Mint Explainer: What consumption expenditure data says about socio-economic disparity

Spending disparity between the rural and urban areas and between the poorest and richest narrowed somewhat in 11 years since 2011-12, but the difference continues to be very wide between different socio-economic classes and at the intra-state and inter-state levels, the Household Consumption Expenditure Survey 2022-23 factsheet released by the Ministry of Statistics and Programme Implementation recently show.

These differences persist as the rise in spending between income groups in both rural and urban areas is uneven. Slicing and dicing of the limited data published by Mospi also show that states such as Kerala, Haryana and Punjab which have among the highest monthly per capita expenditure (MPCE) in the 2011-12 survey, as also in some of the previous ones, have been overtaken by some states from the North-East, Goa and the union territory of Chandigarh. This might be due to the effect of inflation in individual states and increased incomes.

The report also shows that the proportion of the population with less than the average MPCE continues to be very high and almost unchanged from 2011-12.

Mint takes a look at what the consumption expenditure data reveals about persistent disparity across the country.

Increased disparity where urban spending rose faster

While the spending disparity between the rural and urban areas narrowed at the national level, it increased in states such as Bihar, Delhi, Gujarat, Punjab, Uttarakhand and north-eastern states such as Arunachal Pradesh, Manipur, Meghalaya and Nagaland. In all these states, urban MPCE (not adjusted for inflation) grew faster than rural spending, defying the national trend of a faster rise of expenditure in rural areas.

In most states and union territories, rural spending rose at a faster pace. This helped states such as Maharashtra and West Bengal in particular to close the gap in rural and urban spending. The least disparity in rural-urban spending was seen in Goa and Kerala, both states reported a similar decline in rural-urban disparity. Manipur reported a significant change while maintaining a low spending disparity – faster growth in urban MPCE has ensured that its rural per capita expenditure is no longer larger than the spending in towns.

Spending power shifts away from remittance-rich states

Delhi, Haryana, Kerala and Punjab were among the states with the highest MPCE in 2011-12. Kerala and Punjab are among the states that receive a lot of remittances from overseas workers. They have been displaced from the top position with a sharper increase in spending in Chandigarh, Goa and Sikkim. Goa most likely benefitted from the growth of tourism. The average MPCE across rural and urban Chandigarh is now twice the national average and also much larger than those of Haryana and Punjab, the traditional food bowls of India.

Mineral-rich state of Chhattisgarh which has a large tribal population had the lowest MPCE in both rural and urban areas, as spending rose slower than the national average. Its MPCE in the rural and urban areas were about a third of that for Sikkim and Chandigarh, respectively, places with the highest average per capita spending in 2022-23.

Large share of the population with less than the national average MPCE

Another highlight of the survey is the widening rural-urban disparity in the spending of those in the lower fractile classes. This too was an outcome of a faster rise in spending in urban areas compared to rural areas. The disparity widened the most for those in the bottom 5% class and the next 5%.

However, the disparity between the spending of the bottom 5% and the top 5% narrowed in 2022-23 from 2011-12. Still, the disparity is very wide and the spending of the bottom 5% is a fraction of the top 5%. For every ₹100 spent by a person from the top 5% class, a person from the bottom 5% class in rural areas spends just ₹13 and even less in urban areas at less than ₹10.

The national average MPCE of ₹3,773 and ₹6,459 for rural and urban areas, respectively, was almost equivalent to the expenditure of 60-70% fractile class in 2011-12. This saw only a little change in the latest survey. Thus, a vast majority of the population spends far less than the national average in rural and urban areas.

What might be disturbing for many economists and rights activists is just how much larger is the spending capacity of the top 5% compared to the poorer classes. The average MPCE of the top 5% in rural areas was estimated at ₹10,501 and in urban areas at ₹20,824. That is almost as much as the combined MPCE of the bottom 40% in rural areas and the bottom 50% in urban areas.

That apart, wide disparity is seen in the spending based on the type of household and social groups. The average MPCE of someone employed as casual labour in agriculture in rural areas was estimated at ₹3,273 compared to ₹4,533 for the wage earners/salaried employed in non-agricultural activities. The average MPCE of some employed as casual labour in urban areas was ₹4,379 against ₹7,146 for the salaried and ₹8,619 for those classified as ‘others’. Classification of the population along social groups showed that scheduled tribes and scheduled castes had much lower average MPCE than those belonging to general classes.