Visuals from the MSME Conclave held in Bengaluru recently. Seen in pictures are Ministers Shoba Karandlaje, DK Shivakumar and MB Patil.
On 27 December 2024, the Ministry of Statistics and Programme Implementation (MoSPI) released the Household Consumption Expenditure Survey (HCES) 2023-24.
This survey is conducted by the National Sample Survey Office (NSSO) which comes under the Ministry of Statistics and Programme Implementation (MoSPI).
After an 11-year hiatus when the government rejected the results of the 2017-18 survey, citing “quality” concerns about the data, this is the second year in a row that the HCES survey was conducted and the findings released.
According to the Ministries Press Information Bureau statement:
“Sustained momentum in rural consumption continues as the urban-rural gap narrows further in 2023-24 compared to 2022-23”.
This article will explain what is HCES, and its importance, and also, will bring out the important findings of the latest study and end with a conclusion.
What is HCES?
HCES is aimed at accumulating information on consumption and expenditure of the households on goods and services. In August 2022–July 2023, the initial survey was carried out, and in February 2024, the factsheet containing the study’s summary findings was printed.
The comprehensive report and survey data at the unit level were then made public in June 2024.
In HCES 2023-24, two sets of MPCE estimates were generated:
What does the survey provide? – Importance of HCES
The survey offers essential data for assessing trends in economic well-being and determining and updating the basket of consumer goods and services and weights used for the calculation of the Consumer Price Index.
This survey data is also used to calculate or measure poverty inequality and social exclusion. The primary indicator, the Monthly Per Capita Consumption Expenditure (MPCE) compiled from HCES, is used for most analytical purposes.
Important Findings of the Survey 2023-24
Average MPCE:
Without imputed
Without taking into account the value of items received free of cost by the households through various social welfare programmes, the average MPCE in rural and urban India in 2023-24 has been estimated to be
Rs. 4,122 and Rs. 6,996, respectively.
The Average MPCE (without imputation), in nominal prices, in 2023-24, increases by 9% in rural areas and 8% in urban areas compared to 2022-23.
Source: HCES Fact Sheet, MoSPI
With Imputed
The estimated average monthly per capita expenditure (MPCE), with imputed values for goods received via social welfare programs, is ₹4,247 and ₹7,078 for rural and urban areas, respectively.
Narrowing Urban-Rural Gap in MPCE:
In the period from 2011-12 to 2022-23, the urban-rural MPCE gap narrowed from 84% to 71%.
The figure has decreased to 70% in 2023-24, indicating the continued growth of rural consumption.
Inequality
Analysis of MPCE reveals that the bottom 5% of India’s rural population has an average MPCE of Rs. 1,677, significantly less than the Rs. 2,376 average for the same demographic in urban areas.
In India, the average MPCE for the top 5% of the rural and urban populations is Rs. 10,137 and Rs. 20,310, respectively.
The greatest increase in MPCE between 2022-23 and 2023-24, at 22%, was observed among the bottom 5% of India’s rural population. The urban counterpart experienced an approximately 19% rise during the same period.
Source: HCES Fact Sheet, MoSPI
Consumption Behaviour:
In line with the trend seen in HCES 2022-23, non-food items continue to account for the majority of household spending in 2023–2024, accounting for roughly 53% and 60% of MPCE in rural and urban areas, respectively.
In urban areas, rent accounts for 7% of non-food expenditures.
In both rural and urban areas, households spend a significant portion of their non-food expenditure on transportation, apparel, bedding and footwear, entertainment, and miscellaneous goods.
Beverages, refreshments, and processed foods are the major expenditures/contributors in the food items basket of rural and urban households.
Gini coefficient – Decline in Consumption inequality:
From 2022–2023 to 2023–2024, consumption inequality (measured by the Gini Coefficient) decreased in both rural and urban areas. In rural areas, the Gini coefficient decreased from 0.266 in 2022–2023 to 0.237 in 2023–2024 and in urban areas, it decreased from 0.314 in 2022–2023 to 0.284 in 2023–2024.
The percentage of households’ average MPCE that went towards non-food items (rent, transportation, clothes, bedding, shoes, and entertainment) increased from roughly 47% in 2011–12 to roughly 53% in rural areas and from roughly 57% to 60% in urban areas.
MPCE between the States and Union Territories
Among the States, Sikkim is the highest in MPCE with a rural expenditure of Rs. 9,377 and an urban expenditure of Rs. 13,927. The lowest is Chhattisgarh with a rural expenditure of Rs. 2,739 and an urban expenditure of Rs 4,927.
Among the UTS, Chandigarh is the highest – rural Rs. 8,857 and urban Rs. 13,425, while the lowest is Dadra and Nagara Haveli and Daman and Diu – Rs 4311, and Jammu and Kashmir – Rs. 6, 327 in rural and urban areas respectively.
In the rural-urban gap, according to Average MPCE, Meghalaya tops among the states with 104% followed by Jharkhand with 83% and Chhattisgarh with 80%.
In nine out of 18 major states, the MPCE surpasses the national average for both rural and urban areas.
Conclusion:
Elevated food inflation is the major contributor to increased spending over the past year. The continued high food inflation is still worrisome as this is the major contributor to increased expenditure among households (both rural and urban areas), which is visible in HCES.
One interesting/surprising observation from the survey is Sikkim, one of the Northeast States, is the highest among all the states in both rural and urban expenditure.
The present food inflation is expected to come down in the next couple of quarters, however. The Reserve Bank of India expects that food inflation is likely to soften in the fourth quarter.
However, the Gini coefficient shows that there is a decline in consumption inequality across both urban and rural sectors, and this is thanks to the government’s social welfare schemes like PM Garib Kalyan Anna Yojana, PM-Kisan etc., which have contributed to narrowing this consumption inequality.
The government has decided to use the Results of HCES 2022-23 for CPI calculation. The government has also decided to bring in a new series of CPI, IIP, and GDP data.
The new CPI series is expected by February 2026; for GDP data, the base year is expected to be moved from 2011-12 to 2022-23.
It is also expected that the GST data will be used for GDP calculation.
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