Consumption is more balanced, but inequity rises in many pockets

However, what is worrisome is that the data also showed a marked rise in consumption inequality.
Consumption is more balanced, but inequity rises in many pockets
(Express Illustrations | Amit Bandre)

The Household Consumption Expenditure Survey (HCES) for 2022-23, released after 11 years, shows the average spend on non-food items in rural India exceeded 50 per cent of household expenses for the first time. Money spent on food items decreased from 52.9 per cent in 2011-12 to 46.4 per cent in 2023. A lower spend on food shows not only that the average income has risen, but that the consumption pattern has become more balanced between food and non-food items.

Typically, higher food spend is an indicator of poorer communities. The thumb rule is that households spending over 75 per cent on food are considered food-insecure, whereas those spending less than 50 per cent on food have higher food security.

Urban India performed better in this regard, with the proportion of food in household consumption declining further to 39.2 per cent in 2022 from 42.62 per cent in 2011-12. India has therefore followed the trajectory of Engel’s law—rising incomes are followed by increases in food expenditure, but an even higher rise in expenditure of non-food goods. The government’s free foodgrains scheme in the Covid and post-Covid periods has also worked well; ultimately, the share of income spent on food has declined.

However, what is worrisome is that the data also showed a marked rise in consumption inequality. This was indicated by a rising Gini coefficient of consumption expenditure in the rural areas of 11 of the 25 states surveyed. The Gini index is used to determine the level of income inequality. A higher Gini consumption coefficient indicates greater consumption inequality, with high-income households skewing consumption in their favour.

The highest Gini coefficients were in historically poorer states like Jharkhand, Nagaland and Chhattisgarh, while it was a surprise that Maharashtra, a more egalitarian state with a much higher output, showed the Gini coefficient rising to 0.291 from 0.253 over the decade under review.

Spending on conveyance also showed a sharp increase over the decade—up to 7.6 per cent from 4.2 per cent in rural areas, and 8.6 per cent from 6.5 per cent in urban areas. While it is a positive that households are spending more on mobility, it also needs to be probed whether the expenses have risen because of an increase in distance people are made to commute between where they live and where they work.

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