMCG companies selling cooling systems such as air-conditioners and refrigerators are laughing all the way to the bank by witnessing amazing growth in sales.

Even during normal years, sale of these products reach a feverish pitch during the summer months. Average y-on-y growth for this category hovers in the range of 20-25 percent. However, the scorching heat of this summer has pushed the sales beyond expectations. While the y-on-y growth in the A/C category is above 50 percent, refrigerator sales grew at an amazing rate of 40 percent.

The growth has been equally good across the entire range of top FMCG companies such as Godrej & Boyce, LG, Samsung, and Videocon. In A/C category, while Godrej witnessed a growth of 50%, Videocon registered a growth of 60%. Samsung is expecting to sell a million units this year to corner 30% market share. Refrigerator sales increased by 30% for Godrej and 40% for Videocon.

All top FMCG companies in the segment had prepared for the deluge in demand. Even with all the preparation, with the demand much exceeding previous years, production capacity is being stretched to the utmost. Most companies like Godrej and LG have doubled their production for the products. Samsung had set up new manufacturing plants for split A/Cs in Sriperumbudur and Noida to meet the summer demand.

Indian consumers are favoring split A/Cs to window units, which is proved by above 70% sales growth for the product. The growth in window A/C sales is negligible compared to this.

A new trend that is seen emerging in recent years is the growth in sales across the country. Indian economy’s good performance leading to more disposable income for people from all walks of life is believed to be the reason behind this.