India’s richest 5% spent 8-10 times its poorest; agri household expenditure lower than rural avg for 1st time: NSSO

After a gap of 11 years, the National Sample Survey Office (NSSO) under the Union Ministry of Statistics and Programme Implementation released data on national household consumption expenditure. The survey aims at generating estimates of household monthly per capita consumption expenditure (MPCE) and its distribution separately for the rural and urban sectors of the country, for states and Union territories, and for different socio-economic groups. 

The estimates of MPCE in the broad findings of the Household Consumption Expenditure Survey (HCES) 2022-23 (August-July) released February 24, 2024 were based on data collected from 261,000 households – 155,000 in rural areas and 106,000 in urban areas from 36 states and Union territories. 

Let’s look at some of the important trends from the report:

Average estimated consumption in rural and urban India: A person living in rural India spent Rs 3,773 a month on average and a person living in urban area spent Rs 6,459 per month on average as consumption expenditure. The data indicates that household spending continued to show an increasing trend since 1999-2000 (NSS Survey 55th round). 

In the 10-year period since the last survey done in 2011-12 (July-June), MPCE increased around 2.6 times (from Rs 1,430 to Rs 3,773) in rural areas and 2.5 times in urban areas (from Rs 2,630 to Rs 6,459). 

Divide between richest and poorest: The survey gives out average consumption expenditure across different economic classes in urban and rural India. The average MPCE for the bottom five per cent of the population was Rs 1,373 in the villages and Rs 2,001 in urban areas. The top five per cent had average MPCEs of Rs 10,501 and Rs 20,824, respectively, in rural and urban areas. 

This means that the daily expenditure on different categories — from food and medical treatment to children’s education, transport and clothing — of the poorest five per cent in rural areas was as low as Rs 46, compared to Rs 350 of the richest five per cent. In urban areas, daily expenditure of the poorest five per cent was Rs 67, compared to Rs 694 of the richest. 

The richest five per cent of rural areas spend nearly eight times more than the bottom five per cent. In urban areas, the richest five per cent spend 10 times more than the poorest five per cent. 

Food spending trends: Since the 1999-2000 survey, the share of expenditure on food has gradually declined and the share of non-food items has increased for both urban and rural households. 

A decline in food spending is understood as an increase in incomes, which then means having more money for other expenditures like on medical, clothing, education, conveyance, durables, fuel, entertainment, among other things. 

According to the survey results, in rural India, the percentage spending on food in 2022-23 was 46.38 per cent, compared to 53.62 per cent on non-food items. In 1999-2000, the share of expenditure on food was 59.40, which declined to 53.11 per cent in 2004-05 and 52.90 per cent in 2011-12.

In urban India, the share of food in the average MPCE dipped to 39.17 per cent in 2022-23 from 42.6 per cent in 2011-12, 40.5 per cent in 2004-05 and 48.1 per cent in 1999-2000. The spending on non-food items in urban India was 60.83 per cent in 2022-23, up from 57.38 per cent in 2011-12, 59.49 per cent in 2004-05 and 51.94 per cent in 1999-2000. 

Which food items have seen increased spending? The survey result showed that the share of cereals and pulses within overall food consumption expenditure has been reducing, both in rural and urban households. 

The expenditure on cereals was 22.16 per cent of the total consumption expenditure in rural households in 1999-2000. It is now down to 4.91 per cent. In urban households, it was 12 per cent and now down to 3.64 per cent. 

Similarly, the share of expenditure on pulses has come down to 1.77 per cent from 3.81 per cent in 1999-2000 in rural India and to 1.21 per cent from 2.84 per cent in urban India. The decline is sharper in rural households and one of the reasons for that could be the provision of free and subsidised food grains (cereals and pulses) under the Pradhan Mantri Garib Kalyan Anna Yojana. 

The data shows that this expenditure has shifted to high-value and nutritious animal (milk, eggs, fish and meat) and horticulture (fruits and vegetable) products. The data showed that an average rural household has, for the first time, spent more on milk and milk products (8.33 per cent of the total expenditure on food) than cereals (4.89 per cent) and pulses (1.77 per cent) combined. Same is true for vegetables; however, its share in overall expenditure has declined for both rural and urban households. 

But it is not yet clear from the data if the increased spending is due to higher inflation or increase in consumption of these items. 

