Context: The Ministry of Statistics and Programme Implementation (MoSPI) decided to conduct two consecutive surveys on household consumption expenditure during 2022-23 and 2023-24.

What is the Household Consumption Expenditure Survey (HCES)?

• The Household Consumption Expenditure Survey (HCES) is conducted by the Ministry of Statistics and Programme Implementation (MoSPI).

• The survey collects data on what households in India spend on goods and services.

• This data helps in understanding trends in economic well-being, updating the Consumer Price Index (CPI), and measuring poverty, inequality, and social exclusion.

• The survey also helps update the basket of goods and services used for calculating the CPI and tracks changes in the standard of living.

• HCES 2023-24: Ongoing from August 2023 to July 2024. The summary results for this year have been released in the form of a factsheet.

Key Findings of HCES: 2023-24

• Average Monthly Per Capita Consumption Expenditure (MPCE)

• Without imputed values for free items:

• Rural MPCE: Rs 4,122

• Urban MPCE: Rs 6,996

• With imputed values for free items (like government benefits):

• Rural MPCE: Rs 4,247

• Urban MPCE: Rs 7,078

Comparison with Last Year (2022-23)

• Nominal increase in MPCE (compared to 2022-23):

• Rural areas: +9%

• Urban areas: +8%

• Rural-Urban Gap:

• The gap in MPCE has narrowed:

• In 2022-23: 84% higher in urban areas

• In 2023-24: 70% higher in urban areas

• This means that rural consumption is growing at a faster pace.

Increase in Consumption for Bottom 5-10%

• The bottom 5-10% of the population (ranked by consumption) has seen the highest increase in MPCE, both in rural and urban areas, indicating more inclusive growth.

Key Expenditure Patterns

• Rural vs Urban Expenditure

• Rural Areas:

• Non-food items make up 53% of rural MPCE.

• Major non-food expenditures include:

1. Conveyance (e.g., transport costs)

2. Clothing, bedding, and footwear

3. Miscellaneous goods & entertainment

4. Durable goods (e.g., vehicles, household appliances)

• Urban Areas:

• Non-food items make up 60% of urban MPCE.

• Major non-food expenditures in urban areas are similar to rural areas but include rent (7% share in urban areas).

• Food Expenditures

• Major food items contributing to household spending:

1. Beverages, refreshments, and processed foods

2. Milk & milk products

3. Vegetables

Inequality in Consumption

• Consumption Inequality: The survey measures how evenly or unevenly consumption is distributed across different households using the Gini coefficient.

• Rural Areas: The Gini coefficient dropped from 266 in 2022-23 to 0.237 in 2023-24, indicating a decline in inequality.

• Urban Areas: The Gini coefficient dropped from 314 in 2022-23 to 0.284 in 2023-24, also showing reduced inequality.

Fractile Analysis of MPCE

• MPCE across different income groups: The survey also divides households into fractiles (income groups) to show how different income groups are doing.

• Bottom 5%:

• Rural: Rs 1,677

• Urban:Rs 2,376

• Top 5%:

• Rural: Rs 10,137

• Urban: Rs 20,310

• Growth in MPCE (from 2022-23 to 2023-24):

• Bottom 5% rural: Increase of 22%

• Bottom 5% urban: Increase of 19%

• State-wise Variation

• Top States in MPCE:

• Rural MPCE: Highest in Sikkim (Rs 9,377) and lowest in Chhattisgarh (Rs 2,739).

• Urban MPCE: Highest in Sikkim (Rs 13,927) and lowest in Chhattisgarh (Rs 4,927).

• Top UTs in MPCE:

• Chandigarh has the highest MPCE in both rural (Rs 8,857) and urban (Rs 13,425) areas.

• Dadra and Nagar Haveli and Daman and Diu have the lowest MPCE in rural areas (Rs 4,311), while Jammu & Kashmir has the lowest in urban areas (Rs 6,327).

Key Observations

• Non-food Items Dominate Expenditure: Both in rural and urban India, non-food items contribute more to total consumption, with categories like conveyance, clothing, durable goods, and entertainment being major contributors.

• Consumption Patterns: In both rural and urban India, beverages and processed foods contribute the most to food-related expenditure.

• Improvement in Inequality: There is a clear decline in income inequality between 2022-23 and 2023-24, both in rural and urban areas.

Road Ahead

• The findings of the HCES 2023-24 highlight the ongoing economic recovery and the narrowing gap between rural and urban consumption.

• Consumption inequality, both in rural and urban areas, has declined from the level of 2022-23.

• The difference between Rural and Urban MPCE has narrowed substantially over the years, implying the success of government policies in improving Rural incomes.

• Policymakers can use this data to design targeted interventions to further reduce inequality and support sustainable economic growth.