The All India Household Consumption Expenditure Survey 2023-24 | UPSC

Introduction

• The Household Consumption Expenditure Survey (HCES), conducted by the Ministry of Statistics and Programme Implementation (MoSPI), plays a crucial role in understanding the spending habits and living standards of Indian households. 
• The 2023-24 findings offer valuable insights into the changing consumption patterns and economic trends in India, helping to inform policy decisions and improve social welfare schemes. 

What is the All India Household Consumption Expenditure Survey?

• The All India Household Consumption Expenditure Survey is a national study conducted every five years to analyze the consumption habits of households across India. The survey helps policymakers understand how households spend their income and provides important data for improving living standards and targeting welfare programs effectively.
• Survey History: The survey has been carried out every five years since 1972-73. After the 2017-18 survey results were discarded due to data quality concerns, the government introduced new surveys for 2022-23 and 2023-24 to test the revised methodology and ensure more accurate and reliable results.
• Survey Overview: The HCES collects data on household expenditure across various categories, including food, clothing, housing, transportation, and services. This information is essential for analyzing the socio-economic condition of different households and improving targeted social programs.
• Survey Frequency: Conducted once every five years, the survey provides a snapshot of evolving consumption behaviors. This recurring data allows policymakers to track trends and adjust their strategies accordingly.
• New Methodology: The 2023-24 survey introduced a revised methodology to improve data accuracy. Some key changes include:
  • Segmentation of the consumption basket into three distinct categories: food items, consumables and services, and durable goods.
  • Inclusion of questions about free items and subsidies received under government welfare programs, like food grains, to assess their impact on household consumption more accurately.

Read also: India’s Labor Productivity: Key Insights for UPSC Aspirants

Key Findings of the All India Household Consumption Expenditure Survey 2023-24

• The 2023-24 HCES has provided valuable insights into the spending patterns of Indian households. Here are some of the most significant findings:
• Increase in Average Monthly Per Capita Consumption Expenditure (MPCE):
  • Rural Areas: The rural MPCE saw a significant increase of 9.3%, from Rs. 3,773 in 2022-23 to Rs. 4,122 in 2023-24, showing a substantial rise from Rs. 1,430 in 2011-12.
  • Urban Areas: The urban MPCE rose by 8%, from Rs. 6,459 in 2022-23 to Rs. 6,996 in 2023-24, compared to Rs. 2,630 in 2011-12.
  • The rural-urban consumption gap decreased to 69.7% in 2023-24, a significant reduction from 83.9% in 2011-12, indicating faster growth in rural consumption.
• Non-Food Expenditure Dominates:
  • Non-food items remain the largest portion of total household spending. In rural areas, 53% of household expenditure goes toward non-food items, and in urban areas, the share is 60%. Major contributors to non-food expenditure include transportation, clothing, entertainment, and housing.
• Increase in Food Expenditure Share:
  • While non-food items dominate, food expenditure as a share of total consumption has increased slightly:
    • Rural Areas: The share of food expenditure rose from 46.38% in 2022-23 to 47.04% in 2023-24.
    • Urban Areas: The share of food expenditure grew from 39.17% in 2022-23 to 39.68% in 2023-24.
• Narrowing Rural-Urban Gap in MPCE:
  • The gap between rural and urban per capita consumption has narrowed, suggesting that rural areas are experiencing more rapid growth in consumption compared to urban areas.
• Regional Consumption Patterns:
  • States like Maharashtra, Punjab, Tamil Nadu, Telangana, and Karnataka report higher per capita spending than the national average, while states in Eastern and Central India, such as Bihar, Odisha, and Uttar Pradesh, have lower consumption levels.
• Declining Gini Coefficient Reflects Reduced Inequality:
  • The Gini coefficient, a measure of income inequality, has shown a decline in both rural and urban areas:
    • In rural areas, the Gini coefficient decreased from 0.283 in 2011-12 to 0.237 in 2023-24.
    • In urban areas, it fell from 0.363 in 2011-12 to 0.284 in 2023-24.
  • This decline suggests a reduction in income inequality, with more equitable consumption patterns across households.

Why is the Household Consumption Expenditure Survey Important?

• Shaping Inflation Indices: The HCES plays a crucial role in adjusting the weightages of different components in the Consumer Price Index (CPI). For example, changes in food expenditure patterns could lead to adjustments in the food weightage of CPI, affecting inflation measurements.
• Macro-Economic Analysis: Economists use the survey data to analyze structural shifts in the economy, helping them understand economic growth trends and make decisions regarding GDP rebasing and poverty measurements.
• Assessing Economic Growth and Inequality: The survey reveals that while the gap between rural and urban consumption is narrowing, significant inequalities persist within households, particularly with the wealthiest 5% spending disproportionately more than the poorest 5%.
• Refining Social Security Programs: Data from the survey helps policymakers improve social security schemes like PM Garib Kalyan Anna Yojana, ensuring that they are better targeted to meet the needs of the population.
• Guiding State Governments: States can use the survey data to learn from high-performing states, such as Tamil Nadu and Kerala, and adopt strategies to increase disposable incomes and improve consumption patterns within their own regions.
• Forecasting Consumer Behavior for Industry: The survey provides valuable insights into changing consumer preferences, allowing industries to adapt their strategies and tap into emerging markets.

Challenges with the Household Consumption Expenditure Survey

• Small Sample Size: The survey only covers 2.61 lakh households, which might be too small to fully capture the diversity of the Indian population.
• Regional and Temporal Variations: Accurately capturing seasonal variations and regional disparities in consumption patterns is challenging, which could lead to discrepancies in the data.
• Impact of Pent-up Demand: The survey was conducted in 2022, a year marked by pent-up demand after the COVID-19 pandemic. This may distort consumption trends, as the data reflects suppressed demand from the previous two years, rather than typical consumption patterns.

See more: A List of Major Freedom Fighters of India (1857-1947)

Way Forward

• Use the Data to Fine-Tune Social Programs: The government should leverage the survey results to optimize social welfare schemes like PM Garib Kalyan Anna Yojana, assessing their impact and adjusting them to better serve the population.
• Institutionalize the Survey Methodology: The new survey methodology should be institutionalized, establishing a consistent quinquennial survey cycle to ensure regular and reliable data collection.
• Be Cautious with Changes to Inflation Indices: Given the pent-up demand observed in 2022, any changes to inflation indices based on this data should be handled with caution, ensuring that temporary consumption trends do not skew the results.