Meanwhile, the share of egg, fish and meat has been continuously increasing in both rural and urban areas. On the flip side, the share of beverages and processed foods in both rural and urban areas has risen significantly. 

Consumption expenditure of agricultural households falls below overall rural average: For the first time, the average MPCE of agricultural households has fallen below the overall average of rural households. The average MPCE of families “self-employed in agriculture” was Rs 3,702 in 2022-23, while the overall average MPCE of rural households was Rs 3,773. 

In 1999-2000, the MPCE of agricultural households was Rs 520, against average rural MPCE of Rs 486. In 2004-05, the MPCE of agricultural households was Rs 583, while the overall average of rural households was Rs 559. In 2011-12, the MPCE of agricultural households was Rs 1,436, more than the average rural MPCE of Rs 1,430. 

This new data is significant in the backdrop of ongoing farm protests, demanding a legal guarantee of the minimum support price (MSP). 

Much like the households self-employed in agriculture, the MPCE of casual labourers (Rs 3,273) and of regular wage earners engaged in agriculture (Rs 3,597) was also lower than the rural average. 

Imputed and non-imputed average MPCE: The 2022-23 survey provides a separate provision for collection of information on the quantity of consumption for a number of items, received and consumed by the households free of cost through various social welfare programmes. These include: food items like rice, wheat, atta, pulses, salt, sugar, edible oil, among others and non-food items like laptop / computer, tablet, mobile handset, bicycle, motor cycle / scooty, school uniform and school shoes. These estimates are referred to as ‘MPCE estimates with imputation’. 

It may be noted that the value of education as well as health services received free of cost by the households has not been imputed.

The average estimated MPCE with imputed values of free items in 2022-23 has been Rs 3,860 and Rs 6,521, respectively, in rural and urban India. But the bottom five per cent of India’s rural population had the lowest MPCE of Rs 1,441 and Rs 2,087 in the urban areas, indicating the poorest section of the population received the least benefit. 

In this categorisation, the top five per cent of India’s rural and urban population had an average imputed MPCE of Rs 10,581 and Rs 20,846, respectively.

Consumption expenditure among disadvantaged and vulnerable sections: In rural areas, Scheduled Tribes (ST) reported the lowest MPCE at Rs 3,106, followed by Rs 3,474 for Scheduled Castes (SC); both less than the average MPCE of Rs 3,773. The MPCE was Rs 3,848 for Other Backward Classes (OBC). 

In urban areas, SCs reported the lowest MPCE at Rs 5,307, STs reported Rs 5,414, and OBCs reported Rs 6,177, all less than the average MPCE of Rs 6,459 in urban areas. 

Trends in expenditure on transport: Among the non-food items, share of spending on conveyance was the highest. Till 2022-23, ‘fuel and light’ used to see the highest consumption spending among the non-food items. 

In both urban and rural areas, conveyance has seen a sharp increase in expenditure, mostly due to increase in fuel costs and rising inflation. In rural areas, conveyance has a share of 7.55 per cent in 2022-23, up from 4.2 per cent in 2011-12, 3.63 per cent in 2004-05 and 2.94 per cent in 1990-2000.

Similarly, in urban areas, conveyance had a share of 8.59 per cent in 2022-23, compared to 6.52 per cent in 2011-12. Meanwhile, the share of fuel and light was 6.66 per cent and 6.26 per cent in rural and urban areas respectively. 

Medical treatment: The survey showed that the expenditure on medical treatment (both hospitalisation and non-hospitalisation) has been rising both in rural and urban areas. 

Till 2011-12, the share of expenditure on the non-hospitalisation part was seeing a consistent decline in rural families and to an extent in urban families as well. But it rose to 4.77 per cent and 4 per cent, respectively, in 2022-23. 

Expenditure on medical treatment (hospitalisation) was 2.36 per cent of the total MPCE in rural areas and 1.91 per cent in urban areas. 

Trends in states: Nine states — Uttar Pradesh, West Bengal, Odisha, Jharkhand, Bihar, Meghalaya, Madhya Pradesh, Chhattisgarh and Assam — lagged behind the national average in both rural and urban households. 

In five other states / UTs — Lakshadweep, J&K, Ladakh, Manipur, Dadra & Nagar Haveli, the urban average MPCE was less than the national urban average MPCE of Rs 6,459. 

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