NEW DELHI: The results of the Household Consumption Expenditure Survey 2022-23 have led to the call for revision of existing weights of Consumer Price Index (CPI), which tracks the retail inflation. One of the key findings of the Household Consumption Expenditure Survey is decreasing per capita spending on food items both among urban and rural populations.
The Survey shows that the average monthly rural spending on food items has come down from 53% of the total in 2011-12 to 42% in 2022-23. In urban areas, the monthly spending on food items has fallen from 43% in 2011-12 to 39% in 2022-23. The share of cereal in consumption has fallen from 11% in 2011-12 to 5% in 2022-23 among rural populace while the same has fallen from 6.67% to 3.64% in urban areas.
Currently, the weight of food and beverages in the Consumer Price Index is 54% for rural areas and 36% for urban areas. Weight of Cereals in rural and urban CPI is 12.35% and 9.67% respectively. With the latest findings of the Household Consumption Expenditure Survey, analysts believe there is a strong case for revision of the weights to different categories of goods and services in the CPI.
“This survey will finally pave the way for revising the existing CPI weights as per the new consumption template of rural and urban households. However, there is still some time before the CPI series can be updated,” says Madhavi Arora, lead economist at Emkay Global Financial Services. Arora says, back-to-back surveys need to be completed before the CPI index can be overhauled.
The second survey is likely to be completed in July 2024. And accounting for time lag to compile results and make appropriate changes, the new CPI series could take another one year from then.
According to Arora, the urbanisation of the rural economy has continued in the decade with a lower share of food compared to non-food (and cereals) in their consumption basket. “We note the share of food saw a reverse trend in 2009-10 (increased), but resumed its downtrend since then,” says Arora.
The survey also shows the gap between urban and rural monthly per capita consumption expenditure (MPCE) reducing sharply over the last decade. The Urban MPCE in 2022-23 was R6,459, 71% higher than the rural MPCE of Rs 3,773. In 2011-12, the difference was 84% of rural MPCE.