The prime minister has taken pains to emphasise India’s strong consumption story. He said on Monday that consumption has risen 2.5 times over the last decade and poverty declined to its lowest level. He said this was a sea change from the pre-2014 regime. The PM also underlined consumption had grown at a faster pace in rural areas as the government’s focus was on ‘villages, the poor and farmers’. That there has been rapid progress in consumption, and therefore in the quality of life, is supported by the recently-released Household Consumption Expenditure Survey carried out between August 2022 and July 2023.
However, what it also shows is the increase in consumption is much more modest than claimed—the average monthly per capita consumption expenditure in Indian households rose 33.5 percent since 2011-12 in urban households to Rs 3,510, while rural consumption rose 40.4 percent to Rs 2,008. Looking at it another way, the survey of 2.6 lakh households—the largest in the world—showed that consumption growth slowed a little in the 2012-2023 period compared to 2004-2011. If we just take rural areas for the 8-year period from 2004 to 2011, growth was 147 percent or 18 percent a year; on the other hand, the growth registered during 2012-2023 was 164 percent or an annual average of 15 percent.
One important takeaway is that the proportion spent on food has dropped to 46.4 percent for rural households from 52.9 percent in 2011-12, while urban folk spent 39.2 percent of their overall monthly outgo on food compared with 42.6 percent just over a decade ago. This means people are now spending more on other essentials—a significant indicator of a better quality of life. However, if people are still spending as much as 40-50 percent on food, it still leaves very little to buy other essentials and services. There are also the red flags being raised by consumer goods companies, whose sales are a bell-weather for consumption trends. Retail intelligence firm Bizom said consumer goods sales contracted 4.5 percent in the October-December 2023 quarter compared to the year-ago quarter. Again, if one accounts for inflation, the consumption figures indicate more a growth in value than in volume; and much of the growth is at the luxury end. It is evident that more work is needed on our consumption story to grow incomes and reduce inequality.