Economics of Indian Weddings
INTRODUCTION
Marriage is considered to be the most significant event in a person’s life. It is not only a socially and ritually recognized union of the two individuals who decide to stay together and rear their offspring, but it also brings several transformations in the lives of the two individuals and their socio-economic hierarchy. A newly married couple marks the beginning of a new family unit. The moment a marriage takes place, the new resultant family unit gets its own identity socially as well as under various laws of the country. It is considered to be the most memorable event in one’s life and is celebrated with great zeal and splendor.
Weddings are celebrated as no less than a festival in India since earlier times, but as the time is passing, they are becoming bigger and fatter. Now a days, ‘The Big Fat Indian Wedding’, as it is famously called, is all about flashy dresses, expensive gifts, loads of dowry, distributing sweets to the acquaintances and having reserved an extra-large banquet hall decorated extravagantly, playing high volume Punjabi music, a grand food-stall and a long guest list.
This article covers:
· The effects of Indian marriages on GDP, both at microeconomic and macroeconomic levels
· How early marriages affect economy
· How marriages have become an industry in India
· The reason for the prevalent Dowry system and its effects on GDP
Hypothesis Question: How can marriage, which is a completely private affair between two individuals, affect Indian economy?
THE INSTITUTION OF MARRIAGE
A new couple is identified and bound as one unit not only by way of bonds of emotions, commitments and natural trust amongst the members of the unit, but also by various laws of the country. For example in a Hindu family, the marriage of the son results into creation of a new HUF (Hindu Undivided Family). This new HUF has been conferred distinct shares and rights under the Hindu law, which can do any activity, hold assets and it is a separate taxable entity under the Income Tax Act 1961 also.
It is this creation of distinct unit by marriage which in turn drives the market economy in various ways and at various levels. When two individuals start a new family it is not that they just decide to stay together for an undetermined time period with their children that are produced thereafter, but the marriage also brings into existence the relation wherein each member owes a responsibility of ensuring the growth, both socially and financially, of each member who is a part of the family unit. The rearing of children, providing them education and placing them at a respectable position in society adds to the pile of responsibilities and obligations that falls upon the shoulders of the couple. This relationship in turn drives the desire of each unit to get engaged in a cycle where each unit wants to consume more, earn more, save more and create wealth as a measure of future security.
This unit can be termed as household economy which contributes to the GDP by encouraging demand, consumption on the one hand and by producing required population with skill, encouraging more production of goods and services, creating wealth and savings on the other, which in turn go back into economy for funding of the development of infrastructure for growth and so on. So, in addition to the contribution to GDP by the Government spending and Business activity of production of goods and services, household economy is also one of the important components of market economy. Statistics suggest that about 40 Crore Indians will marry in the next 15-20 years, which will be a huge boost for the Indian economy.
The largest component of GDP is consumption, which consists of the private/household final expenditure on the economy. The second largest component is investment, which consists of the creation of assets by the couple as a result of marriage. Marriage greatly impacts both these components of the GDP.
IMPACT OF MARRIAGE AT A MICRO-ECONOMIC LEVEL
Indians marry mainly for religious, spiritual and economic benefits. The economic benefits of marriage have recently become more popular. With the coming of liberalization and individualism, Indians have become more and more materialistic. The recent decades are marked by recession, which forces the Indians to weigh every aspect of their life in economic terms, right from choosing an economically beneficial transportation to an economically beneficial marriage. Working middle class Indians are becoming financially insecure. Such insecurity motivates people to think differently about marriage, kin relationships, children, and its economic impact on their lives.
