In 2023-24, India witnessed a notable decline in consumption inequality between rural and urban residents. The latest Household Consumption Expenditure Survey (HCES) revealed that the average Monthly Per Capita Consumption Expenditure (MPCE) in rural areas rose by 9.2% to ₹4,122. Urban areas saw a growth of 8.3%, reaching ₹6,996. This shift reflects the impact of government support in rural regions, particularly following the Covid-19 pandemic.
About Monthly Per Capita Consumption Expenditure
MPCE measures the average monthly spending per person. It includes both food and non-food items. In 2023-24, rural MPCE showed increase, indicating improved economic conditions. The urban-rural consumption gap narrowed to 69.7%, down from 71.2% in the previous year. This trend signals a sustained momentum in rural consumption growth.
Government Support and Its Effects
Government initiatives have played important role in boosting rural consumption. Freebies and subsidies provided to eligible households have enhanced spending capacity. Despite a disappointing monsoon in 2023, these measures have contributed to the rise in rural MPCE. The data indicates that while overall consumption is increasing, disparities remain between the wealthiest and poorest households.
Food vs Non-Food Expenditure
In 2023-24, food accounted for 48.4% of rural MPCE and 40.3% in urban areas. The share of food items in rural areas slightly increased to 47%. In urban areas, it rose to 39.7%. This contrasts with previous years, where food expenditure was declining as consumption levels rose. The increase in food expenditure reflects changing consumer preferences, especially towards processed foods.
Inflation Trends
Food inflation averaged 8.1% in rural areas and 8.4% in urban areas during the survey period. Among non-food items, conveyance and medical expenses were contributors to overall spending. The rise in non-food expenditure indicates a post-Covid normalisation, as people are more inclined to engage socially and travel.
Key Findings from the Survey
The HCES surveyed 261,953 households from August 2023 to July 2024. It brought into light that spending by the bottom 5% of households increased , while spending by the top 5% declined. This trend suggests a shift towards greater economic equality, although substantial gaps remain. The survey also noted a notable increase in vegetable expenditure, reflecting changing dietary patterns.
Consumer Preferences and Changes
There has been a marked shift in consumer preferences towards processed foods. Beverages and refreshments accounted for shares of MPCE. The increase in vegetable expenditure, coupled with high inflation rates, indicates evolving consumption patterns across both rural and urban areas.
Implications for Policy and Planning
The findings from the HCES are vital for policymakers. They highlight the importance of addressing consumption disparities and tailoring social welfare programmes. About these trends can help in designing effective economic policies that support sustainable growth.
Questions for UPSC:
- Critically analyse the impact of government welfare schemes on rural consumption patterns in India.
- Estimate the relationship between food inflation and consumer spending behaviour in urban areas.
- What is the significance of the Household Consumption Expenditure Survey in understanding economic inequality? Discuss.
- Point out the changes in consumer preferences regarding food items in India over the last decade.
Answer Hints:
1. Critically analyse the impact of government welfare schemes on rural consumption patterns in India.
- Government welfare schemes have provided financial support, increasing the purchasing power of rural households.
- Subsidies and freebies have led to a notable rise in Monthly Per Capita Consumption Expenditure (MPCE) in rural areas.
- Post-Covid recovery has been influenced by these schemes, helping mitigate the effects of agricultural distress.
- Despite increased spending, disparities persist between the top and bottom income households.
- Welfare measures have shifted expenditure patterns towards non-food items, indicating a diversification of consumption.
2. Estimate the relationship between food inflation and consumer spending behaviour in urban areas.
- Food inflation in urban areas rose to 8.4%, impacting overall consumer spending capacity.
- Increased food prices may lead consumers to adjust their budgets, prioritizing essential over luxury items.
- Higher food costs can shift spending towards non-food categories as consumers seek to maintain overall expenditure levels.
- Consumer behavior reflects a preference for processed foods, which may be more expensive but convenient.
- Inflation can drive shifts in dietary choices, as consumers adapt to rising costs by seeking alternatives.
3. What is the significance of the Household Consumption Expenditure Survey in understanding economic inequality? Discuss.
- HCES provides critical data on consumption patterns, helping to identify disparities between different socio-economic groups.
- It informs the calculation of the Consumer Price Index (CPI) and poverty metrics, essential for policy-making.
- The survey marks the urban-rural consumption gap, crucial for targeted welfare programs.
- It reveals shifts in spending behavior, reflecting changing economic conditions and consumer preferences.
- HCES findings can guide policymakers in addressing inequality and designing effective economic interventions.
4. Point out the changes in consumer preferences regarding food items in India over the last decade.
- There has been a shift towards processed and convenience foods, reflecting changing lifestyles.
- Expenditure on beverages and refreshments has increased, indicating a preference for ready-to-eat options.
- Vegetable expenditure has risen , influenced by health-conscious consumer trends.
- Overall, the proportion of food in total expenditure has slightly increased, contrasting previous trends of decline.
- Consumer preferences are increasingly shaped by urbanization and exposure to global food trends.
