One of the highlights of the survey was the reducing gap between rural and urban household consumption spending. In 2022-23, the average urban household was spending 71.2% higher than its rural counterpart. The difference was 84% in 2011-12 and 90% in 2004-05. The difference between urban and rural consumption grows at the top. The consumption spending by the richest 5% in villages is half of that in the urban areas. The difference is less than 50% among the poorest 20% of the urban and rural population.

The bottom 5% of India’s rural population has an average monthly per capita consumption expenditure (MPCE) of Rs 1,373 while it is Rs 2,001 for the same category of population in the urban areas. The top 5% of India’s rural and urban population has an average MPCE of Rs 10,501 and Rs 20,824, respectively. The ‘inequality’ at the top should be a cause of concern for the policymakers. The survey also shows a sharp drop in consumption spending in food items.

The average monthly rural spending on food items has come down from 53% of the total in2011-12 to 42% in 2022-23. In urban areas, the monthly spending on food items has fallen from 43% in 2011-12 to39% in 2022-23. The share of expenditure on cereals has fallen from 11% in 2011-12 to 5% in 2022-23 in rural areas while the same has fallen from 6.67% to 3.64% in urban areas. “More aspirational behaviour can also be seen through the rise in the share of items like fruits, milk, consumer services, entertainment and durable goods across both cohorts,” says Madhavi Arora, lead economist, EmkayGlobal.

She also points out that while spending on food hasreduced, the share of proteins in total food spending has increased, to the extent that rural households are now spending a greater share of their food budget on proteins than urban ones.

The drop in spending on food items, especially cereals, could also be attributed to implementation of the Food Security Act, which initially offered 5 kg of food grains to each family member at subsidised rates. Later, the scheme was merged with the Prime Minister Garib Kalyan Anna Yojna that started at the peak of Covid outbreak in April 2020. Under the PM Garib Kalyan Anna Yojna, 80 crore people receive 5 kg food grains per person per month free of cost.

According to the survey results, when the imputed values of items received free of cost through social transfer are included, the average rural consumption per capita per month goes up to Rs 3,860 (from Rs 3,773), and Rs 6,521 (from Rs 6,459) in urban areas.

The change in the consumption trends witnessed in the latest Household Survey report may also lead to change in the way Consumer Price Index (CPI) is calculated. Currently, the weight of food and beverages in the Consumer Price Index is 54% for rural areas and 36% for urban areas. Weight of cereals in rural and urban CPI is 12.35% and 9.67%, respectively.

Based on the latest survey’s findings, analysts believe there is a strong case for revision of the weights to different categories of goods and services inthe CPI. However, the government would wait for results of the second survey, which is likely to be completed in July 2024, before it changes the CPI, which measures retail inflation.

Evaluating the poverty level

Now that the initial results of the consumption survey have arrived, there has been a rush to arrive at the country’s poverty levels. The day after the initial survey reports were announced (late night on 24th February), Niti Aayog CEO B V R Subrahmanyam in hurriedly called press briefing for a select few journalists made the claim that poverty levels in the country could have been closer to 5%, based on the consumption survey data.

He alsomade the claim that the rural deprivation has almost disappeared if one looked at the consumption data. The poverty level arrived at based on the 2011-12 consumption survey was 22%. However, experts and statisticians are not yet ready to draw any conclusion on the poverty levels of the country unless they see the unit level data, which is yet to be released. According to Amit Basole, Professor of Economics and Head, Centre for Sustainable Employment at Azim Premji University, the Niti Aayog CEO’s assertion is based on a very rough calculation.

Basole says Niti Aayog CEO is basing his claims on the distribution of the average monthly per capita expenditure among fractile classes (0-5%, 5-10%, etc). And he is taking Rs 60 per day per person as the poverty line (Rs 1,800 per person per month). “Better to wait till the unit level data is released and a better poverty line is constructed based on the new consumption basket,” says Basole.