There was a hiatus in availability of consumption expenditure data in the country for over a decade, with the government rejecting the 2017-18 Consumption Expenditure Survey (CES) over the quality of data. Estimates of poverty and other indicators of consumption – including on calories intake, inequality and so on – were all based on the numbers from the 2011-12 CES. This was finally addressed last year with the release of the Household Consumption Expenditure Survey (HCES) data for 2022–23 and the publication of the factsheet for the following year recently.
Spending on food is still high
The data for 2023-24 show that the proportion of expenditure on food in MPCE (monthly per capita expenditure) is still high at 47.04% in rural areas and 39.68% in urban areas.
Usually, as households become more prosperous, spending on food as a proportion of total expenditure falls and this is seen as one of the markers of how rich or poor a society is. However, it is seen that the proportion of food expenditure is slightly higher in 2023-24 compared to 2022-23 (46% in rural areas and 39% in urban areas). Data from the next few years will tell us if this is a trend or just an aberration.
A similar trend was also observed for the share of cereals in total MPCE. Whether this has anything to do with withdrawal of the additional covid-relief cereal allocations under the public distribution system (PDS) is something that can only be assessed once the full data are made available. It also needs to be noted that these figures are averages for the entire population and the food expenditure share for lower classes would be even higher. The factsheet does not give such a break-up.
Overall MPCE on average has increased in rural areas from Rs 3,773 in 2022-23 to Rs 4,122 in 2023-24. In urban areas, the increase is from Rs 6,459 to Rs 6,996 during this year. Adjusting for inflation, this is an increase of 3.57% in rural areas and 3.48% in urban areas.
Why there is no clarity on trends
One of the findings that the official press releases have been highlighting is the difference between the urban and rural MPCE has narrowed down. Further detailed analysis would be required however to understand whether this is due to rural incomes growing appreciably fast or urban incomes stagnating. Given the recent news of slowing consumption demand in urban areas, it is quite likely that it could be the latter.
The consumption expenditure data can be useful to understand consumption patterns of the people, inequality trends, status of well-being also taking consumption to be a proxy for income (at least for the poor) and to arrive at poverty estimates. However, there are severe limitations towards achieving these with the current HCES data.
Also read: India Has a Consumption Demand Problem
Even though there is high-frequency data now available on consumption expenditure, it is almost impossible to have any clarity on what trends it indicates
Issues of comparability arise because of changes in the methodology for sampling as well as data collection in the HCES. Concerns have been raised about the current sampling design under-representing the poorest sections of the society while also better capturing the affluent compared to previous rounds. This might result in higher consumption expenditure estimates than what would have been based on previous sampling.
Further, the data are now collected over three visits to the household while earlier the entire questionnaire was administered in one visit. This could have an impact on the way people respond, the same member of the household might not be the respondent each time and so on. Unfortunately, there is no simultaneous survey using the old methodology alongside the new one. This could have given us a correction factor to make the new data comparable.
In the past, this was a regular practice in NSS surveys when methodological changes were made. Overall, sampling between rural and urban areas and the weights assigned are also problematic given that the last census was conducted in 2011, and the distribution might be very different now.
Another limitation is that the poverty line in India has not been updated for a very long time. The poverty line based on the Tendulkar committee recommendations was set in 2009, almost 15 years ago. Most recent estimates of poverty are based on this poverty line updated to current prices. However, the official poverty line needs to be updated regularly to take into account changing standards of living and consumption baskets.
The Tendulkar poverty line does not reflect deprivation appropriately and is more of a destitution line for the present times. The World Bank poverty cut-offs are also too low and would face the same issue of comparison with previous rounds of CES. An expert committee needs to be set up to update the poverty line and resolve the comparability issues to the extent possible. Such a committee should consist of independent reputed experts in the field and their findings must be transparently shared with the public.
Dipa Sinha is a development economist.
