Decoding India's Largest Consumption Spending Survey: What Has Changed, And How?

These are some of the findings of the latest Household Consumption Expenditure Survey (HCES) by the National Sample Survey Organisation (NSSO), the most authoritative account of how Indians spend. Summary results of the latest survey held in 2022-23, after a gap of more than a decade, were released by the government last week.

Unlike many advanced countries, India does not conduct any periodic official income survey. Instead, it uses the spending data as a proxy for household incomes and its distribution across different classes and demographics.

The HCES is usually held once every five years. The last survey was held in 2017-18. But the government, citing poor quality of data, decided not to publish the results. The move stoked much controversy, with allegations that the government was hiding information that would show it in poor light. Which is why, the latest data have aroused much interest and curiosity among data trackers.

So, what are the key takeaways from HCES 2022-23?

Faster Economic Growth Tilts Scale In Favour Of Non-food Consumption

When a country makes economic progress, the share of food in total consumption tends to go down. As income rises, non-food expenditure also increases. India is no exception. Declining share of food expenditure has been a long-term trend.

However, for the first time since the NSSO began collecting data, the share of food in Monthly Per Capita Expenditure (MPCE) in rural India has fallen below 50 per cent, from 59.4 per cent at the turn of the millennium to 56.98 per cent in 2009-10 and 46.38 per cent now.

It is evident from these numbers that the share of non-food consumption has risen at an accelerated pace through the past two decades, mirroring the economic transformation of the time that has led to a gradual convergence of consumption choices among rural and urban populations.

Mobile phones, consumer electronics as also FMCG goods and two wheelers have penetrated rural markets at a much faster pace. And this, in turn, has led to more money being spent on fuel and electricity. As a result the share of non-food items in consumption spending by rural households has increased sharply from 40.6 per cent in 1999-2000 to 43.02 per cent in 2009-10 and 53.62 per cent in 2022-23.

As for the urban landscape, the share of food in total consumption continued to fall, although at a slower pace than rural India – from 48.06 per cent in 1999-2000 to 44.49 per cent in 2009-10 and 39.17 per cent now.

What is noteworthy, however, are the shifts within the food basket, in both rural and urban areas.

Cereals Make Way For Processed Food, Home Deliveries On The Rise

Rural India now spends more on beverages, refreshments and processed food, including cooked meals. As a result, spending on cereal and cereal substitutes has sharply dropped. More money is also spent on eggs, fish and meat, vegetables and fruits.

The share of cereals and cereal substitutes in rural India’s food basket has declined from 37.4 per cent in 1999-2000 to 24.2 per cent in 2009-10 and 10.5 per cent in 2022-23. Spending on beverages and processed food has seen its share rise sharply from 7.1 per cent in 1999-2000 to 13 per cent in 2009-10 and 20.7 per cent. The share of Egg, fish and meat has almost doubled during the same period to 10.6 per cent.

In absolute terms, the average per head monthly spending on beverages and processed food was estimated at Rs 363, Rs 314 for milk and milk products, Rs 203 for vegetables and Rs 185 for egg, fish and meat.

As for urban India, the shift away from staple foodgrain towards egg, fish, meat and milk products had set in much earlier. The typical urban consumer now tends to spend more on dry fruits as well. But the real splurge is in ordering food from outside, apart from eating out. The average urban consumer now spends Rs 687 monthly on beverages, refreshments and processed food. The home delivery of food clearly is contributing to this trend.

Both urban and rural consumers now spend less on sugar and salt, possibly signifying greater health awareness. The urban consumer also continues to depend less on products like pulses for protein intake.

Rural India Spends More On Pan, Tobacco, Intoxicants Than On Education

In 2022-23, the per capita monthly spending on pan, tobacco and intoxicants amounted to Rs 143, as compared to Rs 125 spent on education. Not an encouraging trend for an aspirational India, where education holds key to economic progress and social mobility.

One reason for lower spending on education could be that much of rural India is dependent on government schools and colleges and private education has limited reach. That still doesn’t justify the higher and rising spend on pan, tobacco and intoxicants.

What is even more worrying is that the share of education in non-food expenditure has fallen in the last decade, from 8.3 per cent in 2009-10 to 6.2 per cent in 2022-23.

What has seen a sustained rise in rural India through the past two decades is the expenditure incurred on acquiring consumer durables such as television, mobile phones, home appliances etc. The share of consumer durables in total non-food spending has nearly doubled from 6.5 per cent in 1999-2000 to 12.8 per cent in 2022-23. Rural India is also twice more on entertainment than it did two decades ago.

Mobility Comes With A Cost

A big change in the composition of the non-food basket has been the emergence of conveyance as a major expenditure head. Urban India spends an average of Rs 555 per month on conveyance, while the corresponding figure for rural India is Rs 285.

The share of conveyance in total non-food spending in urban India has risen from 10.6 per cent in 1999-2000 to 14.1 per cent in 2022-23. For rural India, the corresponding figure rose even sharper – nearly doubling from 7.2 per cent in 1999-2000 to 14.1 per cent.

A part of this is good news, as the numbers underline growing mobility. But another reason for the rising share of conveyance in consumption spending lies in rising fuel costs and the failure to build enough public transportation.

In fact, Indian consumers today spend more on conveyance than clothing and bedding, whose share in total consumption spending has tracked just the opposite course during the last two decades.