Five questions the Household Consumption Expenditure Survey 2022-23 answers

The share of food in consumption expenditure in rural India was as high as 59.4 per cent in 1999-2000, it hovered around 50 per cent levels through the first decade of the new millennium, and in 2022-23, it stood at 46.38 per cent.

In urban India, the share of food in the average monthly per capita consumption expenditure (MPCE) has fallen to 39.17 per cent in 2022-23 from 48.06 per cent in 1999-2000.

Table 1

2. Within foods, what are Indians now consuming?

It is helpful to know how much money is spent for better nutrition beyond just cereals (rice, wheat, etc). Expenditure on cereals was almost 22 per cent of the total consumption expenditure in rural households in 1999-2000; it is now down to 4.91 per cent. In urban households, it was 12 per cent; it is now down to 3.64 per cent.

The spending on high-value/ nutritional items such as eggs, fish and meat, and fruits and vegetables has gone up more in rural households than in urban households over the last two decades.

In 1999-2000, rural households spent 11.21 per cent of the total consumption spending on these items, and urban households spent 10.68 per cent. In 2022-23, this was significantly higher for rural households at 14 per cent, and only marginal higher for urban households at 11.17 per cent.

Table 2

3. Is there a need to review the inflation basket? What do the average MPCE data show?

Inflation is calculated based on the changes in the price levels of items in a large basket. These items must ideally reflect what you and I consume — and our consumption patterns may vary depending on whether we live in a city or a village. For accurate calculation of inflation, the basket of goods should represent the consumption expenditure pattern of households, be it urban or rural.

The Consumer Price Index (CPI)-based inflation, also called retail inflation, is currently based on a basket that was decided in 2012. But over the last 11 years, as the latest Household Consumption Expenditure (HCE) Survey 2022-23 shows, a lot has changed.

For example, the CPI (Rural) basket assigns a weightage of 12.35 per cent to ‘cereals and products’. But as mentioned above, the latest HCE Survey shows rural households spend just 4.91 per cent on cereals (and cereal substitutes). Again, the share of expenditure on food in rural households is 46.38 per cent, according to the Survey. But food in the CPI (Rural) basket has a weightage of 54.18 per cent — much higher than what a rural consumer now spends.

Similarly, in the CPI (Urban) basket, food has a weightage of 36.29 per cent; the HCE Survey shows the share of urban household expenditure on food is higher, at 39.17 per cent. In urban households, the spends on pan, tobacco and intoxicants, and entertainment are 2.43 per cent and 1.58 per cent respectively. But the weightage for these two items in the CPI (Urban) basket is 1.36 per cent and 2.04 per cent respectively.

The share of spending on rent has increased both for rural and urban households to 0.78 per cent and 6.56 per cent respectively.

The Reserve Bank of India (RBI) decides to increase or decrease the policy rate (repo rate, the interest rate at which the central bank lends money to commercial banks) based on retail inflation — and this has an impact on growth. A lower interest rate will help economic growth by facilitating loans at lower rates. But if the RBI is guided by wrong data, it will most likely delay any action on interest rates.

4. What does the difference between imputed and non-imputed average MPCE data show?

In the latest HCE Survey 2022-23, the National Sample Survey Office (NSSO) has provided another set of MPCE data by adding the imputed value of a number of items received free by households through various social welfare programmes.

These include: i) food items such as rice, wheat, atta, pulses, salt, sugar, edible oil, etc and ii) non-food items such as laptop/ PC, tablet, mobile handset, bicycle, motorcycle/ scooty, clothing (school uniform), footwear (school shoes, etc).

A fractile class of MPCE is the segment of population lying within two fractiles. For instance, the 0-5 per cent fractile represents the bottom 5 per cent of the population. The 5-10 per cent fractile represents the next 5 per cent of the population, and so on. The 95-100 per cent fractile represents the top 5 per cent of the population.

The MPCE of rural and urban households which includes the imputed value of free food and non-food items is higher compared with the MPCE which does not include the free items.

It is, however, interesting to see who benefits the most in absolute terms. In rural households, the bottom 0-5 per cent of the population got the least to spend in terms of imputed value of free items. This group got just Rs 68.

The highest benefit in absolute terms was garnered by the population in the 70-80 per cent fractile; and even the top 5 per cent of the population got Rs 80, which is more benefits than the bottom 5 per cent of the population.

Of course, in percentage terms, this would differ.

So, the bottom 5 per cent of population’s consumption expenditure was 4.95 per cent more including the free items, compared with the bottom 5 per cent of the rural group which did not receive the free items; the 5-10 per cent fractile spent Rs 82 more, or 4.6 per cent extra, including free items.

For the 70- 80 per cent fractile population, whose extra spend including free items was the highest at Rs 93, the percentage increase was just 2.08 per cent.

In urban households, however, the consumption expenditure of the three lowest fractiles of population — 0-5 per cent, 5-10 per cent and 10-20 per cent — was the highest in percentage and absolute terms by Rs 86 (4.29 per cent), Rs 88 (3.37 per cent) and Rs 84 (2.66 per cent) respectively.

Table 3

5. Which states have a lower standard of living compared with the national average?

One can get a quick idea about the economic well-being of a family by looking at the average monthly consumption spending by its members. Table 4 gives the difference between the urban and rural person’s consumption spending every month in every state/ UT of India. The last column in the table also gives the urban-rural difference as a percentage of rural MPCE.

Table 4