Increase in Disposable Income

The superior labour productivity in Mumbai is offset by a slightly lower workforce

participation (59% versus 62% in rest of country in 2016) and the smaller average
household size (4.4 persons versus 4.7 in the rest of country). Nonetheless,
households' disposable incomes in Mumbai stood at USD16,900 in 2016, 2.3 times
the average in the rest of India.

Household savings have tripled

Indian household saving rates have also leapt. In the eight years from 2005
they virtually tripled as more were lifted out of poverty and found
themselves with disposable income for the first time.
Disposable income, also known as disposable personal income (DPI), is the amount of
money that households have available for spending and saving after income taxes have been
accounted for. Disposable personal income is often monitored as one of the many
key economic indicators used to gauge the overall state of the economy

Economic reforms have led to increased job creation, reduced poverty and
an increase in the purchasing power parity of the country. The two main
sectors in which most jobs have been created as result of this economic
growth and are services – including communications, insurance, asset
management and information technology According to the Central and
Statistical Office, due to growth in the economy., the per capita income of
Indians increased by as much as 14.2% in 2006-2007. Per capita income at
current prices was estimated at Rs29,642 in 2006-2007, compared to
Rs25,956 for the previous year. Adjusted for inflation, per capita income at
current prices rose by 8.1% from 2005-2006 to 2006-2007, with estimated
gains from Rs20,858 Annual gross income India Euromonitor International
Page 45 to Rs22,553. As a result of the increase in total income, the mean
annual disposable income also increased by almost 150% from 1995-2007.
Economic growth resulted in India creating more jobs than any of the other
BRIC nations (Brazil, Russia, India and China) during 1995-2007. According
to the CSO, both the national income and average per capita income
steadily increased during this period. Although the Ministry of Labour and
Employment proposed a National Wage Policy with a minimum wage of
Rs66 per day, the enforcement of the 1948 Minimum Wages Act falls under
the jurisdiction of the individual state governments who revise the rate at
their own discretion. As a result there exists a disparity in the minimum
wage rates in various regions of the country due to differences in
socioeconomic and agro-climatic conditions, prices of essential
commodities, paying capacity, productivity and local conditions. The
government of India imposes an income tax on the taxable income of
individuals, Hindu Undivided Families (HUFs). Levy of tax is separate for
each person and governed by the 1961 Indian Income Tax Act. In India,
individual income tax is a progressive tax with three slabs with different
values for men, women and senior citizens. A 10% surcharge (tax on tax) is
applicable if the taxable income (after all deductions) is above Rs1 million
for individuals and Rs10 million for corporations. All taxes in India are
subject to an education surcharge, which is 2% of the total tax payable.
Beginning in assessment year 2008-2009, a secondary and higher
education tax of 1% is applicable on the subtotal of taxable income. Income
is taxed at a flat rate of 30% for Indian companies, with a 10% surcharge
applied on companies with gross turnover of more than Rs10 million.
Foreign companies pay 40% of their gross turnover. An education
surcharge of 3% is payable, yielding effective tax rates of 34% for domestic
companies and 41.2% for foreign companies. Fringe Benefit Tax is a tax
payable by companies against benefits that are enjoyed by employees but
cannot be attributed to them individually, such as medical reimbursements,
telephone bills and employee stock options. This tax is paid as 34% of the
actual amount paid for these benefits. Allowances form an important part of
income. The annual basic salary forms about 35%-40% of the total gross
income and the rest of it is given as allowances for medical claims, travel,
house rent, children's education, furnishings and sometimes even
entertainment. These allowances can usually be claimed only if bills are
produced. Since income tax is calculated after deducting these claims, the
structure of remuneration encourages employees to spend their income on
discretionary activities