The Household Consumption Expenditure Survey (HCES), conducted from August 2022 to July 2023, reveals a significant increase in Monthly Per Capita Consumption Expenditure (MPCE) from 2011-12 to 2022-23.

MPCE rose by 2.6 times in rural areas and by 2.5 times in urban areas. A more realistic comparison, after adjusting for inflation using the Consumer Price Index (CPI) for both rural and urban sectors, shows that real MPCE grew by 40.4 per cent in rural areas and by 33.4 per cent in urban areas.

This article examines whether this growth in MPCE has contributed to narrowing disparities between States.

Growth in Real rural MPCE

Bihar, which had the lowest MPCE in 2011-12, recorded the highest growth at 64.8 per cent, while Kerala, with the highest MPCE in 2011-12, saw the lowest growth at 16 per cent (see Table).

The other States with higher growth in real MPCE namely Tamil Nadu, Odisha, Himachal Pradesh, and Karnataka are experiencing a growth of more than 50 per cent, which is significantly higher than the national average of 40.4 per cent.

Tamil Nadu and Himachal Pradesh had higher MPCE levels in 2011-12, while Odisha had the lowest and Karnataka was in the middle rung of MPCE in 2011-12. States like West Bengal and Chhattisgarh do not seem to be exhibiting satisfactory growth as the real MPCE growth of these States do not compare well despite their levels of MPCE in the base year being too low.

On the other hand, slower growth in Haryana, Punjab, and Jammu & Kashmir is not a matter of concern given that they already had relatively higher MPCE levels in 2011-12.

Growth in Real Urban MPCE

Bihar experienced the highest growth in real urban MPCE, while West Bengal saw the lowest. In 2011-12, Bihar had the lowest MPCE, whereas West Bengal’s MPCE was in the middle range (see Table).

The growth of West Bengal is indeed quite slow. Among the States with lower MPCE in 2011-12, Uttarakhand (62.3 per cent), Assam (53 per cent), and Odisha (48.8 per cent) experienced much higher growth compared to the national average of 33.4 per cent, while Chhattisgarh (36.3 per cent), Uttar Pradesh (32.7 per cent), and Jharkhand (31.1 per cent) had growth rates closer to the national average.

Madhya Pradesh (28.6 per cent) had much lower growth among the poorer States. Tamil Nadu (50 per cent) and Andhra Pradesh (43.4 per cent) had the highest growth among the richer States, while Kerala (9.6 per cent), Maharashtra (16.5 per cent), and Haryana (17.5 per cent) had the lowest growth among the richest States. Among the middle States, Gujarat (48.2 per cent) had the highest growth.

Inter-State disparity in MPCE

A comparison of MPCE across IStates informs us of each State’s relative standing. In 2022-23, Chhattisgarh had the lowest rural MPCE at ₹2,466, while Kerala had the highest at ₹5,924.

The rural MPCE in Kerala is 2.4 times higher than in Chhattisgarh. In the urban sector, Himachal Pradesh had the highest MPCE at ₹8,075, which is 1.8 times higher than Chhattisgarh’s urban MPCE of ₹42,483. In 2011-12, this ratio for the rural sector was 2.7 and for the urban sector was 2.5.

Such a comparison of inter-State disparity in real MPCE over time between urban and rural space conveys a greater regional convergence of the urban sector than the rural sector.

Sigma convergence is a concept in regional studies that analyses the reduction of income or economic disparities among different regions over time. It is measured using the standard deviation or coefficient of variation of income levels.

A decrease in these metrics indicates narrowing income differences, suggesting that poorer regions are growing faster than richer ones. The coefficient of variation in the rural sector reduced from 29.8 in 2011-12 to 24.7 in 2022-23, while in the urban sector, it decreased from 22.9 to 18.4. These figures confirm sigma convergence in both urban and rural sector.

The Way forward

Disparities among States narrowed from 2011-12 to 2022-23 in both sectors. To bridge the gap between the living standards of rich and poor States, those with lower MPCE must experience faster growth.

The rural sectors of Chhattisgarh and West Bengal, as well as the urban sectors of Madhya Pradesh, Jharkhand, and Uttar Pradesh, did not follow this trend.

West Bengal, which previously ranked in the middle for MPCE, has experienced slow growth in both sectors, highlighting the challenges it faces in keeping pace with other States.

The writer is Assistant Professor, Sardar Patel Institute of Economic and Social Research (SPIESR)

Published on December 6, 2024