Short gearing means for the same gear and speed the engine RPM is higher. You don't necessarily have to shift at higher RPM... but you may have to if fully loaded with 7 passengers...
The short gearing means that when travelling at highway speeds, say ~100kph, the engine RPM will have to be higher, thus consumes more gas. But since you'll be using it for city only it's probably just fine...
BTW judging from the pictures the Avanza interiors seem to be really cheap-looking, much worse than the Vios' which is already below-average...





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