Why in News?

The Household Consumption Expenditure Survey (HCES) 2023-24 provides crucial insights into consumption patterns, inequality, and regional variations.

The report highlights a significant reversal in the decade-long decline in the share of food expenditure in both rural and urban households.

India’s average household consumption spending on a per capita basis rose about 3.5% in real terms through August 2023 to July 2024 from a year ago.

What’s in Today’s Article?

• What is HCES?
• Highlights of the HCES 2023-24
• Income Distribution and Spending Trends
• Sectoral and State-Wise Breakdown of Expenditure
• Conclusion

What is HCES?

• Released by the Ministry of Statistics and Programme Implementation (MoSPI), HCES is designed to collect information on consumption and expenditure of the households on goods and services.
• 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 Monthly Per Capita Consumption Expenditure (MPCE) compiled from HCES is the primary indicator used for most analytical purposes.
• The estimates of MPCE of 2023-24 are based on the data collected from 2,61,953 households (1,54,357 in rural areas and 1,07,596 in urban areas) in the central sample spread over all States and UTs in the country.

Highlights of the HCES 2023-24:

• Rising food expenditure:
  • Rural households: The share of food expenditure increased to 47.04% in 2023-24 from 46.38% in 2022-23.
  • Urban households: A slight rise to 39.68% in 2023-24 from 39.17% in the previous year.
  • Significance of this trend: This trend reflects the impact of higher food prices, as the figures are in nominal terms.
• Urban-rural expenditure gap:
  • The difference in average monthly consumption expenditure between rural and urban households narrowed to 69.7% in 2023-24 from 71.2% in 2022-23.
  • The gap has consistently reduced over the last decade, indicating stronger growth in rural consumption spending.
• Average monthly consumption expenditure (MPCE):
  • Rural areas: MPCE increased by 9.3% to Rs 4,122 in 2023-24 from Rs 3,773 in 2022-23.
  • Urban areas: MPCE rose to Rs 6,996, up from Rs 6,459 in the previous year.
  • Historical context: MPCE in 2011-12 was Rs 1,430 (rural) and Rs 2,630 (urban), showing significant growth over the years.
  • Imputed consumption: Including social welfare benefits, MPCE was Rs 4,247 (rural) and Rs 7,078 (urban) in 2023-24.

Income Distribution and Spending Trends:

• Trends:
  • Top 5%: Decline in MPCE for the top 5% of rural (Rs 10,137) and urban (Rs 20,310) households compared to 2022-23.
  • Bottom 5%: Significant increase in MPCE for rural (Rs 1,677) and urban (Rs 2,376) households.
  • Bottom 20%: Highest percentage growth in spending - 19.2% (rural) and 18% (urban).
  • Top 20%: Marginal growth of 1.5% (rural) and 1.1% (urban).
• Consumption inequality: The Gini coefficient, a measure of inequality, declined:
  • Rural areas: From 0.266 in 2022-23 to 0.237 in 2023-24.
  • Urban areas: From 0.314 to 0.284.
  • This indicates reduced consumption inequality across both rural and urban households.

Sectoral and State-Wise Breakdown of Expenditure:

• Sectoral:
  • Food items:
    • 
    • Cereals: Share increased slightly for both rural (4.99%) and urban (3.76%) households.
    • Beverages and processed foods: Highest share at 9.84% (rural) and 11.09% (urban).
  • Non-food items:
    • Rural: 52.96% of expenditure, driven by conveyance, medical expenses, and clothing.
    • Urban: 60.32%, primarily on rent, entertainment, and durable goods.
• State-wise consumption patterns:
  • Higher spending states: Maharashtra, Punjab, Tamil Nadu, Telangana, Kerala, Karnataka, Haryana, Gujarat, Andhra Pradesh.
  • Lower spending states: West Bengal, Bihar, Assam, Odisha, Uttar Pradesh, Madhya Pradesh, Jharkhand, Chhattisgarh.
  • Rajasthan: An exception with higher rural spending but lower urban spending compared to the national average.

Conclusion:

• The HCES 2023-24 reflects a notable shift in consumption trends, marked by increasing food expenditure, narrowing rural-urban disparities, and reduced consumption inequality.
• While most population segments experienced growth in spending, the decline in top-tier expenditure and the methodological challenges in data collection warrant further analysis.
• The full report, expected next year, will provide deeper insights.