All India Household Consumption Expenditure Survey

SYLLABUS

GS 3   >> Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

REFERENCE NEWS

Ministry of Statistics and Program Implementation (MoSPI) has released the data of the All India Household Consumption Expenditure Survey 2022-23. This data is based on the results of the survey conducted between August 2022 and July 2023.

ABOUT ALL INDIA HOUSEHOLD CONSUMPTION SURVEY

• The Household Consumption Expenditure Survey (HCES) is conducted to gauge household spending habits. It provides crucial insights into household consumption patterns, their living standards and overall well-being.
• It is a quinquennial survey (recurring every five years). It is conducted by the National Sample Survey Office (NSSO), (which now comes under the National Statistical Office in the MoSPI).
• The survey has been conducted every five years, since 1972-73. The survey results were junked in 2017-18 due to ‘data quality issues’. Now, new surveys are being conducted in 2022-23 and 2023-24, according to new methodology.
• In the new methodology, several new features have been introduced-
  • Segregation of the consumption basket into three broad categories- food items, consumables and services, and durable goods.
  • Inclusion of questions seeking inputs on free items and subsidies under welfare schemes, such as foodgrains.

FINDINGS OF ALL INDIA HOUSEHOLD CONSUMPTION SURVEY

1. Increase in Average monthly per capita consumption expenditure (MPCE)

This indicates rising disposable incomes of households, narrowing inequality between rural and Urban areas, and declining poverty levels.

a. Rural per capita consumption expenditure has increased more sharply as compared to urban expenditure in the period from 2011-12 to 2022-23.
b. Rural per capita consumption expenditure has increased by 164%. It has increased to Rs 3,773 in 2022-23 from Rs 1,430 in 2011-12.
c. Urban per capita consumption expenditure has increased by 146%. It has increased to Rs 6,459 in 2022-23 from Rs 2,630 in 2011-12.

2. Decline in the Share of Expenditure on Food in both Rural and Urban Households

This indicates the aspirational spending of households in consumer durables, clothing and footwear, and entertainment.

a. The share of expenditure on food has gradually declined for both urban and rural households.
b. In rural India, the share of food in the average monthly per capita consumption expenditure (MPCE) has fallen to 46.38% in 2022-23 from 59.46% in 1999-2000.
c. In urban India, the share of food in the average monthly per capita consumption expenditure (MPCE) has fallen to 39.17% in 2022-23 from 48.06% in 1999-2000.

3.Share of expenditure on different food items in the food expenditure

This indicates the amount of money spent for better nutrition (eggs, fish, meat, fruits and vegetables), beyond just cereals (rice, wheat).

a. The spending on high-value nutritional items (eggs, fish, meat, fruits and vegetables) has increased more in rural households as compared to urban households over the last two decades.
b. The rural household expenditure on high-value nutritional items has increased to 14% in 2022-23 from 11.21% in 1999-2000. The expenditure on cereals has decreased to 4.91% in 2022-23 from 22% in 1999-2000.
c. The urban household expenditure on high-value nutritional items has marginally increased to 11.7% in 2022-23 from 10.68% in 1999-2000. The expenditure on cereals has decreased to 3.64% in 2022-23 from 12% in 1999-2000.

4.Imputed Average monthly per capita consumption expenditure (Imputed MPCE)

This data helps to ascertain the impact on expenditure by adding the imputed value free items received by households through various social welfare programmes. This data also helps to highlight the socio-economic disparities between different income groups.

a. The imputed MPCE of both rural and urban households is higher as compared with the average MPCE which does not include the free items.
b. The imputed MPCE of top 5% of rural population is 7.65 times more than its bottom 5%.
c. The imputed MPCE of top 5% of urban population is 10 times more than its bottom 5%.

5. State wise Consumption Expenditures 

This data compiles and compares the state wise consumption expenditures and presents a picture on the economic-well being of households in a particular state.

a. Sikkim has the highest MPCE for both rural (Rs. 7,731) and urban households (Rs. 12,105).
b. Chhattisgarh has the lowest MPCE for rural (Rs. 2,466) and urban households (Rs 4,483).

6. Decline in the real growth rate of Rural Spending

While the gap between rural and urban per capita consumption is reducing, however, in real terms the rural per capita expenditure growth has registered a decline. In both nominal and real terms, these growth rates are lower than in the period between the two earlier surveys.

THE IMPORTANCE OF SURVEY DATA:

1. Adjustments in Component Weightings for Precise Inflation Tracking - The consumption expenditure survey is crucial for revising the weightings of various components in the Consumer Price Index (CPI), such as adjusting food weightings based on survey findings to more accurately reflect inflation.
2. Economic Structural Analysis - Economists utilize household consumption expenditure survey data to identify shifts in the Indian economy's structure, aiding in GDP rebasing and poverty level adjustments.
3. Economic Growth and Inequality Insights - These surveys reveal trends in economic growth and disparities, showing both a narrowing expenditure gap between rural and urban areas and significant spending differences between the wealthiest and poorest households.
4. Policy Refinement Instrument - The Imputed Mean Per Capita Expenditure (MPCE) from the survey provides essential data for policymakers to enhance social programs by understanding changing consumer expenditure patterns.
5. Guidance for State Budget Strategies - By analyzing survey results, state governments can learn from examples like Tamil Nadu and Kerala to adjust budgets and boost residents' disposable income.
6. Industry Forecasting Resource - The changing consumer behaviors identified in the survey help industries adjust their strategies and explore new market opportunities.

CHALLENGES ASSOCIATED WITH THE SURVEY:

1. Testing Revised Methodology's Strength - The latest 2022-23 survey, conducted with updated methods, requires a follow-up survey in 2023-24 to validate these changes.
2. Limited Sample Size - Covering 2.62 lakh households in a vast and diverse country like India may not provide a sufficiently broad data set.
3. Handling Variations - Accurately reflecting seasonal and regional differences in household expenditures remains a significant challenge for obtaining precise survey results.
4. Addressing Post-Pandemic Demand Surges - The 2022 survey year, following two years of COVID-19 restrictions, may reflect pent-up consumer demand, potentially skewing data accuracy until further surveys are conducted.

WAY FORWARD:

1. Utilizing Data to Enhance Social Programs - Government should leverage All India consumption expenditure survey data to refine social security initiatives, assessing their impact accurately.
2. Prompt Completion of the Next Survey - Finalizing the 2023-24 survey swiftly will help confirm the effectiveness of the revised methodology.
3. Institutionalizing Survey Updates - Formalizing the new survey method is critical for resuming the regular five-year survey cycle, ensuring consistent and reliable data collection.
4. Awaiting Adjustments in Inflation Measurement - Given the potential distortion from pent-up demand, alterations to inflation index weightings based on recent survey results should be approached with caution.

A detailed, transparent, and comprehensive approach to consumption expenditure survey data is essential for fostering a more inclusive and equitable society.

PRACTICE QUESTION

Q: Assess the impact of the All India Household Consumption Expenditure Survey 2022-23 on policy-making, address its challenges, and suggest improvements.(15M,250W)