Purchasing power, not hot weather determines people’s decision to buy ACs

Amid blazing weather, air-conditioning continues to be a luxuryin most households in the country, especially in rural India. As of 2021, just a little lesser than five per cent of the total households possess an air-conditioner in India. However, the ownership of ACs may not be determined fully by heat, but by the purchasing capacity of people.

This is according to the analysis of three datasets - the Ministry of Statistics and Programme Implementation’s 78th Round National Sample Survey, RBI’s data on Net State Domestic Produce per capita and the India Meteorological Department’s number of heatwave days from 1990 to 2019.

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The NSS notes that 4.9 per cent of the total surveyed households own ACs. The divide is stark between rural and urban India.

Just 1.2 per cent of rural households own ACs, while it is 12.6 per cent in urban areas. Interestingly, the findings indicate that most people who own ACs said that they own more than one in their house.

Hot States without ACs

More than half the households in Chandigarh, 54 per cent of them, own ACs. It is 32 per cent in Delhi. Among States, Goa tops the list, with 21.1 per cent of households owning an AC., followed by Punjab (14.6 per cent), Haryana (12.9 per cent) and Kerala (10.4 per cent).

But on the other hand, very few households in States such as Sikkim (close to 0 per cent), Tripura (0.1 per cent) and Arunachal Pradesh and Mizoram (0.3 per cent each) own an AC.

Now what exactly is driving this behaviour? One would think that the decision to buy AC would be driven by hot weather conditions. But this is not the case. 

IMD’s data indicates that districts in Rajasthan, Andhra Pradesh and Odisha experienced the most heatwave days between 1990 and 2019. However, only 3.6 per cent, 8.1 per cent and 1.5 per cent of the households in these States respectively, own ACs. 

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Purchase drivers

Purchasing power of people seems to be driving the decisions to buy ACs more than weather conditions. The purchasing power of people in all the States where more households possessed air conditioners is much higher than the all-India average. While Goa has the second-highest NSDP per capita of ₹4.3 lakh​, Delhi and Chandigarh too rank quite high on that metric. This is not surprising since most air conditioners available in India cost more than ₹20,000.

Sikkim ranks first among States with the highest GSDP per capita. However, the State has a negligible proportion of AC owners. This could be owing to the cooler temperature in the State. 

In Rajasthan and Odisha, NSDP per capita is lesser than the all-India average, explaining the lower number of households owning an AC. According to the RBI data, Bihar is the State with the lowest purchasing power among people. Here, less than 1 per cent of households own ACs.

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