The issue of slow private consumption demand in India has once again come up for discussion, Stagnant rural wages and the resulting demand deficit in rural areas have been repeatedly highlighted by many over the past few years. During the last month, various corporations voiced concerns regarding slowdown in demand among the urban middle class. There is now a recognition that the depressed demand might contribute to overall slowdown in the prospects for growth in the economy. Despite the festival season, there doesn’t seem to have been much of a revival. SBI economists have predicted a dip in Gross Domestic Product growth in the September quarter to 6.5%.
It is obvious that the benefits of the recent economic growth in India have mostly accrued to a few rich people and rather than only looking at the size of the economy, we need to focus on the distribution as well. India might be among the top five economies in the world in terms of its total GDP, but is also ranked 136 in terms of per capita income. Therefore, very low levels of income for most people continues to be characteristic of the Indian economy, along with increasing concentration of wealth and incomes. Although income data is difficult to come by there are recent surveys that throw some light. All of these surveys show not only that incomes have been increasing very slowly and also that the level of average income is very low.
NABARD just released the data from its All India Rural Financial Inclusion Survey (NAFIS) 2021-22 which estimates that the average monthly household income is Rs 12,698 to Rs 13,661 for agricultural households and Rs 11,438 in non-agricultural households.
Assuming an average household size of 4.4, the per capita income in rural areas comes down to Rs 2,886 per month – not even Rs 100 a day.
So, on average a rural person has an income of less than Rs 35,000 per anum while the per capita GDP of India for 2021-22 was almost five times (Rs 1,71,498).
The Annual Survey of Unincorporated Sector Enterprises (ASUSE 2022-23) also indicates low-income levels. The Gross Value Added (GVA) per established for own account enterprises (OAE) was only Rs 1,27,073 and the GVA per worker (including all types of enterprises) was Rs 1,41,769 i.e. in the range of Rs 10-12000 per month. Even the Periodic Labour Force Survey (PLFS) data show very low earnings from employment. According to PLFS 2023-24, the average wage/ salary earnings during the of regular wage/ salaried employees was Rs 21,103 and average earnings per day of persons engaged in casual labour was Rs 433 (i.e. even if the worker found work for 25 days in the month, monthly earning would be only around Rs 10,000).
Also read: Consumption Data Shows the Indian Middle-Class Is Shrinking
This situation of modest earnings and spendings is also reflected in the household consumption expenditure (HCES 2022-23) data. Data on consumption expenditure is generally believed to be more reliable than income data in a country like ouRs where there is a large informal sector with irregular and multiple sources of income. The average monthly per capita expenditure for bottom five income deciles is less than Rs 3,000 in rural areas and Rs 5,000 in urban areas. The pressure of basic expenses of people is rising with stagnant real incomes and newer consumption aspirations. Even though many are covered under the PDS, a large proportion of total expenditure is on food, almost 40% as suggested by HCES. Data on affordability of healthy diets show that more than half the population cannot afford a healthy diet.
The cumulative size of the market is still big given the population size of India but if we reflect on these figures from the point of view of the individual and household, it is apparent that most people have very little disposable incomes with most of their spending going on regular basic necessities, and not much left for discretionary spending. Improving incomes brings our attention back to the challenge of creating decent jobs. The recent trends on employment show that informalisation continues to increase, there is a reverse structural shift towards agriculture and a high proportion of self-employment. Availability of good quality jobs has to become the central agenda of our economic policy.
While social protection measures such as the PDS, pensions and so on definitely help cushion people to some extent, this is not enough. Even NREGA expenditure has not been rising (as a proportion of the GDP). Existing welfare measures are minimal in terms of coverage and do not amount to any significant macroeconomic impact. A re-imagined macroeconomic policy towards inclusive and employment-centred growth is the need of the hour, not only for India but most other developing countries as well. Maybe this could be something that we take the lead on.
Dipa Sinha is a development economist.
