Consume this survey with a pinch of salt

The findings of the household consumption expenditure survey conducted by the National Statistical Office (NSO) are an important indicator of consumption patterns and useful for policy formulation and estimation of poverty, inequality, etc. The results of the 2017-18 survey were not released by the government, which claimed that data quality was not good. Reports had indicated that the government did not want the data to reveal the impact of demonetisation and GST on consumption. So the latest data can only be compared to the 2011-12 data. The survey paints a positive picture about consumption, and the government would only have been happy to release it in the run-up to the Lok Sabha election. 

According to the survey, the average monthly per capita consumption expenditure (MPCE) of Indian households rose by 33.5 per cent from 2011-12 to Rs 3,510 in urban households and by 40.42 per cent to Rs 2,008 in rural households. This amounts to an increase of 3.1 per cent in rural areas and 2.7 per cent in urban areas at 2011-12 prices. This was fair growth but well below the inflation rate and the annual average GDP growth of 5.7 per cent in this period. One inference therefore is that GDP growth during this period was driven mainly by public expenditure and not by private consumption. The consumption pattern has shown interesting changes from the past. Expenditure on food has shown a falling trend in both rural and urban areas. There was a steeper fall in the case of cereals. There is greater expenditure on nutritional items such as eggs, fish and meat, milk and fruits, beverages and processed foods. There is also more spending on health and conveyance, consumer durables and services. The decline in relative expenditure on food and increase in discretionary expenditure are considered to be positive as they may be indicators of a fall in poverty levels. But it has been noted that the free distribution of food grains to over 810 million people may have reduced the expenditure on food. The data also shows a high level of inequality, with the bottom 5 per cent of the population spending only a tenth of what the top 5 per cent spend. 

The data will help to update the consumer price index (CPI) and make it more representative of consumer spending patterns. The CPI currently assigns a weight of 12.35 per cent to cereals in rural areas, though they account for only 4.89 per cent of the overall household consumption basket now. The CPI will be most useful in monetary policy formulation and inflation measurement only when it truly reflects the consumption patterns of families. But there are questions about how representative the data is because the survey was done in the post-Covid months when there was a surge in consumption.