There was nothing unusual about advertisement executive Dipti Tamankar's (name changed) shopping three years ago.

Household essentials comprised a large part of her shopping basket. Her double income-no kid family lived in a rented flat and travelled in the ubiquitous Maruti 800.

Shopping trends

Preference for dry rations, perfumes has taken a backseat Home, car, mobile and other life-style products are being lapped up, taking the EMI route Financial assets feature in the consumer basket, particularly in the form of insurance products

Now, the bulk of her income goes into paying the equated monthly instalments on her flat, car and home theatre system.

"We needed a mid-sized car and a home theatre. We are also investing heavily in insurance policies. Earlier, we used to spend a lot at a go on holidaying. Now we have tied up with a resort for life-long holidays, and pay EMIs," she points out. The Tamankars have cut down on food, watching movies in theatres and clothes.

So what? Tamankar is part of the new breed of the burgeoning Indian middle class, which is splurging on itself as much as on home and family.

With surging income levels and declining interest rates, priorities, it appears, have changed. No wonder then that the share of fast moving consumer goods in the consumer's shopping basket has been shrinking steadily to make way for more personal indulgences.

According to a study conducted by India's largest consumer products company, Hindustan Lever, consumers have increased spending on education, consumer durables, entertainment and travel, resulting in a lower share of the wallet for FMCGs.

Says M K Sharma, vice-chairman, Hindustan Lever: "Earlier, consumers spent about 52 paise of a rupee on dry rations and FMCGs. There has been a 10 per cent reduction in that, bringing it to 47-48 paise. The incremental spending is more on education, consumer durables and car loans."

Sample this: in the first half of 2003, sales of monthly passenger cars climbed over 35 per cent, flat TV 14 per cent and DVDs 60 per cent.

GSM mobile phone sales jumped 40 per cent, while Reliance mopped up another 5 million subscribers for its limited mobility services. Also, HDFC's retail disbursements shot up 33 per cent.

A recent study by market research firm NFO-MBL India shows that 30 per cent of the new car buyers in 2003 were buying a second car for their family. Also, 50 per cent of the car owners in the A-segment (below Rs 300,000) planned to upgrade to the C-segment (Rs 500,000-Rs 800,000).

Researchers detected three distinct trends in consumer migration. First, the preference for dry rations and perfumes has taken a backseat.

Second, home, car, mobile and other life-style products are being lapped up, taking the EMI route. And finally, financial assets feature in the consumer basket today, particularly in the form of insurance products.

S B Mathur, chairman of Life Insurance Corporation, which still holds a 90 percent market share, says the sale of individual risk products rose 28 per cent to Rs 2,502 crore (Rs 25.02 billion) in the first half of the current financial year.

Individuals have also invested more than Rs 160 crore (Rs 1.6 billion) in pension plans, whose sales grew over 195 per cent. Private life insurers are selling policies like hot cakes, and premium income collection has shot up 150-200 per cent.

"Individuals are investing more in insurance products these days, especially high net worth individuals, who see greater investment value in such products," says Abhay Aima, HDFC Bank's country head, private banking.

Adds NK Ambwani, managing director of Johnson & Johnson, "Consumers are not spending less but are spending differently. The FMCG industry today is faced with the challenge of sustenance and growth."

Agrees Shantanu Khosla, managing director of Procter & Gamble: "Today, consumers have a lot more avenues to spend."

What is driving this change? Consumers now have the advantage of abundant and cheaper credit, interest free loans in some categories, and declining product prices owing to technological innovation, feels Godrej group director Nadir Godrej.

Venugopal Dhoot, chairman of Videocon International, says: "The reduction in taxes and product innovation have brought down prices of consumer electronics products. Moreover, people with higher income are also upgrading products."

This scene is replicated in the food industry. Confirms Sanjay Narang, owner of Mars Restaurants, which runs several chains in Mumbai like Roti, Just Around the Corner and Dosa Diner: "The frequency of visits to restaurants has gone up with the desire to try out new cuisine as the number of speciality restaurants across India is mushrooming."

With interest rates touching a new low, the credit to the housing finance industry has doubled in fiscal 2003 to Rs 12,308 crore (Rs 123.08 billion). HDFC saw a 30 per cent rise in disbursements to Rs 5,471 crore (Rs 54.71 billion) in the first half, while the State Bank of India's home loan portfolio grew Rs 1,700 crore (Rs 17 billion) to Rs 13,850 crore (Rs 138.5 billion).