Over the weekend, the Ministry of Statistics and Programme Implementation released data from the Household Consumption Expenditure Survey (HCES) that was conducted in 2022-23. The survey results, which shows what Indian households are consuming and spending on, was the first such data to be released in over 11 years since the last exercise was conducted in 2011-12.
The data is essential not only for updating the consumer price inflation (CPI) baskets but also gives policymakers and experts an assessment on the income and expenditure levels of households and how and where they are spending their money and gauge the efficacy of policy measures. Field work for the second year of HCES 2022-24 has been initiated from August 2023.
The HCES data for 2022-23 indicates that the income levels of urban and rural households have risen since the last survey, with rural households showing a sharper growth in spending, but also indicates that the gap between the rich and the poor is widening.
According to the data, the average monthly per capita consumption expenditure (MPCE) of both urban and rural households doubled in the 11-year period with both spending lesser on food items. The MPCE for rural households (without considering imputed values of items received free of cost through various social welfare programmes) rose to Rs 3,773 in HCES 2022-23 from Rs 1,430 in 2011-12. Similarly, the MPCE for urban households increased to Rs 6,459 in 2022-23 from Rs 2,630 in the previous round.
Of this 46% of the expenditure was on food items in rural households and 39% in urban homes in 2022-23.
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Widening gap between rich and poor
The bottom 5% of India’s rural population, ranked by MPCE, has an average MPCE of Rs 1,441, while it is Rs 2,087 in urban areas. This translates into a daily average consumption expenditure of Rs 48 in rural areas and Rs 69.5 in urban areas for the bottom 5%.
The top 5% of India’s rural and urban population, ranked by MPCE, has an average MPCE of Rs 10,581 and Rs 20,846, respectively. This would mean a daily average spending of Rs 352.7 in rural households and Rs 694.8 in urban households.
“The difference between rural and urban MPCE has narrowed substantially over the years, implying successful government policies for improving rural incomes, while this is even more pronounced at the lower levels of the pyramid. Conversely, the gap is bigger at the top, reflecting an increase in inequality at higher income levels,” notes Madhavi Arora, Lead Economist, Emkay Global Financial Services.
Arora pointed out that the difference between rural and urban MPCE, as a percentage of rural MPCE, declined to 71% in 2022-23 from 84% in 2011-12 and over 90% in 2004-05. This is even more prominent when looking at spending as per the fractile pyramid. The same ratio drops to just 46% for the bottom 5% of the pyramid and stays under 50% for the bottom 20%.
“Thus, the poorest rural households have been able to spend at a much closer level to their urban counterparts, and this implies that the government’s policy initiatives for enhancing rural incomes have worked to an extent. On the other hand, a difference of over 85% for the highest 10% of households implies rising income inequality at the top of the pyramid,” she said.
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CPI revision
The government will also rejig and update the CPI baskets using this data. New CPI series is likely to have lower weight for food and beverage, higher for core goods and services. Arora noted that the CPI revision will take some time and two back to back surveys are needed due to a change in the methodology and questionnaire. “Accounting for the time taken to compile results and work on the changes to the index, the new updated CPI series will probably take until Jul-Aug 2025 to be released,” she said.
New items, methods
The questionnaire of HCES 2022-23 contains 405 items as against 347 items in 2011-12. Further, a single questionnaire was used in all NSS surveys on household consumption expenditure prior to HCES: 2022-23. However, in HCES: 2022-23, three separate questionnaires covering (i) food items, (iii) consumables and services items, and (iii) durable goods have been used. “Further, another questionnaire has been canvassed for collecting information on household characteristics as well as demographic particulars of the members of the households,” the report explained.
The HCES 2022-23 also includes a separate provision for collection of information on the quantity of consumption for a number of items, received and consumed by the households free of cost through various social welfare programmes. However, the value of education as well as health services received free of cost by the households has not been imputed.
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