NSSO Consumption Spending Data Point To Growing Interstate Disparity

The case with the recently released Household Consumption Expenditure Survey (HCES) by the National Sample Survey Office (NSSO) is no different. In India, consumption expenditure data is used as a proxy to estimate the level of poverty, infer the standard-of-living in different states, and deduce other macroeconomic indicators.

The results of this survey coupled with the recently released Q3 Gross Domestic Product (GDP) data have reignited the debate about the state of the country’s prosperity and poverty.

Headlines over the past few weeks have chronicled either a persisting inequality or a sharp decline in the rural-urban divide. So, which is it? Perhaps, both can be true. 

A Bird’s Eye View And A State-Wise Overview 

The Secretariat earlier reported notable takeaways from the survey that corroborate a picture of India’s economic transformation adhering to Engel's Law—as disposable income increases, the percentage of food expenditure drops—hinting at an advancing economy. Zooming in, however, gaps exist between and within Indian states.

Data collected from households in 8,723 villages and 6,115 urban blocks spread over all states and union territories reveal the variance in people’s monthly spending. Taking a decadal jump from the last survey in 2011-12 to the latest 2022-23 survey, in the past 10 years, the all India average Monthly Per Capita Expenditure (MPCE) for rural households has climbed from Rs 1,430 to Rs 3,773, and for urban households from Rs 2,630 to Rs 6,459.

Among Indian states, Sikkim has the highest MPCE at Rs 7,731 in rural and Rs 12,105 in urban households. At the tail end, Chhattisgarh has an MPCE of Rs 2,466 for rural and Rs 4,483 for urban households. Interestingly, Lakshadweep is an outlier where rural MPCE at Rs 5,895 is higher than urban MPCE at Rs 5,475.

For the sake of this analysis we add a caveat of our own by taking the 17 major states of the country, leaving the northeast and hill states out of the rank race. 

Despite the rise in spending, the 7 states below the all India average of rural MPCE remain the same as in 2011 (Bihar, West Bengal, Uttar Pradesh, Madhya Pradesh, Odisha, Jharkhand, and Chhattisgarh). In urban India, Gujarat and Tamil Nadu’s average MPCE left the all India average behind in 2022, leaving the usual suspects (Rajasthan, West Bengal, Odisha, Uttar Pradesh, Madhya Pradesh, Jharkhand, Bihar, and Chhattisgarh) to trail behind. 

Change In Pecking Order 

While averages are infamous for swallowing nuance in data, they are adept at revealing overarching trends. The MPCE of states in rural and urban India allow us to rank them and compare how they’ve fared since the last survey.

In 2011-12, rural Kerala had the highest monthly spending among rural areas. At Rs 2,669 per month, it was far above the all-India rural average of Rs 1,430 and a considerable margin away from Punjab, the next highest at Rs 2,345. Throughout the decade, the same states have consistently lagged behind—Chhattisgarh, Jharkhand, and Odisha. However, the gaps between them have increased from a few rupees to a few hundred rupees.

In rural India, Tamil Nadu demonstrated a significant ascent in ranking surging by 3 spots to come in third after Kerala and Punjab. Bihar followed suit with a comparable advancement further down the lineup ascending 3 spots to claim the 11th position. Karnataka also rose by 2 ranks, filling in the 7th spot. Haryana and Maharashtra, on the other hand, slipped 2 spots each landing at 5th and 9th place, respectively. 

Shifting focus to urban India, the 2011-12 survey crowned urban Haryana the state with the highest MPCE at Rs 3,817. This is one of those cases where averages erase context. The high spending is most likely owing to the growth of Gurugram as a financial and technology hub. 

Once again, there was a significant gap with the next highest state–Kerala at Rs 3,408. In 2022-23, Telangana dethroned Haryana to claim the top rank in urban household consumption expenditure at Rs 8,158. Its parent state Andhra Pradesh consistently ranked 6th. As expected, Bihar came in last in 2011-12, but did marginally better in 2022-23 by trading spots with Chhattisgarh, letting it claim the last spot instead.

Within the selected states, Tamil Nadu saw the sharpest ascent from the number 8 spot in 2011-12 to the 4th position in 2022-23. Odisha also displayed some upward mobility moving from the 15th place to the 12th, and Gujarat from 10th to 8th.

On the other hand, Maharashtra slipped from 3rd position in 2011-12 to 7th in 2022-13. In the same vein, Punjab descended from 5th place to the 9th, West Bengal from 9th to 11th and Madhya Pradesh from 12th to 14th, placing it in the bottom five. 

Growing Interstate Inequity

The underlying trend in both rural and urban India is an increasing inter-state inequity. While rankings show how states have fared compared to each other, they don’t display the widening gap very well. 

For that, we calculate the absolute deviation of each state’s MPCE from the all India MPCE. This allows us to quantify the extent to which each state's expenditure deviates from the national average as seen in the charts below, providing a clearer understanding of the growing disparities. 

Individuals residing in states that had a high per capita expenditure such as Kerala, Tamil Nadu, and Punjab experienced further improvement, evidenced by figures that were much higher than the all India average for 2022-23.

On the other hand, states with initially low MPCE such as Chhattisgarh, Jharkhand, and Odisha have lurked further behind with an increasing gap. This brings to fore a North-South divide with southern states consistently faring much better than the Hindi-speaking heartland.

If an average person from rural Kerala from 2011 had a time machine and travelled to rural Chhattisgarh in 2022, the former would still have more purchasing power than the latter. 

In a curious case, Gujarat is the only state in which the trend of states above the India MPCE faring better, and states under stretching further away, doesn’t hold. Rural MPCE of Gujarat was closer to the national average in 2022. In urban areas, Gujarat and Tamil Nadu used to fare under the national average, but pulled up to cross it in 2022-23. 

Rural-Urban Gap Narrows 

In 2011-12, urban households in West Bengal were spending twice the spending by rural households. That gap, highest among states, sharply narrowed to 40 per cent in 2022-23.  A similar pattern was seen in the case of Jharkhand and Maharashtra as well.

In 2022-23, the rural-urban was most pronounced in the case of Chhattisgarh, followed by Jharkhand and Odisha. While in most states the urban-rural divide is narrowing, Bihar, Gujarat, and Punjab seem to have tracked the opposite course.  

Urban consumption expenditure is 1.71 times rural consumption expenditure in 2022-23, dropping from 1.8 times in 2011-12. This is the data point that has made waves about inequality narrowing. But, the expenditure gap between rural and urban India persists.

The purchasing power of someone in rural India in 2022 is closer to someone from rural India in 2011 than to someone in urban India in the same year, highlighting the enduring urban-rural economic divide.  

While the collation of survey findings was released in a fact sheet by the Ministry  of Statistics and Programme Implementation (MoSPI), the report with unit-level data is expected to be in the public domain by mid-summer. The NSSO will also be conducting another round this year to check if the results are statistically robust.