Syllabus
GS Paper 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Applications where to apply?
When asked about
– Rural-Urban Divide
– Inequality
– Prelims related facts based on the report
Context
Household Consumption Expenditure Survey was released after a gap of more than 11 years. This article analyses recent findings and trends in household consumption data.
Source
The Hindu | Editorial dated 26th February 2024
Household Consumption Expenditure Survey
The National Sample Survey Office (NSSO), Ministry of Statistics and Programme Implementation has conducted Household Consumption Expenditure Survey (HCES) during August 2022 to July 2023. This survey on household consumption expenditure 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.
Genesis of the survey
The National Sample Survey Office (NSSO) has been conducting household surveys on consumption/consumer expenditure at regular intervals as part of its rounds, normally of one-year duration. The data on household consumer expenditure were collected in every round up to the 28th (1973-74) from the first round (1950-51) of the National Sample Survey (NSS).
After the 26th round of the survey, the then Governing Council of NSSO decided to conduct the surveys on consumer expenditure and employment-unemployment together on a large scale, once in every five years. The last survey was released for the year 2011-12. The survey of 2022-23 titled “Household Consumption Expenditure Survey” is the latest one on the subject.
Survey Method
- Multistage Stratified Sampling Design:
- The survey employs a multistage stratified sampling design.
- Villages and urban blocks are designated as the first-stage units for sampling.
- At the ultimate stage, households are selected as the units of analysis.
- Sampling Method: Simple Random Sampling Without Replacement (SRSWOR):
- The survey employs the SRSWOR method for selecting samples.
- This method ensures that each household has an equal probability of being selected while preventing duplication in the sample selection process.
- Classification of Households by Economic Categories:
- All households within a selected village or urban block are classified into three economic groups, based on the below two criteria:
- Rural Areas: Classifications are based on land possession.
- Urban Areas: Classifications are based on possession of cars.
- These classifications help in stratifying households into distinct groups.
- All households within a selected village or urban block are classified into three economic groups, based on the below two criteria:
- Selection of Sampled Households:
- A total of 18 households are then selected with proportional representation from each of the three economic groups.
Significance of the survey
- Understanding Consumption and Expenditure Patterns:
- Household Consumption Expenditure Surveys (HCES) offer insights into how households allocate their resources towards different categories of goods and services, revealing consumption patterns over time.
- Assessment of Standard of Living:
- By analysing HCES data, policymakers, researchers, and economists can gauge the standard of living of households based on their consumption habits and expenditure levels.
- Measurement of Well-being:
- HCES data provides a basis for evaluating the well-being of households by examining their consumption choices and expenditure patterns, which can reflect their access to necessities and discretionary items.
- Preparation of Weighting Diagrams for CPI Compilation:
- The budget shares of various commodity groups obtained from HCES data are instrumental in creating weighting diagrams used in the compilation of official Consumer Price Indices (CPIs). These indices are crucial for monitoring inflation and price trends.
- Utilization in Deriving Macroeconomic Indicators:
- The data collected through HCES serves as a valuable source for deriving a range of macroeconomic indicators, offering insights into consumption trends, economic activity, and household financial behavior at a broader level.
Survey Findings
- Average estimated Monthly Per Capita Consumption Expenditure (MPCE) in 2022-23 has been Rs. 3,773 in rural India and Rs. 6,459 in urban India. The share of food and non-food items in total MPCE is shown below:
- Monthly Per Capita Consumption Expenditure (MPCE) of bottom 5% and top 5 % of the society:
| Rural | Urban | |
| Bottom 5% | 1,373 | 2,001 |
| Top 5% | 10,501 | 20,824 |
- Among the states, MPCE is the highest in Sikkim for both rural and urban areas (Rural – Rs. 7,731 and Urban – Rs. 12,105).
- It is the lowest in Chhattisgarh (Rural – Rs. 2,466 and Urban – Rs. 4,483).
- Among the UTs, MPCE is the highest in Chandigarh (Rural – Rs. 7,467 and Urban – Rs. 12,575).
- It is the lowest in Ladakh (Rs. 4,035) and Lakshadweep (Rs. 5,475) for rural and urban areas respectively
- The average MPCE by social groups is provided below:
Shifts in Total Household Expenditure:
- Reduction in Food Expenditure:
- Both rural and urban areas witnessed a decrease in the share of food expenses in total household expenditure from 2011-12 to 2022-23.
- Rise in Non-Food Expenses:
- Correspondingly, non-food expenses increased during the same period.
- Increase in Healthier Options:
- Fruits, egg, fish, and meat expenditure increased significantly.
- Stagnant Expenditure on Certain Items:
- Milk, edible oil, and spices expenditure remained almost constant
Indians have been spending more on processed food (including cooked meals purchased outside), beverages, and refreshments by reducing money spent on home-cooked food, which is prepared using cereals, pulses, and vegetables.
- Conveyance: Substantial increase due to rising petrol and diesel prices.
- Consumer Services: Increased spending on services like househelps, tailors, laundry, telecom, and Internet.
- Decrease in Clothing and Footwear Expenses: Decline in expenditure on clothing, bedding, and footwear.
- Increase in Durable Goods Spending: Sharp increases recorded in spending on durable goods like televisions, handbags, utensils, washing machines, refrigerators, laptops, cars, scooters, and mobile phones.
- Rise in Sin Goods Expenditure: Possibly due to higher taxes.
Conclusion
In summary, the household consumption expenditure survey provides valuable insights into evolving consumption behaviors, economic dynamics, and standard of living indicators in India, informing policymakers, researchers, and stakeholders in crafting effective interventions and policies to address evolving consumer needs and socio-economic trends.
Related Topics
Consumer Price Indices (CPI)
CPI measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption.
Base Year: 2012 (This means the price level in 2012 is considered the baseline, with a value of 100)
Published by: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI)
Frequency: Monthly
Four types of CPI are as follows:
- CPI for Industrial Workers (IW).
- CPI for Agricultural Labourer (AL).
- CPI for Rural Labourer (RL).
- CPI (Rural/Urban/Combined).
Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the NSO in the Ministry of Statistics and Programme Implementation
Relevance
- CPI is widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting
- For monitoring price stability, and as deflators in the national accounts.
- CPI is also used for indexing dearness allowance to employees for increase in prices.
References
Practice Question
Examine the trends in household consumption expenditure in India as revealed by the 2022-23 survey. Discuss the key shifts in consumption patterns, factors influencing expenditure trends, and their implications for economic policy and household well-being. [250 words]