Nominal MPCE Grows By 9% In Rural, 8% In Urban Areas From 2022-23: Report

The Household Consumption Expenditure Survey for 2023-24 suggests that rural areas are experiencing a sustained rise in consumption.

New Delhi:The Household Consumption Expenditure Survey for 2023-24 highlights a continued increase in rural consumption, with the gap between urban and rural spending narrowing even further compared to 2022-23. This suggests that rural areas are experiencing a sustained rise in consumption, bringing them closer to urban levels in terms of spending trends. This survey has been conducted by the Ministry of Statistics and Programme Implementation (MoSPI).

In 2023-24, the average Monthly Per Capita Consumption Expenditure (MPCE) for the bottom 5% of India's rural population is Rs 1,677, while for the same group in urban areas, it's higher at Rs 2,376. On the other hand, the top 5% of India's rural population spends an average of Rs 10,137, compared to Rs. 20,310 for their urban counterparts.

When comparing year-on-year growth, the bottom 5% of India's rural population saw the largest increase in MPCE, with a notable 22% rise from 2022-23. For the equivalent group in urban areas, the growth was slightly lower at about 19%. This reflects a continued improvement in rural consumption, particularly at the lower end of the income spectrum.

Consumption behaviour of households

The report released by MoSPI shows that households across the country are spending more on non-food items, with these expenses making up 53% of average monthly per capita consumption expenditure (MPCE) in rural areas and 60% in urban areas. The main areas driving this non-food spending in 2023-24 include: (i) transport (conveyance), (ii) clothing, bedding and footwear, (iii) entertainment and miscellaneous goods, and (iv) durable goods. In urban areas, rent also plays a significant role, accounting for about 7% of non-food expenditure.

When it comes to food expenditure, beverages and processed foods continue to be the largest contributors, as they were in 2022-23. This is followed by spending on milk and milk products, as well as vegetables.

Regional economic differences

The variation in Monthly Per Capita Consumption Expenditure (MPCE) across states and Union Territories (UTs) is significant. Among the states, Sikkim has the highest MPCE, with rural areas at Rs 9,377 and urban areas at Rs 13,927. On the other hand, Chhattisgarh has the lowest MPCE, with Rs 2,739 in rural areas and Rs 4,927 in urban areas.

In the UTs, Chandigarh stands out with the highest MPCE--Rs 8,857 in rural areas and Rs 13,425 in urban areas--in contrast, Dadra and Nagar Haveli and Daman and Diu (Rs 4,311) and Jammu and Kashmir (Rs 6,327) report the lowest MPCE in rural and urban areas, respectively.

The rural-urban gap in MPCE is most pronounced in Meghalaya (104%), followed by Jharkhand (83%) and Chhattisgarh (80%). Notably, the average MPCE in 9 out of 18 major states exceeds the national average in both rural and urban areas. Average all India MPCE in rural areas is Rs. 4,122 while in urban it is Rs. 6,996.

Key Insights from HCES 2023-24

1. In 2023-24, the average Monthly Per Capita Consumption Expenditure (MPCE) is Rs. 4,122 for rural India and Rs. 6,996 for urban India, excluding the value of free items received through social welfare programmes. When these imputed values are included, the MPCE rises to Rs 4,247 in rural areas and Rs 7,078 in urban areas.

2. Compared to 2022-23, nominal MPCE has grown by about 9% in rural areas and 8% in urban areas.

3. The gap between urban and rural MPCE has steadily decreased over the years. From 84% in 2011-12, it fell to 71% in 2022-23 and further to 70% in 2023-24, reflecting continued consumption growth in rural areas.

4. The largest increase in MPCE from 2022-23 to 2023-24 was seen among the bottom 5-10% of India's population, in both rural and urban areas.

5. Non-food items account for the largest share of household expenditure, with 53% in rural areas and 60% in urban areas. Major contributors include transportation, clothing, bedding and footwear, entertainment and durable goods. In urban areas, rent (including house, garage, and hotel accommodations) constitutes about 7% of non-food spending.

6 Beverages, processed foods and refreshments remain the biggest contributors to food expenditure for both rural and urban households.

7 Consumption inequality has decreased, with the Gini coefficient dropping from 0.266 to 0.237 in rural areas and from 0.314 to 0.284 in urban areas between 2022-23 and 2023-24, signifying a reduction in income inequality.

These findings reflect a continuing rise in overall consumption, especially in rural areas, and a shift in household expenditure patterns across the country.

Survey Methodology

The Household Consumption Expenditure Survey is designed to gather detailed information on household spending on goods and services. The data collected helps track trends in economic well-being, update the basket of consumer goods and services, and adjust the weights used to calculate the Consumer Price Index. Additionally, the information from this survey is crucial for measuring poverty, inequality, and social exclusion.

The 2023-24 MPCE estimates are based on data collected from 2,61,953 households (1,54,357 in rural areas and 1,07,596 in urban areas) across all states and Union Territories.