First consumption data released after 2011-2012

While declining food spending has been a long-term trend in CES data, this number has fallen below 50% for the first time in rural India

NEW DELHI: ​An average Indian spent ₹3,773 per month in rural India and ₹6,459 in urban India in 2022-23. The average monthly food spending of an average rural and urban Indian was ₹1,750 and ₹2,530, respectively. At 2011-12 prices, the average monthly spending by rural and urban Indians has increased from ₹1,430 and ₹ 2,630 in 2011-12 to ₹2,008 and ₹3,510 in 2022-23. Even the top 5% of rural and urban Indians spend ₹10,501 and ₹20,824 on average in a month.

Representative Image. (File)

These are the key takeaways from the summary results of the Household Consumption Expenditure Survey (HCES) for 2022-23, released by the National Sample Survey Office (NSSO) on Saturday.

While the NSSO has just published a 27-page “fact-sheet” on the HCES results and said that a “ detailed report of the survey will be brought out subsequently”, even the summary results are important because they are the first piece of consumption data published by the government after the 2011-12 Consumption Expenditure Survey (CES).

Because India does not have official income statistics, CES data is pretty much the only piece of information on not just consumption spending but also poverty and inequality among households in India. CES data is also a critical piece of information in updating the GDP series and inflation basket in the country, both of which continue to be pegged to the 2011-12 CES at the moment.

To be sure, the NSSO did conduct a CES in 2017-18, but its findings were junked by the government after a leak before being officially released in a move that was widely criticised by independent economists. The official reason for junking the CES was poor quality of data. The leaked findings, however, showed that average consumption had fallen in real terms compared to 2011-12.

Because the NSSO has only released summary stats and both the full report or unit level are yet to be released for the 2022-23 HCES, a detailed analysis of the results, including things such as consumption inequality, is not possible.

Having said this, the 27-page sheet released by the government does show some interesting and important changes in India’s consumption economy. Among the most important in these trends is a continuing fall in importance of food spending in household budgets. Food consumption had a share of 52.9% and 46.2% in total spending of rural and urban households in 2011-12. These numbers have fallen to just 46.4% and 39.2% in 2022-23.

While declining food spending has been a long-term trend in CES data, this number has fallen below 50% for the first time in rural India. Cereals, which are the mainstay of Minimum Support Price (MSP) and National Food Security Act (NFSA) operations in the country, account for just 4.9% and 3.6% of total spending in rural and urban areas. In both rural and urban areas, beverages and processed food (it also includes purchased cooked meals) is the largest sub-category in terms of share in food spending, which underlines the growing commercialisation of food markets in India.

The other notable feature in the HCES results is the sharp increase in share of expenditure on conveyance in not just urban but also rural areas. It is now the largest non-food sub-category in terms of share in spending in both rural and urban areas.

Important and insightful though these results are, the hurried publication of HCES data – the NSSO normally released full reports and unit-level data together – just before the announcement of 2024 election dates is bound to draw attention to the most important political economy question, which is the comparison of consumption spending growth under the Narendra Modi government and its predecessor.

The press release issued by NSSO has given rural and urban Monthly Per Capita Consumption Expenditure (MPCE) levels from 2009-10 to 2022-23 and they show that it has continued to increase under the Modi government. While the press release does not state the methodology for the price adjustments, an HT analysis shows that the 2022-23 data has been adjusted to 2011-12 prices using CPI-rural and CPI-urban for rural and urban areas respectively. The 2009-10 consumption spending has been adjusted to 2011-12 prices using CPI-Agricultural Labourers (CPI-AL) and CPI-Industrial Workers (CPI-IW) for rural and urban areas respectively. This is expected because the latest series of CPI begins only in 2011.

A more thorough analysis of consumption spending growth under the current and previous governments, however, would require a longer-term comparison of real MPCE. Using the same adjustment as the press release (CPI-AL and CPI-IW for the data up to 2009-10 and CPI-rural and CPI-urban for the 2022-23 data), the compounded annual growth rate (CAGR) of real rural MPCE works out to 1.5% from 1999-00 to 2004-05, 3.27% from 2004-05 to 2009-10, 7.48% from 2009-10 to 2011-12, and 3.13% from 2011-12 to 2022-23. On the other hand, for urban areas the CAGR was 9.54% from 1999-00 to 2004-05, 3.93% from 2004-05 to 2009-10, 5.59% from 2009-10 to 2011-12, and 2.66% from 2011-12 to 2022-23.

While a simple comparison of the CAGR of MPCE shows a slowdown in consumption growth under the Modi government, it needs to be kept in mind that these figures could have been adversely affected by the pandemic’s impact on consumption spending.

To be sure, comparing HCES MPCE numbers with previous CES numbers even after inflation adjustment might not give accurate results because of a significant change in methodology of the survey. The most far reaching change in methodology in the 2022-23 HCES is that data for food, consumable and service items and durable goods has been collected in separate visits unlike older CES when it was collected all at once.

“The changes in sampling and data collection methods in the HCES compared to previous CES make it completely non-comparable with previous rounds. This is not just a question of comparing real MPCE overtime but there are also issues such as potential attrition of respondents across multiple rounds. One will have to wait for publication of unit level data to get more clarity on these issues”, said Himanshu, associate professor of economics at Jawaharlal Nehru University.

To be sure, debates and controversies around CES estimates are not new and they have been at the heart of what has been described as the Great Indian Poverty Debate. Because HCES had made a fundamental departure from the practice of collecting all information from a household in a single visit, the debate about its compatibility and veracity vis-a-vis previous CES rounds is only likely to be bigger.