Hyderabad : Hyderabad is the cheapest and Mumbai is the costliest city in India, according to a study conducted by the Economic Times Intelligence Group.

The aim of the study was to find out what a high income household spends if it were to be located in any of the eight major cities in the country.

The differences which the study identified are whopping. For instance, the cost of living in Mumbai is 87 per cent more than living in Hyderabad. New Delhi comes after Mumbai, but it is nevertheless all of 25 per cent cheaper.

That too is quite a difference. Bangalore, Pune and Chennai follow but the differences among these cities are narrow. Ahmedabad comes sixth and Kolkata seventh. Hyderabad is the cheapest and at the bottom of the list.

For determining the cost of living in each city, a standard consumption basket of 50 items (goods and services) of daily use was made.

The consumption quantities of each item were derived through an initial survey of households. Then the prices of these goods and services in each of the eight cities was found out to establish how much a family spends.

For reasons of comparability, the survey assumed that the representative family stays in the median locality of the city, meaning where the real estate prices are neither too steep nor too low.

It assumed that the working couple travels from this locality to the most common business district of the city in company-given transport and pays for the petrol.

Based on these yardsticks, the survey found that the biggest skew in expenditures was caused by the real estate rate and travel costs.

For example, rent for an 800 sq ft flat in a median locality in Mumbai would be Rs 12,000 against Rs 3,000 for Hyderabad. Distances in cities like Mumbai and Delhi also make commuting to a place of work quite expensive.

If rent and commuting expenses are not considered there is little difference in the cost of living among the various cities.

Take the example of Mumbai. The city’s overall cost of living is about 25 per cent more than Delhi’s for the assumed standard consumption basket. But the difference would be only nine per cent if rent and commuting expenses were excluded.

In many consumption items, the price differences are narrower, partly because of the rising consumption of branded goods.

The survey, a pioneering study across Indian cities, can be used for computing salaries and allowances of expatriate employees, help human resource departments in companies design compensation packages and, more importantly, perhaps help you take that long-pending decision on shifting base to another city.

August' 2002

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