Difference in rural and urban consumption: Not as big as it seems

Source-This post on Difference in rural and urban consumption: Not as big as it seems has been created based on the article “Rural-urban consumption disparity: Less than it looks” published in “Live Mint” on 17 April 2024.

UPSC Syllabus-GS Paper-3-Indian economy

Context-As per the government’s latest data on household consumption expenditure, the per-person monthly spending in urban areas of India in 2022-23 was1.72 times that in rural areas. The article highlights the fact that there is not much difference in rural and urban consumption. The increase in spending in rural areas indicate their rising aspirations.

What are the categories that create the gap in rural-urban consumption?

1) Rent-The average monthly rent spending is only ₹30 in rural areas, whereas it is ₹423 in urban areas. This is because most families live in their own homes in rural areas.

2) Conveyance-In rural areas, it is ₹285, while in urban areas, it is ₹555.

3) Beverages and processed food-The average rural spending was ₹363 and nearly double that in urban areas. Similarly, the rural-urban gap in spending on entertainment and other goods is also high.

4) Impact of government transfer-As per the survey result, the average government transfers are higher in rural areas as compared to urban areas. Additionally, the large difference in education and healthcare spending between rural and urban areas may decrease once government subsidies are taken into consideration.

What are the differences in the quality of consumer spending between rural and urban areas in food and non-food categories?

In order to calculate the real consumption levels, there is a need to remove the impact of inflation in rural and urban areas over the last decade.

1) Food categories–

A) Rural areas spend slightly more per person each month on vegetables compared to urban areas. The difference in spending on pulses and pulse products between rural and urban areas is also small. In the main protein-rich foods like eggs, fish, and meat, the rural-urban gap in average monthly spending is only about ₹21.

B) In consumption of sugar, salt, and spices, the gap in real consumption between rural and urban areas is marginal.

C) Fruits and milk products-Two nutritious item groups are fruits and milk and milk products. The average monthly urban real spending on fruits is about 1.7 times that in rural areas and about 1.5 times that of milk and milk products.
However, spending levels alone doesn’t indicate if the gaps between rural and urban consumptions is due to lack of affordability or lack of accessibility.

For ex- in rural areas, there are probably fewer cold storage facilities for perishable items like fruits and milk compared to urban areas. 

2) Non-food categories-In consumption of paan, tobacco and other intoxicants, rural-urban gap is smaller and almost negligible. 

Read more-All India Household Consumption Expenditure Survey 2022-23 

What does this data about rural-urban spending indicate? 

Once all government transfers are considered, spending in rural India will resemble that of urban India more closely. 

What should be the way forward?

In order to experience real welfare gains by householders, it is important to ensure that family members don’t have to separate in search of jobs. So, to achieve this objective, there is a need to create non-farm jobs in rural areas and minimise relative cost of housing in urban areas by providing affordable housing. 

Question for practice 

Highlight the categories that create the gap in rural-urban consumption?