Syllabus:GS-3/Economy
Recent Context
According to the Household Consumption Expenditure Survey (HCES), India’s average per capita household spending rose by about 3.5% in real terms during the period from August 2023 to July 2024 compared to 2022-2023.
What is the Household Consumption Expenditure Survey?
The purpose of the Household Consumption Expenditure Survey (HCES) is to gather information on household spending and consumption of goods and services. Along with the weights used to calculate the Consumer Price Index, the survey offers vital information for evaluating trends in economic well-being and updating the basket of consumer goods and services.
The NSSO has been carrying out the Consumer Expenditure Survey since 1972. Its purpose is to gather data on household consumption of goods and services.
Furthermore, poverty, inequality, and social exclusion are measured using the data gathered by HCES. For the majority of analytical purposes, the main indicator is the Monthly Per Capita Consumption Expenditure (MPCE), which is obtained from HCES.
As with HCES:2022-23, HCES:2023-24 has produced two sets of MPCE estimates:
o Not including assumed values for goods that households receive for free through different social welfare programs.
o Including imputed values for goods that households receive for free through different social welfare programs.
Methodology Used in HCES
Three distinct questions were used for this survey, covering:
1. Food products
2. Services and consumables
3. Use of durable goods
Additionally, a special portion of the survey was designed to gather data on the amount of free goods that households got and used from various social welfare programs.
Modifications to the Approach
There are now 405 items in the survey, up from 347 previously. Furthermore, the questionnaire's format has evolved.
HCES 2022–2023 introduced four different questionnaires for food, consumables and services, and durable items, in contrast to prior surveys that used a single questionnaire. As a result, rather than using a single visit as in previous surveys, data collection now entailed many visits.
Major Highlights of the Survey
The average MPCE increased: Comparing 2023–24 to 2022–23, the average Monthly Per Capita Consumption Expenditure (MPCE) in rural and urban areas increased by almost 9% and 8%, respectively. Due to sustained consumption growth in rural areas, the urban-rural MPCE difference shrank from 84% in 2011–12 to 71% in 2022–23 and then to 70% in 2023–24.
Effect on the Poorest 5–10% of the Population: The lowest 5–10% of Indians, both in rural and urban regions, saw the most gain in MPCE during 2022–2023 and 2023–2024.
The Share of Non-Food Items in Domestic Spending: In line with past patterns, non-food products continue to be the largest source of household spending in 2023–2024.
Expenditure on Food Products: Both rural and urban households continue to spend the most money on processed meals, beverages, and refreshments under the food products category.
Principal Categories of Non-Food Expenditure: In both rural and urban locations, transportation, clothing, bedding and footwear, entertainment, miscellaneous goods, and durable goods account for a sizable portion of spending on non-food items.
Reduction in Inequality of Consumption: Inequality of consumption has declined in both rural and urban areas since 2022-2023. In rural areas, the Gini coefficient decreased from 0.266 in 2022-2023 to 0.237 in 2023-2024; in urban areas, it decreased from 0.314 to 0.284. Less inequality is indicated by a lower Gini coefficient.
Spending in Rural and Urban Areas:
o In rural areas, non-food items accounted for 53% of spending, with the greatest shares going to clothing, bedding, and footwear.
o Non-food products accounted for 60% of spending in metropolitan areas, with miscellaneous goods, entertainment, apparel, footwear, and education being the main categories.
o 31.5% of the increase in urban consumption was attributable to food items, particularly processed meals, beverages, vegetables, and dairy goods.
The Gap in Rural-Urban Consumption: With rural households now spending 69.7% of what urban households spend, the gap between rural and urban consumption has shrunk even more to 70% in 2023–2024.
Regional Differences in MPCE: Meghalaya has the largest MPCE disparity among the states (104%), followed by Jharkhand (83%), and Chhattisgarh (80%).
MPCE-Highest and Lowest States: With rural areas reporting Rs 9,377 and urban areas reporting Rs 13,927, Sikkim has the highest MPCE. The state with the lowest MPCE was Chhattisgarh.
Consumption Trends by Region: According to regional consumption patterns, states in the north and west consume more per person than those in the east and center. While West Bengal, Bihar, Uttar Pradesh, and Odisha had lower than average consumption, states like Maharashtra, Punjab, Tamil Nadu, and Kerala had higher than average consumption.
Way Forward and Conclusion
The HCES 2023–24 show a substantial narrowing of the difference between rural and urban consumption as well as ongoing economic recovery. Compared to 2022–2023, there is less disparity in consumption in both rural and urban areas.Over time, the difference between rural and urban MPCE has significantly decreased, demonstrating how well government initiatives have worked to increase rural earnings. Policymakers can use this information to help create focused plans to further lower inequality and encourage long-term, steady economic growth.
UPSC Mains Model Question
Q. Discuss the findings of the Household Consumption Expenditure Survey (HCES) 2023–24 in the context of narrowing rural-urban consumption disparities and economic recovery. Highlight the role of government initiatives in reducing inequality and suggest measures to ensure sustainable and inclusive economic growth. (250 words)
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