An analysis of marriage at a micro-economic level can be understood by analyzing the economy of the household and the behavior within the household. A single adult individual contributes to the economy through his production, distribution, exchange and consumption. Production includes the goods or services one produces through either his labor (manual or intellectual), or the use of his abilities as a contribution to the economy. Consumption includes the final purchase of goods and services from the market, as well as the aggregate of all economic activity that does not fall under production of goods. Distribution is the return, which an individual gets on his production. It includes the four broad categories of rent, wages, interest and profit. Lastly, exchange refers to the exchange of goods and services in the market, and is considered as an essential component of production. Thus, these four processes represent a constant flow of goods and services in the economy. Such an exchange marks the most essential aspect of a market economy, as it determines the demand and supply of those goods and services in the market, which has a direct effect on the GDP. Therefore, a single individual contributes to the economy through his work and the goods he buys from the salary he receives from his job, also including all the taxes like income tax, sales tax, property tax, VAT, etc. he pays to the government which adds up to the economy.
When two individuals are married, because of various social obligations attached to marriage they end up contributing more to the economy in many more different ways than when they were single. The basic point of marriage in India is the pooling of financial and human resources between the two individuals. Such pooling of resources increases the economic contribution of the family as a whole. If both the partners are earning, then post marriage there is increase in purchasing power also. The increase in purchasing power automatically induces the family to purchase higher luxury products, which they would not have been able to purchase otherwise. Once married, the couple needs to find a place together to start a family independent of their parents. This in turn automatically pushes the demand for new residential units, home appliances, car and other consumer goods and services. When the couple produces children, there is a multiplier effect in the economy, which helps in boosting the demand further. Emotional attachment of the parents to their children drives the parents to invest in their child’s education which results in the production of more human resources and skill development, enabling an increase in the production of goods and services which had earlier been triggered off by an increase in the demand for goods and services as a result of marriage thereby pushing up the GDP. From this we can conclude that married people end up spending more than an unmarried person, because a married unit can contribute more to consumption and production.
In traditional Indian families, the wife usually does not work, as she has a duty to perform her household chores and services. This is a result of a strategic sexual division of labor among households, wherein the husband becomes the provider of the family by working and earning the income running the household, while the wife takes up the responsibility of performing household duties and care and protection of all the family members. In such household frameworks, only the production/earnings of the husband are taken into account in the GDP, whereas the unpaid labor of the wife remains unaccounted for. This is because the labor of the wife is only directed towards the four walls of her home. She performs her labor not for any money but out of love and affection. Many economists have argued that the GDP value as calculated in India is not the true figure because it excludes all such acts carried out of love and affection, which are otherwise economic acts fully capable of being accounted for in the GDP. However, these acts are excluded from the GDP since they have not been performed as a part of a monetary transaction, they do not picture in the market economy though the same work if done by an outsider like a hired maid would have contributed directly to GDP. Therefore, the hard work and labor of a wife, which goes into cooking, cleaning, rearing of children and other household chores remains unaccounted for in the GDP. Though the value of such services by a non earning wife is not specifically measured in GDP, the fact remains that she contributes to the GDP in her own way as already stated.
However, marriage does have a few negative impacts on productivity. Under the Hindu law, the assets held by a family i.e. an HUF can get divided amongst the members as more and more HUFs having legal rights on the property get created as a result of subsequent marriages in the family. However, the division of assets into smaller sizes reduces the productivity. For example, a division of agricultural lands amongst various members, who after marriage demand their separate shares of land, results into a very small land holding by each family unit. It is a well documented fact that modern agricultural techniques, which are required for producing agricultural production cannot be deployed on small land holdings and due to various caste, religion and other socio-economic factors the smaller lands owned by several families cannot be clubbed together for the purpose of making it a large cultivable unit so as to enable the deployment of modern agricultural methods.
