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Resource centre on India's rural distress
 
 

Consumption expenditure still tilted towards food

-The Business Standard

 

Indian economy has been on a sustained growth path, but Indians are still spending a major chunk of their expenditure on food items.

Per capita consumption expenditure in a month was 88 per cent more in case of urban India compared to rural India during 2009-10, a trend which was more or less five years ago, according to the latest figures on consumption expenditure.

Per capita expenditure on consumption for the bottom 10 per cent of the people in rural areas was five times less than the top 10 per cent of the people while in case of urban parts, it was 10 per cent less. The figures on consumption pattern released by the National Sample Survey Office (NSSO) show over half of the expenditure by rural households went on food items during 2009-10. The figure for urban India was 40 per cent.

It is expected as people become prosperous, they spend less on food items. Does it mean the country is not becoming prosperous?

“No, you cannot conclude that from the data,” Pronab Sen, principal advisor in the Planning Commission, told Business Standard. The reason for such high spending on food items is that food inflation was too high during the period, he explained.

Food inflation shot up to 19 per cent by later half of November 2009 as drought hit many parts of the country.

The data also showed quite a difference between pattern of consumption between rural and urban India. (See chart). Sen, who served as Chief Statistician earlier, said in urban parts one has to spend lots of money on rent and transport that is not the case with rural areas.

So, percentage of expenditure on food in case of urban India came down, he added.

Per capita consumption expenditure in urban India stood at Rs 1,984.46 a month against Rs 1,053.64 in rural areas during 2009-10. The figures, computed by a new methodology, is not given for earlier years. But, the difference between rural India and urban India was more or less same in 2004-05, using old methodology.

During 2009-10, per capita consumption expenditure for the bottom 10 per cent of the people in rural areas was as low as Rs 452.98 a month, while the top ten per cent spend more than five times at Rs 2516.69.

Similarly, bottom ten per cent people on an average spend Rs 599.27 a month, while the top ten per cent spend over five times at Rs 5,863.25. The figures given by NSSO will be used to estimate poverty in India, after the Planning Commission comes out with poverty line.

As much as 37.2 per cent of the people were below poverty line during 2004-05, after Suresh Tendulkar Committee came out with new methodology for poverty estimates.

Earlier, 27.5 per cent people were expected to be below poverty line (BPL) that year, using old methodology. As per Planning Commission member Abhijit Sen's calculations, 32 per cent people were below poverty line during 2009-10, using new methodology suggested by the Tendulkar Committee.