Indian households are likely to cut back on consumption of food items to manage inflation but they may not compromise on spending towards lifestyle category, according to a Morgan Stanley report.

The report which is based on 2008 representatives of the low, medium and high income groups concludes that Indian households are likely to cut savings to manage rising inflation.

"The findings indicate that there will be a slow down in the consumption of food items and other staples over the next twelve months," Morgan Stanley research head (India) Ridham Desai said.

The report

found that households expect inflation for their consumption basket to rise further. The research also suggests that they are willing to cut their savings to retain their expenditure growth at previous year's levels.

It further said that households are likely to cut back on consumption on grocery items. They may include food items, such as fruit and vegetables, beverages and meat and chicken.

They are unlikely to reduce consumption of lifestyle category and household amenities such as medical, education, and transportation, it added.

The study also highlights that rural India is steadily emerging as a focus area for consumer companies and says the consumption habits for urban and rural India appear alike.