IMPACT OF MARRIAGE AT A MACRO ECONOMIC LEVEL
The macroeconomic level looks at the general economic practices in a particular country at large and not only a particular household. The key indicators for a macro-economic study are national income, savings, investment, output, etc. Though each household’s contribution to the economy, as per these indicators, seems very small, but when weighed in the context of the whole nation, these small household contributions end up having a huge impact for the economy in the long run. In a survey among three New York City households, with a single person earning $90,000 a year, a childless couple earning $1,70,000 a year, and a family of five with an annual income just over $,500,000, showed that the married couples ended up spending lesser on basic living costs than a single person. For example, only 9.3% of the couples’ $14,200 monthly gross income goes for rent, compared with 23% of the single person’s $7,500 monthly pay. The couple also pays less for food (5.6% vs. 8.3%), cable television (1% vs. 1.8%) and the telephone bill (1.2% vs. 2.8%). . Where the single person spends a major part of his income on basic costs of living, he cannot have much expenditure in comfort goods, as he also needs to save a part of his remaining income. In the case of married individuals, the incomes of the households increase due to pooling of resources from both the partners. This gives the married couples the opportunity to purchase higher luxury and comfort goods. This proves that a married person spends less on investment and more on comforts as compared to a single person. Married couples also get a tax relief under Indian tax codes; especially the HUFs, which receive a beneficial tax treatment. Due to all the above reasons, the income of an average family left for consumption and saving is much more than an average single person, thereby contributing more to the GDP.
Moreover, the Indian economy needs to compete with the fast growing economies of the developed nations in order to gain a dominant position in the world markets. One of the ways in which an economy can be advanced is by improving the labor, skills and productivity of its population. Household formation is the first step towards improving human resource, skill and productivity. The emotional and social commitment of earner of the family drives him to provide the best for his family. He works much harder in order to earn more, thereby improving his own skills and productivity, and at the same time ensures the best development of skills in his family members. Moreover, the cost of raising and educating children is staggering. The married couple works towards more wealth creation in order to meet with the high financial needs of the children and hedge against the future needs such as weddings, retirement, healthcare, and entertainment, etc. For this reason, a married unit normally strives to earn more than what it can immediately consume which results in creation of wealth/investment in form of fixed assets and financial assets. The savings in form of financial assets such as bank deposits, bonds, fixed deposits and shares, etc. go back into economy, which churns out more GDP through other channels. Though this appears as a very small contribution at each family unit when compared to the national output, but all these small contributions add a big boost to the economy in the long run.
IMPACT OF EARLY MARRIAGE ON THE ECONOMY
While marriages are very beneficial for the economic growth of the country, child marriages have a negative impact on the economy. Not only do child marriages affect the girls personally, physically and psychologically, it also has a tragic impact on the economy. Maximum child marriages, almost one-third of the whole world, take place in India because of which India’s GDP suffers a loss of 12% annually, according to a recent report of the World Bank. When girls are married off before they turn 18, there is a high possibility that they will have to sacrifice their education, which will mean loss of opportunity for skill development, thereby losing an opportunity to secure a decent job and contribute to the economy in any way. Moreover, even if the women of the family are educated they can contribute to the family income in some way or the other and indirectly contribute to purchasing power of family. They may not be able to provide the necessary health care and guidance needed by their new born in order to rear them with skilled human resources, which is one of foundation for a developed economy. The economy thereby loses out on an educated citizen who had the potential to contribute the country’s economic worth. When young brides do not complete their education, their financial responsibility lies solely on the husband. India’s economy remains deprived of any financial contribution from such women. This as a result perpetuates the cycle of poverty and hinders economic growth. A survey conducted in 2008 showed that the labor participation of women was only 33 per cent as compared to 81 per cent of men. As a popular saying goes, “if you educate a woman you educate a family; educate a family and you educate a nation”. Education leads to the economic upliftment of the family by creating a scope for contributing to the family income, which in turn helps in enhancing the economic growth of the country in the long run. If the rate of marriages in the prime of youth remains the same, in the next one decade, on an average more than 39000 girls will get married daily in the world.
Another threat posed by child marriages is the increase in population. Young girls who are married off early have a long and active reproductive period, which may result in over production of human population than what the country can viably sustain. They are unaware of various healthcare methods such as use of contraceptives and are not in a position to discuss with either the parents or the husband, and hence are more likely to have frequent and unplanned pregnancies in comparison to the women who marry later. This adds to India’s ever increasing population number. Considering the basic law of demand and supply, the resources are scarce to cater to the huge population of India, which is increasing at an exponential rate. This adds to the burden on India’s economy, which is already facing a heavy deficit. If a ban were enforced on child marriages, the Indian economy would receive a huge boost. Young girls would complete their education, take up a job and contribute to the economy as a responsible citizen, and then get married at a later age. If secondary and higher education is encouraged among Indians, especially Indian girls, the incidences of child marriage would decrease, and the country would gain an educated adult who has the full potential to contribute to the economic growth of India.
