Household Consumption Expenditure Survey 2023-24- Explained Pointwise

The Household Consumption Expenditure Survey 2023-24 was recently released by the Ministry of Statistics and Programme Implementation (MoSPI). The Survey highlights a rise in the share of spending on food in rural and urban households. However, non-food items continuing to dominate overall expenditure.

All India Household Consumption Expenditure Survey (HCES), is a survey conducted by the NSSO every five years, to ascertain the household spending habits. However, Govt had junked the last survey results of 2017-18, citing ‘data quality issues‘. Post that, the survey methodology underwent a revision. Now, MoSPI has published back-to-back surveys for 2022-23 and 2023-24 to check the robustness of revised methodology and stability of results for consumption expenditure.

What is the All India Household Consumption Survey?

1. About the Survey- The Household Consumption Expenditure Survey (HCES) is conducted to gauge household spending habits. It provides crucial insights into household consumption patterns, their living standards and overall well-being.

2. Interval of the Survey- It is a quinquennial survey (recurring every five years). It is conducted by the National Sample Survey Office (NSSO), (which now comes under the National Statistical Office in the MoSPI).

3. History of the Survey- The survey has been conducted every five years, since 1972-73. The survey results were junked in 2017-18 due to ‘data quality issues’. Now, new surveys are being conducted in 2022-23 and 2023-24, according to new methodology.

4. New Methodology- In the new methodology, several new features have been introduced-
a. Segregation of the consumption basket into three broad categories- food items, consumables and services, and durable goods.
b. Inclusion of questions seeking inputs on free items and subsidies under welfare schemes, such as food grains.

What are the recent findings of the All India Household Consumption Survey?

1. Increase in Average Monthly Per Capita Consumption Expenditure (MPCE)

Significance- An increase in the per capita expenditure of households indicates rising disposable incomes of households, narrowing inequality between rural and Urban areas, and declining poverty levels.

a. Rural per capita consumption expenditure has increased more sharply as compared to urban expenditure in the period from 2011-12 to 2022-23. Rural-urban consumption gap reduced to 69.7% in 2023-24, down from 71.2% in 2022-23 and 83.9% in 2011-12.
b. The average MPCE for rural households has increased to Rs. 4,122. It has increased by 9.3% from Rs 3,773 in 2022-23. In 2011-12, the rural household MPCE was Rs 1,430.
c. The average MPCE for rural households has increased to Rs. 6,996. There has been an increase of 8% from Rs. 6,459 in 2022-23. In 2011-12, the urban household MPCE was Rs 2,630.

2. Dominance of Non-Food Expenditure in both Rural and Urban MPCE

Non-food items accounted for 53% of total expenditure in rural areas and 60% in urban areas. Major contributors of non-food expenditure includes conveyance, clothing, bedding and footwear, and entertainment.

3. Increase in the share of Food Expenditure

Despite the dominance of non-food spending, the share of food expenditure increased slightly for both rural and urban households.
a. For rural areas, the share of food expenditure has increased to 47.04% in 2023-24 from 46.38% in 2022-23.
b. For urban areas, the share of food expenditure has increased to 39.68% in 2023-24 from 39.17% in 2022-23.

4. Narrowing Rural-Urban Gap in MPCE

The gap between rural and urban spending has decreased to approximately 70%, down from 71% in 2022-23. This indicates a stronger growth rate in rural consumption compared to urban areas.

5. Regional Consumption Patterns

States in western, northern, and southern India, including Maharashtra, Punjab, Tamil Nadu, Telangana, and Karnataka, have reported higher per capita spending than the national average. In contrast, eastern and central states like Bihar, Odisha, and Uttar Pradesh have recorded lower spending levels than the national average.

6. Gini Coefficient Decline suggests improvements in consumption equality

a. In Rural Areas- It fell from 0.283 in 2011-12 to 0.266 in 2022-23, and further to 0.237 in 2023-24.
b. In Urban Areas- It has declined from 0.363 in 2011-12 to 0.314 in 2022-23, and to 0.284 in 2023-24.

The Gini coefficient, a measure of inequality, has shown a decline in both rural and urban sectors, suggesting improvements in consumption equality.

What is the significance of the All India Household Consumption Survey?

1. Changing the weightage of components to accurately capture inflation- The consumption expenditure survey serves as a benchmark for assigning and changing the weightage for different components of Consumer Price Index (CPI). For ex- Lowering the weightage for food in CPI in accordance with the survey data.

2. Macro analysis of the economy- The Household consumption expenditure survey data is used by the economists to analyse the structural shifts in the Indian economy and take further measures, like rebasing the GDP and the poverty levels.

3. Assessment of economic growth trends and inequalities- The Household consumption expenditure survey indicates a narrowing gap in per capita spending between rural and urban India. However, it also highlights the wide income gaps within households, with the top 5% of households spending significantly more than the bottom 5%.

4. Fine-tuning tool for Policymakers- The Imputed MPCE provides critical insights for policymakers to fine-tune social schemes by understanding evolving consumer’s expenditure behaviour.

5. Compass for the State governments- State governments can use the survey to reorient their budgetary strategies to increase disposable incomes in the hands of people by learning from states like Tamil Nadu and Kerala.

6. Fore-casting tool for the Industry- The survey provides the industries an insight into the changing consumer behaviour, which helps them to refine their strategies and tap into emerging markets.

What are the Challenges with the survey?

1. Small Data Set- The survey has covered 2.61 lakh households. This is a small sample size for a large and diverse country like India.

2. Temporal and Regional Variations- Incorporating accurate seasonal variations and regional disparities in household expenditure is another major challenge to obtain accurate survey results.

3. Risks of Pent-up Demands- The survey has been conducted after two long years of COVID in 2020 and 2021. The year 2022 in which the survey was conducted has been a year of pent-up demand, as the last two COVID years had witnessed suppressed demands.

What Should be the way forward?

1. Putting the data to fine-tune the social programs- The All India consumption expenditure survey data must be used to fine tune various social security schemes like PM Garib Kalyan Anna Yojana, being run by the Govt by measuring their impact.

2. Regularisation of the survey- The new survey methodology must be institutionalised at the earliest to establish the usual quinquennial survey cycle (recurring every five years).

3. Changes in the bases of Inflation Indices need to be awaited- Since the survey was conducted in a year of Pent-up demand, any changes to the weights of different parameters in the inflation indices based on the survey results will introduce significant bais.

An accurate, transparent, and comprehensive consumption expenditure survey data will help in shaping a more inclusive and equitable society.