What Consumption Expenditure Survey Leaves Unanswered

Why in News?

• The release of the Household Consumption Expenditure Survey (HCES) for 2022-23 marks a significant milestone after a decade-long hiatus.
• The factsheet offers valuable insights into present patterns of household consumption, but decisive conclusions should not be made due to changes in methodology, survey design, and item coverage.
• Also, it is crucial to understand key takeaways from the factsheet, notable changes, challenges in comparability, and indicators such as rural-urban inequality, inter-caste differences, and shifting consumption patterns.

The HCES for 2022-23 and Difference from Earlier Rounds of Surveys

• A New Survey Structure
  • In contrast to earlier survey rounds, the HCES adopts a segmented approach by conducting three separate surveys on food items, consumables and services, and durable goods.
  • This departure from the traditional single-questionnaire method aims to enhance the precision of responses by focusing on specific categories.
  • While this change aligns with the need to combat respondent fatigue, it raises concerns about comparability with previous rounds that followed a more unified structure.
• Introduction of Multiple Household Visits
  • Another notable change in the methodology is the introduction of multiple separate visits to households.
  • This adjustment acknowledges the well-documented issue of respondent fatigue associated with lengthy questionnaires conducted in a single sitting.
  • Shorter, focused questionnaires are expected to yield more precise answers. However, this modification poses challenges in terms of comparability, potentially resulting in higher expenditure estimates.
  • To assess the magnitude and direction of this potential bias, a subset of households could have been subjected to the older single-visit design for comparison.
• Imputed Values for Social Welfare Programs
  • The HCES incorporates imputed values for items received or consumed free of cost through various social welfare programs.
  • This includes essentials like rice, wheat, footwear, laptops, and motorcycles. However, the validity of these imputed values remains uncertain until unit-level price and quantity data are released.
  • Understanding the impact of such imputations on the overall consumption expenditure distribution is crucial for a comprehensive analysis.
• Changes in Item Coverage
  • The survey covers 405 items of consumption, compared to 347 in the 2011-12 round.
  • Such revisions in item coverage are not uncommon and are reflective of evolving consumption habits over time.
  • However, these changes further contribute to the challenge of ensuring comparability across different survey rounds.

An Analysis of HCES Data for Within-Survey Indicators

• Rural-Urban Inequality
  • Average all-India urban monthly per capita consumption expenditure (MPCE) at Rs 6,459 in 2022-23, is roughly 72 per cent higher than in rural areas (Rs 3,773).
  • The corresponding figure was 84 per cent in 2011-12. This seems to indicate a decline in rural-urban inequality over the decade.
  • However, there are two caveats. This does not account for the rural-urban price differential, which can fluctuate.
  • Additionally, a longer view reveals that the rural-urban gap tends to fluctuate. From 75.9 per cent in 1999-2000, it rose to 90.8 in 2004-05, and then declined to 83.9 in 2011-12.
  • Moreover, there is no indication of whether the ratio increased or decreased in 2017-18.
• Distribution of Consumption Expenditure
  • In 2011-12, the ratio of the 10th percentile of the rural expenditure distribution (Rs 710) to the 90th percentile (Rs 2,296) was 0.31.
  • This ratio is 0.33 in 2022-23 (Rs 1,782/Rs 5,356). In other words, the consumption expenditure of the bottom 10 per cent of the rural distribution is roughly one-third of the top 10 per cent — a ratio that has not changed substantially over the decade.
  • For urban areas, the corresponding ratio was 0.21 in 2011-12, which has risen to 0.27 in 2022-23, indicating a reduction in urban inequality.
• Inter-Caste Differences
  • The ratio of average rural Scheduled Caste (SC) MPCE to that of the higher-ranked castes was 0.73 in 2011-12.
  • This has remained unchanged at 0.7 in 2022-23. For rural Scheduled Tribes (ST), this ratio has improved marginally from 0.65 to 0.69 and for Other Backward Classes (OBC), from 0.83 to 0.87.
  • While rural India does not show a marked narrowing of inter-caste gaps in MPCE, the urban figures suggest a narrowing of inter-group MPCE gaps.
  • For SCs, the ratio increased from 0.63 to 0.72; for STs, from 0.68 to 0.74 and for OBCs, from 0.7 to 0.84.

Shifting Consumption Patterns Highlighted by HCES Data

• The factsheet reveals that in rural India, the percentage share of cereals, a food staple, in average MPCE is now 4.91 per cent and 3.64 per cent in urban India, compared to 10.75 per cent and 6.66 per cent respectively in 2011-12.
• This is accompanied by an increase in the share of processed foods and beverages.
• Overall, HCES indicates a decline in the share of food expenditure over the decade, which stands at 46 per cent in rural and 39 per cent in urban India.
• There have been notable shifts which include an increase in the share of medical expenses on hospitalization, conveyance, and durable goods in rural India, and paan, tobacco, intoxicants, conveyance, and durable goods in urban India.

Way Forward: Need to Follow-Up the Survey

• The release of the HCES findings for 2022-23, while limited in scope, represents a welcome development in the pursuit of understanding India's consumption landscape.
• The provided factsheet offers valuable insights into present consumption patterns, rural-urban disparities, and inter-caste differences.
• However, its limited scope necessitates a prompt release of the full price and quantity unit-level data for the surveyed year, 2022-23.
• This complete dataset is crucial for researchers, policymakers, and analysts to delve deeper into the intricacies of the survey and draw more nuanced conclusions.
• A continuous and updated flow of data ensures a more accurate understanding of evolving consumption habits, poverty indicators, and other critical socio-economic parameters.
• Timely follow-up surveys enable policymakers to adapt strategies based on current trends rather than historical data.

Conclusion

• While the changes in HCES survey design aim to improve data collection methodologies, challenges in comparability and potential biases need careful consideration.
• The insights into rural-urban inequality, inter-caste differences, and evolving consumption patterns highlight the complexity of India's socio-economic landscape.
• For a comprehensive understanding, the swift release of full price and quantity unit-level data is imperative, ensuring that future analyses and policy decisions are well-informed and nuanced.

Q1) What is consumption expenditure?

Consumption expenditure refers to the total amount spent by households on goods and services for their personal use, contributing significantly to the overall economic activity.

Q2) How does consumption expenditure impact the economy?

Consumption expenditure is a key driver of economic growth. Increased consumer spending stimulates demand, encouraging production, job creation, and a more robust economy.

Source: The Hindu