“The increase is largely due to government support towards rural areas post Covid. Freebies and subsidies supported the growth in per capita expenditure, in a year when the Southwest monsoon had disappointed (in 2023),” said Yuvika Singhal, economist, QuantEco Research.
Testimony to Sustained Momentum
The urban-rural gap in MPCE has declined to 69.7% in 2023-24 from 71.2% in 2022-23, and 83.9% in 2011-12.
“This confirms sustained momentum of consumption growth in rural areas,” the Ministry of Statistics and Programme Implementation (MoSPI) said in a statement accompanying the report. HCES datasets are crucial for updating item weights for computation of the Consumer Price Index (CPI), and for measuring poverty, inequality, and social exclusion. To be sure, a sharp gap remains between the average consumption expenditure of the top 5% and the bottom 5% households in both urban and rural India. A gap also continues to exist in the average spending among the top 5% households in both geographic categories.
Data also showed spending by the top 5% of the rural and urban population, ranked by MPCE, declined 3.5% and 2.5%, respectively, in 2023-24 from the year before. Conversely, spending by the bottom 5% increased by 22.1% in rural areas and 18.7% in urban areas.
When including items received free through various social welfare programmes, home produce items, gifts, etc., food accounted for 48.4% of the average MPCE in rural areas and 40.3% in urban areas. Non-food items made up 51.6% in rural areas and 59.7% in urban areas.
Food vs non-food items
In rural areas, the share of food items in MPCE rose slightly to 47% in 2023-24 from 46.4% in 2022-23. That compares with 52.9% in 2011-12. In urban areas, this share increased to 39.7% from 39.2% in 2022-23, compared with 42.6% in 2011-12.
“As consumption levels increase, the proportion of food in total expenditure declines. However, in 2023-24 the proportion of food has increased both in rural and urban areas,” said Devendra Kumar Pant, chief economist at India Ratings and Research.
By contrast, the share of non-food items in average MPCE in rural areas marginally declined to 53% in 2023-24 from 53.6% in the year before. It was 47.1% in 2011-12. In urban areas, it fell marginally to 60.3% from 60.8% in 2022-23. Its share was 57.4% in 2011-12.
The survey, conducted during August 2023 to July 2024, covered 261,953 households.
During August 2023 and July 2024, the average food inflation was 8.1% in rural areas, compared with 6.2% in the corresponding period last year. In urban areas, it rose to 8.4% from 5.6%.
Among the non-food items, the major contributors in rural areas in 2023-24 were conveyance (7.6%), medical (6.8%), and clothing, bedding & footwear (6.6%). In urban areas, the top contributors were conveyance (8.5%), miscellaneous goods, entertainment (6.9%), and durable goods (6.9%).
Post-Covid normalisation
“Non-food expenditure reflects a post-Covid normalisation, driven by people’s increased desire to go out and engage socially in urban areas,” said Singhal.
Among food items, beverages, refreshments, and processed foods (including purchased cooked meals) accounted for the highest share in MPCE at 9.8% in rural areas and 11.1% in urban areas. “Increase in share of processed food reflects a change in consumer preferences,” said Singhal.
The share of expenditure on vegetables was higher in 2023-24 compared to the previous year across rural and urban areas.
The average vegetable inflation across rural and urban areas was around 21% in the same period when the survey was conducted. Pant expressed surprise at the minimal change in the proportion of expenditure on cereals and pulses.
