Consumption growth slows, Indians are consuming less food and more durable goods, finds households survey

The All India Household Consumption Expenditure survey has arrived after a long wait of 11 years, and one of its main messages is that consumption growth slowed a little in the years 2011-12 to 2022-23, compared to the growth between 2004-05 and 2011-12.

For urban areas, the per-year growth is 17.2% from 2004-05 to 2011-12, while from 2011-12 to 2022-23, the per-year growth is 13.2%. Adjusting for inflation is a bit messy since a unified Consumer Price Index (CPI) for the country came into existence only after 2011-12.

But economists say that even using the earlier avatars of CPI for agricultural laborers and industrial workers, the real growth in consumption works out slower in the last 11 years, compared to the previous eight years.

If the purpose of junking the 2017-18 consumption expenditure survey was to hide a fall in consumption in that year, as a leaked report showed, then the new survey is not exactly making the India consumption story look much better. But that's trivializing the exercise.

The All India household consumption expenditure survey (HCES) is by far the most comprehensive exercise carried out by the National Statistical Organisation to ascertain what the average Indian is consuming. It covers 2.6 lakh households (1.55 lakh rural and 1.07 lakh urban households), making it one of the largest surveys in the world.

Depending on this data, the components of the GDP and their weights are constructed. Even more important for policymaking, the consumer price index (CPI) is also constructed based on what the HCES says Indians are consuming.

From the CPI point of view, the key takeaway from the latest survey is that the weight of food in the Indian household's consumption basket has fallen. For rural households, it has fallen from 52.9% in 2011-12 to 46.38%, while for urban households, food constitutes only 39%.

The current CPI constructed on the basis of the 2011-12 HCES gives a 45.9% weight to food. When the CPI is revamped, mostly next year, the weightage of food may drop towards 42% or 43%. Even more important is the steep fall in the weightage of cereals - it has come down from 22.16% in 1999-00 to 10.69% in 2011-12 to as little as 4.89% in 2022-23.

For urban households, cereals account for just 3.62% of their expenditure, down from 6.6% in 2011-12. State-level politicians probably smelt the falling weight of cereals in an Indian household's monthly bill. This probably is why they are preferring to offer free electricity and bus rides.

Other key learnings from the HCES include the rising share of conveyance in an urban family's monthly expense - it has risen from 6.52% in 2011-12 to 8.59% in 2022-23. The government needs to rethink its fuel pricing policy. The rising prices are clearly hurting.

A key positive from the HCES is the rising amounts spent on consumer durables. Their share in the urban Indian household's wallet is up from 5.6% in 2011-12 to 7.17% in 2022-23. More consumer durables require more power consumption. Again, some political parties appear to have smelt this too.

Finally, one probably sad takeaway from the HCES is that families are spending less on education. The share has fallen from 6.9% in 2011-12 to 5.78% in 2022-23; rural households' expenditure on education has similarly fallen from 3.49% in 2011-12 to 3.3% in 2022-23. This isn't a great sign for an economy that is on the cusp of cashing in on its demographic dividend.