NEW DELHI: The Household Consumption Expenditure Survey results, which were announced after11 years, have already led to a series of claims and counterclaims – with either side cherrypicking data to establish their points. And while the inferences from the survey would be hotly debated, the results of the much-awaited 2022-23 survey can be summed up in three larger points – shrinking gap between rural and urban consumption; increased spending by households in non-food items and a persistent sluggishness in household consumption.
The survey and its significance
The National Sample Survey Office (NSSO) has been conducting household surveys on consumption/consumerexpenditure at regular intervals. From 1950-51 to 1973-74, the surveys were done once every year. Later, the NSSO decided to conduct the surveys on consumer expenditure and employment-unemployment together on a large scale, once every five years. This five-year chain broke in 2017-18, when the government decided not to release the survey reports citing several errors. According to a leaked portion of the report, the consumption expenditures were showing a declinefrom 2011-12 levels.
Nonetheless, the latest survey results are finally out, though a detailed unit-level report is yet to be released. According to the factsheet released by the Ministry of Statistics and Programme Implementation (MOSPI), the survey has covered the whole of India except a few inaccessible villages in the Andaman and Nicobar Islands. Information in the survey has been collected from 8,723 villages and 6,115 urban blocks spread over the entire country covering 2,61,746 households (1,55,014 in rural areas and 1,06,732 in urban areas).
In order to ensure proper representation of households of different economic categories, all the households of a selected village/urban block were classifiedinto three groups depending on a criterion based on land possessed in rural areas and possession of car in urban areas as on the date of the survey.
The consumption basket of items was divided in to three broad categories–food items, consumables and services items, and durable goods. The method of data collections and questions asked underwent several changes since the last survey in 2011-12. Three sets of questionnaires were used–one each for three categories of items mentioned earlier. In 2011-12, 347 items were covered under the questionnaires. For 2022-23, several items were removed, merged and new items were included. The 2022-23 questionnaires covered 405 items.
Another big change in the method of data collection was the number of visits by the NSSO officials made to each household. Instead of a single monthly visit in a quarter, as was the norm earlier, in 2022-23, the officials paid visits three times in a quarter to each household. In the absence of credible income data, India has been using the consumption expenditure data to evaluate the poverty situation in India. Since the 2017-18 survey report was never published, there was a big debate over the poverty level in India for the past couple of years.
Key survey results
The survey shows that the average monthly per capita consumption (in current prices) in rural areas was Rs 3,773 and Rs 6,459 in urban areas, almost 2.5 times the monthly consumption recorded in 2011-12. The rural consumption (Rs 1,430 per month in FY2012) has grown at a slightly higher pace than in urban areas (Rs 2,630 in FY23).
However, much of the growth in monthly consumption over the previous decade is because of inflation. In real terms, monthly per capita consumption grew by only 1.3 times in urban areas and 1.4 times in rural areas.
At 2011-12 prices, the same expenditure stood at Rs 2,008 in rural India and Rs 3,510 in urban India in 2022-23. The per capita income in nominal terms has grown by 2.7 times and 1.55 times between 2011-12 and 2022-23. This shows that the consumption growth has not been commensurate with growth in per capita income during the period, insinuating what is widely known now — a slowdown in household consumption.
“While a more detailed report is on the way, the preliminary data show a marked deceleration in household consumption, both in nominal and real terms, in line with our assertion that domestic demand is weakening based on multiple high-frequency data and various surveys,” says Kunal Kundu, India economist at SocieteGenerale.
One of the highlights of the survey was the reducing gap between rural and urban household consumption spending. In 2022-23, the average urban household was spending 71.2% higher than its rural counterpart. The difference was 84% in 2011-12 and 90% in 2004-05. The difference between urban and rural consumption grows at the top. The consumption spending by the richest 5% in villages is half of that in the urban areas. The difference is less than 50% among the poorest 20% of the urban and rural population.
The bottom 5% of India’s rural population has an average monthly per capita consumption expenditure (MPCE) of Rs 1,373 while it is Rs 2,001 for the same category of population in the urban areas. The top 5% of India’s rural and urban population has an average MPCE of Rs 10,501 and Rs 20,824, respectively. The ‘inequality’ at the top should be a cause of concern for the policymakers. The survey also shows a sharp drop in consumption spending in food items.
The average monthly rural spending on food items has come down from 53% of the total in2011-12 to 42% in 2022-23. In urban areas, the monthly spending on food items has fallen from 43% in 2011-12 to39% in 2022-23. The share of expenditure on cereals has fallen from 11% in 2011-12 to 5% in 2022-23 in rural areas while the same has fallen from 6.67% to 3.64% in urban areas. “More aspirational behaviour can also be seen through the rise in the share of items like fruits, milk, consumer services, entertainment and durable goods across both cohorts,” says Madhavi Arora, lead economist, EmkayGlobal.
She also points out that while spending on food has reduced, the share of proteins in total food spending has increased, to the extent that rural households are now spending a greater share of their food budget on proteins than urban ones.
The drop in spending on food items, especially cereals, could also be attributed to implementation of the Food Security Act, which initially offered 5 kg of food grains to each family member at subsidised rates. Later, the scheme was merged with the Prime Minister Garib Kalyan Anna Yojna that started at the peak of Covid outbreak in April 2020. Under the PM Garib Kalyan Anna Yojna, 80 crore people receive 5 kg food grains per person per month free of cost.
According to the survey results, when the imputed values of items received free of cost through social transfer are included, the average rural consumption per capita per month goes up to Rs 3,860 (from Rs 3,773), and Rs 6,521 (from Rs 6,459) in urban areas.
The change in the consumption trends witnessed in the latest Household Survey report may also lead to change in the way Consumer Price Index (CPI) is calculated. 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.
Based on the latest survey’s findings, analysts believe there is a strong case for revision of the weights to different categories of goods and services inthe CPI. However, the government would wait for results of the second survey, which is likely to be completed in July 2024, before it changes the CPI, which measures retail inflation.
Evaluating the poverty level
Now that the initial results of the consumption survey have arrived, there has been a rush to arrive at the country’s poverty levels. The day after the initial survey reports were announced (late night on 24th February), Niti Aayog CEO B V R Subrahmanyam in hurriedly called press briefing for a select few journalists made the claim that poverty levels in the country could have been closer to 5%, based on the consumption survey data.
He also made the claim that the rural deprivation has almost disappeared if one looked at the consumption data. The poverty level arrived at based on the 2011-12 consumption survey was 22%. However, experts and statisticians are not yet ready to draw any conclusion on the poverty levels of the country unless they see the unit level data, which is yet to be released. According to Amit Basole, Professor of Economics and Head, Centre for Sustainable Employment at Azim Premji University, the Niti Aayog CEO’s assertion is based on a very rough calculation.
Basole says the Niti Aayog CEO is basing his claims on the distribution of the average monthly per capita expenditure among fractile classes (0-5%, 5-10%, etc). And he is taking Rs 60 per day per person as the poverty line (Rs 1,800 per person per month). “Better to wait till the unit level data is released and a better poverty line is constructed based on the new consumption basket,” says Basole.
