Household Consumption Expenditure Survey: The recently released results of the Household Consumption Expenditure Survey (HCES) for 2022-23, which came after a gap of 11 years, paint a dynamic picture of India's evolving economic landscape, particularly in rural areas.

The survey, conducted every five years, sheds light on consumption patterns, income disparities, and shifts in consumer behaviour, offering valuable insights for policymakers and investors alike.

Rural growth outpaces urban, indicating policy success

One of the standout findings of the survey is improvement in rural household incomes compared to urban counterparts since the last survey in 2011-12.

Meanwhile, rural households have seen a higher rate of improvement in Monthly Per Capita Consumption Expenditure (MPCE), narrowing the gap between rural and urban spending substantially.

The trend underscores the success of government policies aimed at enhancing rural incomes. Notably, the improvement is more pronounced at lower income levels, signalling progress in reducing poverty and enhancing livelihoods, brokerage firm Emkay noted.

Income inequality rises at the top

However, while the gap between rural and urban MPCE has narrowed, the survey reveals a concerning trend of widening income inequality, particularly at higher income levels.

The disparity in spending between the wealthiest 10 per cent of households compared to the rest is stark, indicating a growing divide in economic fortunes within society.

Shifts in consumer behaviour and nutritional preferences

The survey also reflects changing consumer preferences and improved nutritional habits across both urban and rural households. As incomes rise, there has been a decline in the share of food expenditure, with a corresponding increase in spending on fruits, milk, consumer services, durable goods, and entertainment.

Spending on proteins, essential for a balanced diet, has increased, with rural households allocating a higher proportion of their food budgets to protein-rich foods compared to urban counterparts, Emkay said.

Implications for CPI index

The findings of the HCES are expected to have significant implications for India's Consumer Price Index (CPI) basket. With lower spending on food and beverages, the new CPI series is likely to see a reduction in the weight assigned to these items, while core goods and services may receive higher weights.

The adjustment aims to better reflect changes in consumer behaviour and consumption patterns since the last survey, providing a more accurate measure of inflation and consumer sentiment.

While the HCES results offer promising insights into improving rural livelihoods and shifting consumer behaviour, challenges remain, particularly regarding income inequality and ensuring sustainable economic growth.