Households spend slightly more on food items in 2023-24

● Urban-rural gap declines marginally

- PRIYANSH VERMA

AS THE DEBATE on whether to cut the weight of food in the retail inflation index rages, the latest survey has shown a marginal increase in food's share in household consumption, and a resultant dip in discretionary spending on other items like durable goods, education, and medicines.

This raises fresh questions on the strength of consumption demand in the economy, and bears out high-frequency data that reveal a slowing of urban consumption.

According to the Household Consumption Expenditure Survey (HCES) 2023-24, the share of food items in the average monthly per capita consumption expenditure (MPCE) of households in rural areas has risen to 48.43% from 47.47% in 2022-23; in urban areas, the rise was to 40.31% from 39.7%.

Besides, cereals' share in MPCE has also risen to 7.6% in 2023-24 from 6.92% in 2022-23, in the rural areas, and in urban areas, to 4.8% from 4.51%.

CONSEQUENTLY, THE SHARE of non-food items in rural areas' MPCE has declined to 52.96% in 2023-24 from 53.62% in 2022-23; and in urban areas to 60.32% from 60.83%.

Meanwhile, the survey showed that the urban-rural gap in MPCE has declined to 71% in 2022-23 from 84% in 2011-12. It has further come down to 70% in 2023-24 that "confirms sustained momentum of consumption growth in rural areas", the statistics ministry said in a release.

"Increased spending on food items by households is a direct consequence of high food inflation," said Indranil Pan, chief economist, Yes Bank. "But less spending on discretionary items also shows a decline in consumption, partly due to low real-wage growth this year," Pan added.