Santa at the stockmarket

FOR the first time in 45 months, the Sensex has vaulted over the 5,500 mark. There are other heartening signs, too, of an economy in the pink. Advance tax collections from Indian companies, for instance, rose by 40 per cent and forex reserves — which was $1 billion 12 years ago, is set to touch $100 billion. This indication of new economic robustness should help us address some of the issues thrown up by the latest National Sample Survey data on consumption expenditures for 2001-02, which point to a further widening of disparities between Urban India and Rural India. Nothing captures this reality more than the fact that the monthly per capita consumer expenditure in the first was 87 per cent higher than in the second.

This process has been the focus of much academic debate. The recent work of Professor R. Radhakrishna, for instance, argues that the nineties growth trajectory has benefitted Urban India but has aggravated the rural-urban divide in consumer expenditures. This widening rural-urban divide has also coincided with worsening inequalities in consumer expenditure within urban India — with the top 30 per cent of the population gaining the most. The relative position of Rural India has, thus, turned adverse over time, which has been further corroborated by the latest NSS data. Reversing these disturbing rural-urban disparities is therefore a major challenge.

The NSS data also indicates a steady decline in the share of food and foodgrain or cereals in total consumption expenditures in both rural and urban India. However, this fall is more steep in the urban areas: the share of food has fallen from 64.5 per cent in 1972-73 to 43.1 per cent in 2001-02. Does this downtrend point to greater prosperity for consumers? Yes and no. Yes, as it is consistent with expectations that with higher incomes people will spend proportionately less on basic food and more on health-giving foods, like fruit, vegetables, milk and milk products. But the evidence however seems to suggest the contrary, since this trend is happening also in rural areas where food energy levels of the poor is far from being nutritionally adequate. This is why the lower spend in rural India on cereals is not necessarily the best sign of development and rising incomes. In this connection, Radhakrishna observed that in the nineties, the per capita consumption of cereals, adjusted for inflation, dropped more sharply in rural than urban areas; that unlike earlier, this loss of food energy intake could not be compensated by higher increased consumption of non-cereal foods. Clearly, there are doubts whether the diversification in consumption away from food and foodgrain has improved the nutritional status of Rural India, especially the poor.