THE MARRIAGE INDUSTRY
Apart from an impact on the economy after the marriage formation, the events leading to the marriage also have a significant impact upon India’s GDP. Marriage has become an independent industry altogether which contributes 10-12% of India’s annual GDP, becoming the fourth largest contributor to the economy after agriculture, manufacturing and service sectors. In an Indian wedding, everyone just spends and does not think of returns. Every manufacturer and retailer involved with marriage related goods eagerly awaits the season to push business. With each passing decade the Indian weddings are getting grandeur. Three decades ago people hardly thought about the lavish wedding function that has now become a trend and may be a compulsion. However, no one’s complaining; at least not the retailers and associated players because of the tremendous business opportunity that comes along with it.
Marriage is the single largest expense for many families in India. Currently, the Indian wedding industry is over Rs 1, 00,000 Crore and is growing at 25 to 30% annually. The estimated cost of a wedding with no expenses spared could be between Rs 5 Lakhs to Rs 5 Crore, in India.
The wedding market in India (Amount in crore)
No. of Indian marriages in a year: 1 (approx)
Indian wedding market: Rs 1,00,000
Gold and diamond jewellery market: Rs 60,000
Apparel market (wedding): Rs 10,000
Durable goods market: Rs 30,000
Hotel and other wedding related market : Rs 5,000
Item-wise expenses:
Dinner cost: Rs 700 – 1000/person
Pandal decoration cost: Rs 10,000
Bridal wedding dress cost: Rs 20,000 - 50,000
Groom’s dress cost: Rs 15,000 - Rs 40,000
Wedding invite card cost: Rs 500 - 1500 per card
Bridal make up cost: Rs 5000- Rs 50,000
Bridal Mehendi cost: Rs 1000 - Rs 5000
With each passing year, Indian weddings are getting bigger and better offering lucrative business opportunity to players involved. Giving up the basic traditional look, the Indian weddings are donning a more corporate look, these days. . However, such grand celebrations are understood among the rich and affluent class. But what about the large expenditures of the middle class families. Why do the middle class families spend beyond their means on marriage? This can be explained by an economic phenomenon known as the Bandwagon Effect. According to this economic phenomenon, an individual behaves in the same economic manner as that economic class to which he aspires to belong. The middle class in this case aspires to become the upper class and follows it in all its economic mannerisms in order to associate more with the upper class.
Currently, the country has a population of around 1.25 billion and considering an average family with five members, there are around 250million families in India. With about one marriage per family every 20 years, the country averages roughly 10 million marriages every year. An average 30 to 40 grams of gold is spent in every marriage across the country, thus the total consumption of gold comes between 300 to 400 tons annually.
It is also expected; the per capita income will be tripled in a couple of decades and the per capita consumption of gold during weddings will increase. With half of India’s population being under 29 years of age, the marriage market is set to boom like never before over the next five to ten years.
In a way wedding expenditure is a key catalyst of economic growth during a period of inflation in the market, providing the liquidity and demand in the associated industries despite the recession. Though such spending induces savings, but only a small part of the savings for such purposes have any interface with the financial markets as they are outside the banking channels. Further with global markets being easily reachable and a penchant for ostentatious imported flavors in various items of expenditure incurred on weddings, there is a burden on imports, which in turn affects the GDP adversely by increasing the outflow of foreign exchange.
