Household Consumption Expenditure Survey 2023-24: Rural-urban gap shrinks, household expenditure increases
India’s rural-urban consumption gap continued to shrink in 2023-24, with an overall household spending rising across all segments, according to a detailed government report on Household Consumption Expenditure Survey (HCES) posted by the Ministry of Statistics and Programme Implementation.
The reduction challenges the commonly held view that urban areas are ahead of rural areas in terms of economic well-being and consumption, experts said.
Household expenditure increased across all major states, with Odisha registering the highest rural Monthly Per Capita Consumption Expenditure (MPCE) growth at 14 per cent and Punjab leading in the urban MPCE growth at 13 per cent from 2022-23.
Notably, southern states, like Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana, Punjab and Haryana in the north; and Maharashtra, Gujarat, and Rajasthan in the west generally recorded higher MPCEs than the national average.
Main findings of HCES 2023-24
According to the government, consumption inequality, both in rural and urban areas, for almost all the 18 major states has declined in 2023-24 from 2022-23.
“Persistent decline in rural-urban consumption difference across major states continues in 2023-24,” it said.
“Average MPCE is on the rise across all household types in rural and urban areas,” experts added.
Food accounts for major spending
In terms of spending patterns, food accounted for 47 per cent of the rural household expenditure and 40 per cent of the urban expenditure.
Among food items, beverages and processed food had the highest share, followed by milk products and vegetables.
Non-food expenses were dominated by transportation (7.59 per cent in rural, 8.46 per cent in urban), followed by medicines and durable goods.
Among household types, salaried non-agricultural workers had the highest MPCE in rural areas, while the ‘others’ category accounted for the highest MPCE in urban areas.
Understanding HCES, MPCE
HCES is designed to collect information on consumption and expenditure of households on goods and services. According to the official statement, the survey provides data required to assess trends in economic well-being, and to determine and update the basket of consumer goods and services, and weights used for the calculation of the consumer price index.
Data collected in HCES is also used to measure poverty, inequality, and social exclusion.
The MPCE compiled from HCES is the primary indicator used for most analytical purposes.
Therefore, MPCE is an indicator of the level of living of the household.
Average MPCE of any sub-population of a country (region or population group) summarises the level of living of that population.
What does the survey tell?
According to the government’s statement, the average MPCE in rural and urban India in 2023-24 has been estimated to be Rs 4,122 and Rs 6,996, respectively, without taking into account the values of items received free of cost by the households through various social welfare programmes.
Considering the imputed values of items received free of cost through various social welfare programmes, these estimates become Rs 4,247 and Rs 7,078, respectively, for rural and urban areas.
The rural-urban consumption gap narrowed to 70 per cent in 2023-24 from 71 per cent in 2022-23.
It was 84 per cent in 2011-12.
The rural-urban gap in 18 major states declined on the basis of the average MPCE.
Kerala recorded the lowest disparity (18 per cent) and Jharkhand the highest (83 per cent).
Gini coefficient declines
At an all-India level, the Gini coefficient of consumption expenditure declined to 0.237 in 2023-24 from 0.266 in 2022-23 for rural areas and to 0.284 in 2023-24 from 0.314 in 2022-23 for urban areas.
In other words, the Gini index fell to 0.237 in rural areas from 0.266 in 2022-23 and to 0.284 in urban areas from 0.314 in the previous year, signalling a more equitable distribution of expenditure across major states.
The Gini coefficient is a key measure of inequality.
It is an index to calculate the degree of inequality in the distribution of income/wealth to estimate how far a country’s wealth or income distribution deviates from equal distribution.
Punjab and Odisha
Household expenditure increased across all major states.
Odisha registered the highest rural MPCE growth at 14 per cent and Punjab recorded the highest urban MPCE growth at 13 per cent.
Maharashtra and Karnataka recorded the lowest MPCE growth at 3 per cent and 5 per cent in rural and urban areas, respectively.
There has been an increase in average MPCE for all of the 18 major states in rural and urban areas in 2023-24.
“The maximum increase in average MPCE in the rural areas has been observed in Odisha (about 14 per cent from 2022-23), while the maximum increase in average MPCE in the urban areas has been observed in Punjab (around 13 per cent from 2022-23). The least increase in average MPCE has been observed in Maharashtra (about 3 per cent) and Karnataka (about 5 per cent) in rural and urban areas, respectively,” it said.
What does it mean?
According to a recent report by the SBI, India is witnessing a significant decline in consumption inequality across rural and urban regions. Therefore, the gap MPCE between rural and urban areas has reduced notably.
The report attributed the “improvement” to the government’s initiatives, including direct benefit transfers, enhanced rural infrastructure, efforts to boost farmers’ income, and overall improvements in rural livelihoods.
Inequality in rural areas (measured using the Gini coefficient equivalent) decreased, indicating “a more equitable distribution of income in rural India”.
