Consumer Expenditure by Indians

A summarized analysis of the report released by NSSO

The National Sample Survey Office (NSSO), Ministry of Statistics, and Programmed Implementation have conducted the Household Consumption Expenditure Survey (HCES) from August 2022 to July 2023. This survey on household consumption expenditure aims at generating estimates of household Monthly Per Capita Consumption Expenditure (MPCE) and its distribution separately for the rural and urban sectors of the country, for States and Union Territories, and different socio-economic groups. The summary results of HCES 2022–23 relating to MPCE are being released in the form of a factsheet. In absolute terms, the survey noted the average monthly per-capita expenditure (MPCE) in the rural category for 2022–23 at Rs 3,773, up from Rs 1,430 seen in 2011–12. The same for the urban category was seen at Rs 6,459 in 2022–23, sharply up from the average per capita spending observed at Rs 2,630 in the same base year. The survey report prepared by NSSO is released by the Ministry of Statistics and Programme Implementation (MoSPI) every five years. However, the latest set of data comes after 10 years, as the same for 2017–18 wasn’t released by the government owing to the vast variance seen in the figures.

There has been a rise in discretionary spending in both rural and urban categories. According to the study, there has been a decline in food expenditure on cereals and food intake, but an increase in spending on milk, fruits, vegetables, and processed food. Compared to 43% in 2011–12, food expenditure will represent 46.38% of total spending in 2022–2023. According to the consumption expenditure survey, the percentage of money spent in the rural category on "non-food items" increased to 53.6 percent in 2022–2023 from 47.1 percent in 2011–2012. For urban households, the proportion of spending falling into the same group increased to 60.8 percent in the most recent survey year, compared to 57.38 percent in 2011–12. Durables make up a large portion of "non-food items," and their percentage share of spending increased to 6.89 percent from 4.85 percent in the rural category. On the other hand, during the survey period, the proportion of respondents in the urban category increased to 7.17 percent from 5.60 percent. The experts believe that the high increase in discretionary expenditure in rural households is attributable to a decrease in spending on food related items. Alternatively, this also disproves the belief that rural residents have less purchasing power.

The report has observed a sharp decline in spending on major food items like cereals and pulses compared to other items in the food basket. This has been seen across rural as well as urban categories. In the rural category, the percentage share of expenditure over cereals (like wheat, rice, and barley) was seen at 4.89 percent in 2022–23, against 10.69 percent seen in 2011–12 as a part of overall monthly per capita expenditure. The same in the urban category was seen at 3.62 percent for 2022–23, as compared to 6.61 percent seen in 2011–12. In terms of overall spending on food items, the share of average monthly per capita expenditure on food as a part of the overall MPCE has reduced to 46.4 percent in 2022–23, compared to 52.9 percent in 2011–12 in the rural category. The same for the urban category was seen at 39.2 percent, as compared to 42.62 percent in the same period. According to several policy observers, the decline in spending on cereals in the rural category in particular has been due to the implementation of the National Food Security Act of 2013. As of now, 35 kilograms of food grains are provided free of charge to each prioritized household under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). The survey also notes a steady rise in the share of spending on milk, meat, and processed foods in terms of overall spending on food. This has been observed across rural as well as urban categories. This rise, in particular, has been more in the rural category. The share of spend on milk, meat, and processed foods as a part of the overall MPCE in this category has increased to 8.33, 4.91, and 9.62 percent, respectively, in 2022–23, as compared to 8.04, 4.79, and 7.90 percent noted in 2011–12. Experts have observed that the availability of more spendable money owing to the food-security benefits also means an increasing inclination towards high nutrition foods among the lower and middle income groups.

Looking at the area-wise distribution, the northeastern state of Sikkim emerged as the state with the highest MPCE across the rural as well as urban categories. In the rural category, MPCE for the state was seen at Rs 7,731, while the same for the urban category was recorded at Rs 12,105. According to the experts, this has been possible due to Sikkim also having topped the list of states with the highest per capita income at Rs 472,543 in the years 2021–22. On the other hand, Chhattisgarh emerged as the state with the lowest average monthly per capita spending across rural and urban categories. The MPCE for the state in the rural category was seen at Rs 2,466, while that in the urban category was noted at Rs 4,483. The rural-urban difference in average MPCE was also the highest in Chhattisgarh at 82 percent, only after Meghalaya at 83 percent. The report observed that those who were self-employed in non-agricultural professions in rural areas had more spending power than those engaged solely in agriculture. The average MPCE for those who identified as self-employed in agriculture stood at Rs 3,702, lower than the overall MPCE for rural areas. On the other hand, the average MPCE of those who identified themselves as self-employed in non-agriculture was seen at Rs 4,074. In terms of social categories such as Scheduled Tribe, Scheduled Caste, Other Backward Class, and the Unreserved, the average MPCE for all social categories was found to be higher in urban areas than their counterparts in the rural category.

These findings offer valuable insights into evolving consumption patterns and potential areas for policy intervention to ensure inclusive and sustainable economic development across India. The data suggests a move away from staples like cereals and pulses towards milk, vegetables, fruits, and processed foods. This could be due to factors like rising incomes, urbanization, and changing tastes. The rise in spending on non-food items, especially durables, in both rural and urban areas indicates an increase in discretionary spending power. This could be due to factors like government schemes, improved employment opportunities, or rural-to-urban migration. The decline in spending on cereals, particularly in rural areas, could be partly attributed to schemes like the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which provides free food grains to eligible households. The significant difference in MPCE between states like Sikkim and Chhattisgarh highlights the persistent regional disparities in income and spending patterns. Self-employed individuals in non-agricultural professions in rural areas have higher spending power compared to those solely engaged in agriculture. This could be due to factors like better returns from non-agricultural activities or diversification of income sources.

- Soham Sonar