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Thursday, July 18, 2024, 1:30 am

Thursday, July 18, 2024, 1:30 am

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Priorities appear to be changing, according to the most recent household expenditure study.

Household Consumption Expenditure Survey
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The Household Consumption Expenditure Survey, conducted between August 2022 and July 2023, was released with broad results by the Statistics Ministry on an unusually late Saturday. Especially with the once-a-decade Census, which is expected in 2021, nowhere in sight, this is significant since it is the first significant survey-based data produced since 2011–12 that captures ground realities at the household level. The results of the most recent consumption survey, which was conducted every five years by the National Sample Survey Office (NSSO), along with a related employment survey, were discarded by the government due to “quality issues” with the data, which was seen as a cover for any unfavourable information the survey may have revealed. If the reason for abandoning the 2017–18 Survey was that it accurately depicted the negative effects of the late 2016 demonetisation of high-value currency notes on India’s predominantly informal economy and the subsequent introduction of the Goods and Services Tax, then caution should be exercised when interpreting the results of the 2022–23 Survey as well. For, it is expected to intensify the consumer jubilation that has been observed following two years of income losses and restrictions brought on by the pandemic—what economists refer to as the release of pent-up demand.

In summary, the Survey indicates some intriguing shifts in consumption habits, and the full results need to be released quickly to allow for more in-depth examination. Over the 2011–12 year, households’ average monthly per capita consumption spending (MPCE) increased by 40.4% in rural India to ₹2,008 and by 33.5% in urban to ₮3,510. According to the government, this indicates that income disparity is decreasing, poverty rates are sharply down, and incomes are growing. Yet over an 11-year period, this only represents a 3.5% compound annual rise in rural family spending and a 3% growth in urban household spending —well below the rates of inflation and GDP growth during this time.

The average MPCE for rural families was ₹2,054 whereas for urban counterparts it was ₹3,544, which is puzzling because even after factoring in the assumed values of free items acquired via various welfare initiatives like the PM Garib Kalyan Anna Yojana. It is noteworthy that the percentage of monthly food expenditures has decreased from 50% in rural houses to 46.4% in urban homes, with cereals experiencing the biggest decline. This trend may be mitigated if Consumer Price Index weights are adjusted. It is important to remember, though, that food inflation started to rise in June of last year, right before the Survey was finished, and it has continued to do so ever since. Therefore, proportionate spending has probably changed. When the new Survey finishes this July, a better picture free of pent-up demand and inflationary dip-poly effects is anticipated. Consequently, any recalculation of GDP, poverty, or inflation must wait until those findings are also compiled and made public.

Abhishek Verma


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