DOWRY
Historically, weddings were celebrated with great pomp and splendor because marriages were considered to be more of a transaction rather than a ‘bond of love’. Over hundreds of years, however, the definition of the term has evolved from the ceremonial and voluntary gift giving of the bride’s family to a form of monetary extortion demanded by the groom’s family. Evaluated in terms of total cash value, the amount of the dowry is negotiated by the groom’s family based on their social and economic status. The higher the socioeconomic status of the groom’s family, the higher the dowry demanded. Although unanimously regarded by legislators and scholars as a perpetrator of social detriment against women, the Dowry Prohibition Act of 1961that outlawed the practice has been remarkably unsuccessful in reducing the frequency of its occurrence.
Economic theory views the market for marriage as one in which people bargain for a spouse who maximizes their utility gains from marriage, when combined with the realities of various sociological factors, presents an interesting perspective on the reasons behind the existence of the dowry system in India. Under the assumption of a perfectly competitive marriage market with perfect information, the existence of a dowry can be seen a combination of two reasons:
1. The “Marriage Squeeze” and Excess Supply of Wives - Dowries are likely to occur when equilibrium conditions result in an excess supply of women or a relative scarcity of men who want to marry and enter the marriage market. This can be equilibrated through the use of the marital cost of dowry. In theory, the monetary cost of the dowry increases as the supply of women wanting to marry rises, shifting the supply curve enough to balance the demand for wives. But, the excess supply argument is suspect for the case of Indian society because the nation’s gender-ratio imbalance is tilted towards fewer women than men. However, there is a fundamental flaw in examining the total gender ratio as an indicator of the relative supply of women in the marriage market. In India, Hindu marriages are based on social and religious beliefs that allow men to marry at virtually any age, while women are required to marry by a much younger age. The most significant implication of such an ideology is that the Indian marriage market becomes divided into an older male cohort and a much younger female cohort. Thus, the actual gender ratio in the Indian marriage market cannot be detected in the nation’s total gender ratio. This peculiar gender division leads to some key insight about the rising costs of dowry. The reason behind a surplus of younger female cohort in the Indian marriage market is that India’s surge in population growth over the last several decades has led to a “marriage squeeze”, which means a population with a declining mortality rate and increasing birth rate, which results in larger younger cohorts than older ones.
2. Divergent Patterns of Human Capital Accumulation - The existence of dowry may alternatively be attributed to an inherent differential between the gains from marriage for men and women. This explanation has one very important implication: the benefits of marriage for women exceed the benefits gained from marriage by men. It is thus the net difference between these marital gains that the groom’s family appropriates as dowry, or “marriage payment.” The discrepancy in marital gains exist because parents invest money into the acquisition of market specific human capital for a son, and a daughter is expected to acquire only household specific human capital which does not require the investment of money. This may happen because of several reasons:-
a) The most basic phenomenon of Indian marriage is that a daughter, once married, essentially becomes the property of her husband’s family. All assets, including any labor market earnings, household skills, and dowry, are transferred to the family-in-law. Sons, however, are almost always the source of future income and dependence for parents during their old age.
b) The wage discrepancy in the labor market is another reason that Indian parents tend to invest less in market specific human capital for their daughters. Many studies have determined that there is an enormous amount of wage discrimination in the Indian labor market. In particular, research has shown that Indian women with post-secondary schooling earn about 21% less than Indian men, and that about 67-77% of this wage gap may be attributed to discrimination. The primary significance of this wage discrepancy in decisions of human capital acquisition is that investment into market specific human capital for daughters yields a much lower expected real rate of return than such investment for sons.
c) In addition to rationally and economically analyzing the expected return on investment, Indian families are also heavily influenced by the strong social and cultural beliefs that view the acquisition of economic resources by women with intense antagonism. Indian social structural ideologies have long regarded women as the stable foundation of the family. Appropriate responsibilities for women have generally been limited to household tasks such as childbearing, cooking, cleaning, and other social and religious activities. Moreover, education that grants her the means of economic self-sufficiency increases the probability that a girl will gain an unseemly amount of independence, violate her traditional role and disrupt familial and societal harmony in the future.
