The recently released Household Consumption Expenditure Survey (HCES) 2023-24, conducted by the National Statistics Office (NSO), offers fascinating insights into the evolving consumption patterns of Indian households. Contrary to prevailing narratives, the survey data reveals surprising trends, especially among the lower-income groups, challenging conventional assumptions about the impact of inflation on the poor.
Key Findings from the Survey
- Unexpected Growth in Spending Among the Bottom 50%
Despite concerns about inflationary pressures, the bottom 50% of consumers saw their spending rise by double digits during the survey period (August 2023–July 2024). This trend suggests that factors beyond income stagnation or inflation might be driving increased consumption at the bottom of the economic pyramid. - Urban vs. Rural Consumption
Urban households continue to outspend their rural counterparts, with per capita monthly consumption expenditure (MPCE) at ₹6,996 in urban areas, compared to ₹4,122 in rural areas. However, rural consumption growth has outpaced urban areas over the past 11 years, reflecting improved income levels and possibly enhanced government support schemes. - Role of Government Schemes
The surge in consumption among lower-income groups can likely be attributed to direct cash transfer schemes such as the Kisan Yojana, Ladki Yojana, and Behen Yojana. These initiatives seem to be empowering the economically disadvantaged, enabling them to spend more on necessities and beyond. - Middle-Class Consumption Defined
The survey also refines the parameters of India’s middle class, categorizing households spending ₹4,300–₹8,300 per month in urban areas and ₹2,800–₹4,900 in rural areas as middle-class. This definition excludes the top and bottom 20%, offering a clearer picture of the middle-income segment. - Sectoral Spending Trends
Food expenditure rose marginally as a percentage of total spending, reaching 47% in rural areas and nearly 40% in urban households. These figures are consistent with a slight increase in food prices but do not indicate a structural shift in spending patterns. - Slowdown Among High-Income Urban Households
Interestingly, spending growth among urban high-income households appears to have slowed, potentially due to tighter credit conditions. This could signal a shift in discretionary spending habits, particularly for premium goods and services.
Contradictions with Corporate Performance
The survey’s findings challenge corporate narratives that suggest mass-market products are underperforming. This divergence could stem from a combination of increased competition, evolving consumer preferences, and the localization of spending. For example, rural consumers might now be spending on goods and services previously unavailable in their regions.
Why These Trends Matter
The HCES 2023-24 results are more than just numbers—they offer a glimpse into India’s socioeconomic fabric. The robust growth in rural spending and the resilience of lower-income households highlight the potential for inclusive economic growth. However, the slowing momentum in urban high-income spending serves as a reminder of the challenges posed by inflation and credit constraints.
Looking Ahead
Policymakers and businesses alike must pay close attention to these trends. Strengthening rural infrastructure, enhancing access to affordable credit, and tailoring products to meet the needs of India’s rising bottom-of-the-pyramid consumers could unlock significant growth opportunities.
The HCES 2023-24 data underscores the complexity of India’s consumption story. As India continues its growth trajectory, understanding the nuanced behaviours of its diverse population will be crucial for building a more inclusive and equitable economy.
(Sources: PIB.gov.in, Business Standard, Indian Express, Aarati Krishnan’s commentary on Twitter, Household Consumption Expenditure Survey 2023-24 fact sheet by NSO)
