The National Sample Survey Office’s household consumer expenditure survey for the period August 2022-July 2023, conducted after 11 years, portrays a sanguine picture – chiefly, of the income gap closing between rural and urban areas; and a diversification in expenditure away from food, particularly cereals, to discretionary items. The question is whether the improvements have been ordinary or substantial.

The difference between average urban and rural monthly per capita consumer expenditure (MPCE) as a percentage of rural MPCE (in current prices) has fallen from 88.2 per cent in 2009-10 to 71.2 per cent in 2022-23. The rural-urban gap has perhaps closed due to the direct benefit transfers and free grain distribution, the latter creating space for discretionary spending. States regarded as laggards have shown maximum improvement in closing the gap, such as Bihar, Uttar Pradesh and Madhya Pradesh. From the findings of the consumer survey, the government claims that income poverty is down to 5 per cent. This is, however, based on a poverty line whose methodology is not clearly defined. Be that as it may, SBI Research observes that rural and urban consumption patterns are converging at the bottom of the income pyramid, which points to a sociological convergence as well as aspirational trends.

One of the most remarkable findings of the survey is the sharp decline in cereals spending as a proportion of MPCE, which points to an economy on the upswing. It has fallen from 10.75 per cent in 2011-12 to 4.91 per cent in 2022-23 in rural India, and from 6.66 per cent to 3.64 per cent in urban India. This reinforces the closing of the rural-urban gap. Consumer price index weights would have to be re-examined with respect to cereals, even as the proportion of expenditure on food as a whole is 46.38 per cent in rural India and 39.17 per cent in urban India. However, the issue of whether the Centre is supplying more foodgrains for free than required does arise.

As for the downsides, average rural MPCE was up 40 per cent in 11 years (July 2012-July 2023) in real terms (2011-12 prices) from ₹1,430 in July 2012 to ₹2,008, and in urban areas by 33.4 per cent to ₹3,510. This works out to a CAGR of about 3.2 per cent in rural India and 2.8 per cent in urban India. This lags GDP growth by a fair margin. Experts have estimated that as per National Accounts Statistics, the annual growth in private final consumption expenditure over this period would be in the region of 6 per cent. Even if one shaves off more than a percentage point to account for population growth, this is a big gap that needs to be explained for an economy where consumption accounts for 60 per cent of GDP. As for inequality, 60 per cent of the rural population and nearly 70 per cent of the urban population has an MPCE below the average nominal level of ₹3,773 and ₹6,459, respectively. The rural-urban gap is pronounced at higher levels of income – even though it has declined over time for the whole population. India has progressed, but somewhat unevenly.