Household Consumption Expenditure Survey (HCES)

The government of India has finally conducted and released the Household Consumption Expenditure Survey of 2022-23 after more than a decade.

What is Household Consumption Expenditure Survey (HCES)?

• The Household Consumption Expenditure Survey (HCES) is a survey conducted every five years to collect information about the consumption of goods and services by the households.
• Conducted by National Survey Organisation (NSO), it also collects additional information on the age and profile of the members of a household.

What are the findings regarding rural and urban consumption in the survey?

• Rural vs urban MPCE: The monthly per capita consumption expenditure (MPCE) was Rs. 3,773 for rural areas and Rs.6,459 for urban areas in 2022-23.
  • Compared to the last survey in 2011-12, rural MPCE has increased at a CAGR of 9.2 per cent from Rs.1,430 while the urban MPCE has increased at an annual rate of 8.5 per cent from Rs.2,630.
• MPCE on food vs non-food items: The households are spending less on food than expected. MPCE on food by rural households is just 46 per cent, whereas expenses on non-food items is 54 per cent. For urban households, the food, non-food mix is 39 and 61 per cent.

What can be the reason behind this changing trend?

• The faster growth in rural consumption is a little strange given sluggish growth in rural areas in the recent past.
• But the social welfare schemes could have freed up some money allocated for food, thus increasing overall spends.
• Rural inflation has also been higher than urban inflation during this period, which would also be reflected in higher expenditure growth for rural households.

What are the findings of the survey regarding ‘inequality’?

• Narrowing gap: The consumption gap between urban and rural areas is narrowing but income inequality continues to make spends higher among high-income earners.
  • The difference between rural and urban consumption as a percentage of rural MPCE has fallen from 90.8 per cent in 2004-05 to 71.2 per cent in 2022-23.
• Improving income: This shows that those living in rural areas have seen their incomes improve.

What are the findings regarding eating habits in rural and urban India?

• Shift towards processed foods: The largest share of food and drink consumption is going towards beverages, refreshments and processed foods indicating shifting eating patterns across India.
  • The share in MPCE for this component was 9.62 per cent in rural India while it was 10.64 per cent in urban India. Milk and milk products had the next largest share at 8.3 and 7.2 per cent in rural and urban areas followed by vegetables, egg, fish and meat and cereal and cereal substitutes.
• In rural India, the share of cereal in total monthly per capita consumption expenditure (MPCE) has fallen to 4.89 per cent in 2022-23 as compared to 10.69 per cent in 2011-2012.
• Cereal: The share of cereal substitutes has gone down to 0.02 per cent from 0.06 per cent during the same period.
• Vegetables: At the same time, the spending on vegetables has reduced to 5.38 per cent from 6.62 per cent.
• The share of this category has gone up to 9.62 per cent from 7.90 per cent in 2011-12. This is despite the total food spending as a percentage of total spending in rural India falling from 52.9 per cent in 2011-12 to 46.38 per cent in 2022-23.
• Some other categories, which saw higher spending percentages in rural India were dry fruits (1.17 per cent), egg, fish & meat (4.91 per cent), fruits (2.54 per cent) and milk & milk products (8.33 per cent).