2023 consumption survey reveals 'sharp decline' in rural-urban divide

Household Consumer Expenditure Survey (HCES) reveals a sharp decline in the rural-urban divide as the Centre's initiatives transform grassroots, according to the latest econwrap report by SBI Research.

Notably, the last Consumer Expenditure Survey released by the MoSPI’s (Ministry of Statistics and Programme Implementation) National Sample Survey Office(NSSO) shows per capita monthly household expenditure (MPCE) doubled in 2022-23 as compared to 2011-12. It suggested the average MPCE at current prices, without imputation, was ₹6,459 in urban areas in 2022-23, more than double from ₹2,630 in 2011-12. The average MPCE in rural areas surged to ₹3,773 from ₹1,430 during the same period.

The average MPCE at 2011-12 prices, without imputation, was estimated at ₹3,510 in urban areas in 2022-23, up from ₹2,630 in 2011-12. In rural areas, the average MPCE almost doubled to ₹2,008 from ₹1,430 in the same period.

Estimates of MPCE, considering imputed values of items received free of cost through various social welfare programmes in HCES:2022-23, showed average MPCE at current prices at ₹6,521 in 2022-23, more than double from ₹2,630 in 2011-12 in urban areas, while ₹3,860 in rural areas, up from ₹1,430 in 2011-12.

Soumya Kanti Ghosh, group chief economic adviser, SBI Research says the revised MPCE weights in CPI computation could help India's real GDP growth for FY24 to top 7.5%.

"The bottom half of the rural pyramid now has MPCE patterns mostly converging with urban counterparts. Poor have no differences across caste, income or even religion. The impact on headline inflation would depend on whether the decline in food inflation outstrips the postulated increase in core inflation," he says.

The key findings of the recently released Household Consumption Expenditure Survey, released after a decade-long hiatus, threw light on changing paradigms of household consumption across rural or urban households. These changes need to be "analysed in sync with the slew of multi-dimensional action-oriented policy endeavours" in the same period, the report says.

Decadal build-ups in MPCE show a nearly equivalent increase in MPCE in fractile classes spanning across rural-urban areas, says SBI Research. "The gap between Top to Bottom Fractiles for both Rural and Urban has declined sharply. Poverty has staged a significant 440 basis point decline since 2018-19 and Urban Poverty a 170 basis point decline.”

It is estimated that rural poverty declined to 7.2% in 2022-23 compared to 25.7% in 2011-12, while urban poverty dipped to 4.6% vs 13.7% in 2011-12.

SBI Research attributes it to the government’s initiatives for those at the bottom of the pyramid, which has a positive impact on rural livelihood. “Enhanced loops of physical infrastructure are scripting a new story in two-way rural-urban mobility, one of the prime vectors for the incrementally shrinking horizontal income gap and the vertical income gap in Rural Income classes,” the report adds.

The findings show states once considered laggards are showing the “maximum improvement” in rural as well as urban gap states like Bihar, Uttar Pradesh, and Madhya Pradesh.

The estimates of MPCE were based on the data collected from 2,61,746 households, 1,55,014 in rural areas and 1,06,732 in urban areas across states and union territories.