The economic impact of dowry however is largely neutral. Since it is a transaction between two families, the money is just flowing from one household to another. The only positive impact of dowry is that this money, which would have been saved in a non-productive manner by bride’s family, otherwise increases the purchasing power of the groom’s family and gives the scope of consumption of this money. This assumption is more relevant because a large part of dowry is sourced from black money and once coming in the hands of the recipient drives him to consume it in durable consumer goods in cash in turn giving impetus to consumption, rather than saving the money. Since consumption of money, which would have rather been saved as black money, is more beneficial to the economy it can be reasonably concluded that the exchange of dowry has a positive impact for the economy.
Parallel Black Economy of Marriage
Given the significant amount of money that is spent on weddings, there are possibilities of negative effects on the economy. A person is taxed on his income through income tax, and on expenditures through sales tax, VAT, etc. At the time of calculating the taxable income, a person is required to declare all his assets, expenditures, savings and investments. Many a time, the outrageous amount of money spent on weddings, is not from the recorded source of income on which the legitimate taxes have been paid. This has a cascading effect, as the recipient also does not record such receipts and the money remains in a parallel black economy. A social obligation to have exorbitant marriage expenses and extremely high dowries in weddings seems to provide an incentive for families to evade payment of taxes on the income out of which such expenses are met. Such money spent would always remain in black market leading to less productivity even if it leads to increase in supply of goods and services, because the negative effect of suppression of taxes is more than the positive effect of increase in consumption and services due to the incurrence of wedding expenses. The Delhi government’s trade and taxes department reported large-scale tax evasion in the expenses of grandiloquent marriage venues. They reported that tax was being evaded by underreporting the number of people who attended the wedding, underreporting of other expenditure to unorganized sectors providing services to wedding venue. This money, which is not reported for the purposes of evading taxes, also fails to get recorded in the GDP. Therefore, the GDP shows the goods produced but does not show the corresponding money that flowed in the market for these goods, as there is no record of it. This is a severe loss for the GDP, because the current figure of the GDP does not represent the real value of all goods produced in the country. All the unreported income flows in a parallel black economy in India. Had these expenses been accounted for in the GDP, India’s GDP would have been much higher than what it is.
CONCLUSION
To conclude, marriages in India do have a positive impact on the economy as it drives the demand, consumption, production of goods and services and encourages investment/savings at the household level. Therefore, it can be reasonably concluded that marriage is one institution, which touches upon all aspects of the economy. An increase in marriage, therefore, incidentally results in a boost in all the spheres of the Indian economy. However, not all marriages can be equally beneficial to the GDP. As proved in the paper, child marriages could have a more negative impact on the GDP than a positive one. The another negative impact of the wedding industry is that it induces the families to, at first place, create the black money and then use the occasion of wedding as conduit for spending such black money without paying due taxes by the person incurring or receiving the marriage expenses. Even if it induces savings, most of the times the money saved for this purpose is out of banking channels or in form of assets, which are non-productive as they are out of bounds from the active economy. Had these expenses been taken into account, the government’s treasury would fill up, which would enable the government to create the necessary long-term infrastructures, which act as the platform for other economic activities to grow and thereby further contribute to the GDP.
Thus, a balance needs to be struck so that the positive impacts of marriage heavily outweigh the negative impacts. This can be done by enforcing policies to check expenditure of black money and prevention of early child marriage, providing basic education to all, etc.
REFERENCES
https://www.breakthrough.tv/earlymarriage/2013/09/impact-early-marriage-economy/
https://www.milligazette.com/news/11256-child-marriages-cause-12-loss-to-indias-gdp
https://www.dhirubhai.net/pulse/indian-wedding-industry-opportunities-growth-arvind-singh
https://www.forbes.com/2006/07/25/singles-marriage-money-cx_tvr_06singles_0725costs.html
https://www.moneycontrol.com/news/tax/how-can-huf-help-individual-to-save-income-tax_1007010.html
https://digitalcommons.iwu.edu/cgi/viewcontent.cgi?article=1030&context=uauje