Changes in domestic household consumption bode well for manufacturers

- Instead of demanding support prices, farmers should focus on commodities where consumer spending is increasing...

Recently, the government released some results of the Household Consumption Expenditure Survey. The National Statistical Office conducted a comprehensive consumption survey of 2.60 lakh households between August 2022 and July 2023. This is the first survey of its kind in over a decade, the results of which have been made public. Although such a survey was also conducted in 2017-18, the data was not made public due to data quality issues. The proportion of rural households' expenditure on food has declined from 53 per cent in 2011-12 to 46 per cent in 2022-23. Since the exact impact of increased foodgrain allocation by the government cannot be known on this ratio, it would be considered unsafe to draw any policy conclusions from this figure.

What is more interesting is that the consumption expenditure of rural households has increased by 40 percent and that of urban households by one-third. These are solid figures but it should also be borne in mind that nominal growth in consumption is significantly lower than nominal growth in GDP. This raises a question as to whether India is moving towards public investment or government-supported growth by reducing household spending.Per capita private consumption expenditure is almost double what consumption surveys suggest. This difference is not unusual, but it does not help resolve the macroeconomic question of whether consumption can still be classified as a driver of Indian growth.

In general, comparisons with data from previous editions of the survey should be avoided as there are significant differences in the methodology of the two surveys. While the previous round asked questions related to expenditure on fewer items, the new edition took a digital approach to interviewing households and included expenditure on more items. It may not be wise or easy to compare data from this survey with data from a decade ago, but survey data from this period will be closely studied. For example, spending inequality has had some troubling consequences.

In terms of consumption expenditure, the bottom five percent of the country's population spend only one-tenth as much as the top five percent. There is also inequality in the total distribution. Geographical differences between states in terms of consumption expenditure are also marked. The post-Covid survey was conducted at a time when consumption expenditure was on the rise. Some analysts have therefore said that these findings should be viewed with caution. The lesson that the government should take from this is that these surveys should be conducted regularly so that better policies can be formulated.

The frequency of such surveys needs to be increased. Consumption patterns are also changing rapidly and policy makers need fast and accurate data to make sound decisions. Consumption surveys are also used to determine the items included in the Consumer Price Index.