Much ado about nothing

After a gap of 12 years, the National Sample Survey Office (NSSO) conducted a Household Consumption Expenditure Survey (HCES) spanning from August 2022 to July 2023. The Union Ministry of Statistics and Programme Implementation released the survey data on February 4. According to the latest findings, the monthly per capita consumption expenditure (MPCE) stands at Rs 3,773 for rural areas and Rs 6,459 for urban areas, calculated at current prices. This translates to a daily expenditure of Rs 126 for rural Indians and Rs 215 for urban dwellers on expenses ranging from food, medical care, education, childcare, transportation, to clothing, among others. Notably, the bottom 5 per cent of rural India spends Rs 45 per day, while the corresponding figure for urban areas is Rs 67. Furthermore, the top 5 per cent of rural households spend nearly eight times more than the bottom 5 per cent.

The HCES data serves is the base for assessing the income poverty level in the country. However, there is currently no official estimation of poverty based on this survey. Previously, the Planning Commission utilised HCES data for poverty estimation, but since its dissolution, its successor, NITI Aayog, has not undertaken this task nor established a new national poverty line. Compounding this issue, the latest survey round presents a challenge as it deviates from the previous nine surveys conducted between 1972 and 2012, with changes in the items covered, questionnaire structure, periodicity of data collection and mode of data collection.

B V R Subrahmanyam, chief executive officer of NITI Aayog, has still released a widely reported “personal assessment” indicating that, based on the new consumption expenditure data, poverty levels are below 10 per cent. Subrahmanyam derives this estimation by considering the Rs 32 per day poverty line established in 2011-2012, updated to Rs 60 per day to account for inflation trends. Applying this revised poverty line to the latest consumption expenditure figures, he inferred a poverty rate below 10 per cent.

In recent months, various estimates of income poverty, primarily conducted by individual economists, have suggested near-zero levels of extreme poverty. One notable aspect of these estimates is the inclusion of the value of free services and subsidies provided by the government in household income calculations. Subrahmanyam further elaborates on his assessment, suggesting that when accounting for the monetised value of free food grains and subsidies received by households, the poverty level was below 5 per cent, signaling a significant reduction in destitution and deprivation.

The NSSO survey typically presents two sets of MPCE data. One incorporating the imputed value of consumption from home-grown or produced stock, gifts, loans, free collection, and goods exchanged for services. This is widely accepted as the MPCE. The other incorporates the value of items received through government schemes like free food grains under the public distribution scheme and non-food items like laptops and mobile phones. Many economists cite the latter set as a substantial addition to household income, thus reducing income poverty.

An examination of the benefits received from the aforementioned sources and their impact on consumption expenditure reveals that with the imputation of all such free or subsidised items, the latest survey places the MPCE at Rs 3,860 for rural areas and Rs 6,521 for urban areas, at current prices. Comparatively, this indicates that rural individuals receive only Rs 87 per month and urban individuals Rs 62 through such “freebies”. Percentage-wise, these additions account for just 2.25 per cent of rural consumption expenditure and 1.33 per cent of urban consumption expenditure. Thus, the question arises: is this fuss warranted, or is it “Much Ado about Nothing”?

This was first published in the 16-31 March, 2024 print edition of Down To Earth

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