Household survey: Fresh light on India’s consumption conundrum

livemint.com:

There has been a huge divergence in India among observers on the state of consumption in general and the health of rural demand in particular. Not surprisingly, there is also a squabble over the appropriate letter of the alphabet to denote the shape of consumption demand. There has also been a discernible cleft between rural and urban areas, as also between goods and services, when it comes to the rates and patterns of private consumption demand growth.

Let us look at the latest top-down data first. The country’s latest Household Consumption Expenditure Survey reveals that between 2011-12 and 2022-23, nominal average monthly per capita expenditure (MPCE) increased at a compounded annual growth rate (CAGR) of 9.2% and 8.5% in rural and urban India, respectively. The numbers stand at 9.4% and 8.6% if the imputed impact of social welfare schemes (excluding education and health) are considered.

But in real terms, average MPCE increased by 3.1% and 3.3%, respectively, and only at 2.7% each if welfare benefits are included. In both nominal and real terms, these growth rates are lower than in the period between the two earlier surveys. Importantly, while a rural-urban per capita consumption chasm is reducing, the rural share in overall spending is declining.

Of the two Reserve Bank of India surveys on consumption, one focuses on consumers’ perceptions of current conditions and the other on their outlook for the future. The latest survey shows that consumer confidence continued on its recovery path to a level of 95.1 in January 2024 from 92.2 in November 2023 (on this scale, 100 marks neutrality between optimism and pessimism). But what about their future outlook? As per the survey, households expect an improvement in general