The Household Consumption Expenditure Survey (HCES) is a critical tool for understanding the consumption patterns, expenditure habits, and standard of living of households across India. The latest edition of this survey, covering the period 2023-24, was released recently. Data from the latest survey reveals a growing shift toward spending on beverages, processed foods, and conveyance, alongside a consistent decline in the share of cereals in household expenditure.
The Household Consumption Expenditure Survey (HCES) is a critical tool for understanding the consumption patterns, expenditure habits, and standard of living of households across India. Conducted by the National Sample Survey Office (NSSO) since 1950, it provides invaluable insights into the well-being of households. The latest edition of this survey, covering the period 2023-24, was released recently.
In today’s story, we delve into the design and methodology of the Household Consumption Expenditure Survey (HCES) and examine the key findings from the latest 2023-24 survey. This analysis not only highlights how the data was collected but also explores the changes introduced compared to previous surveys, thereby gathering insights into the evolving consumption patterns and expenditure habits of Indian households.
Genesis and Changes in the Household Consumption Expenditure Surveys
The National Sample Survey Office (NSSO) has conducted household consumption expenditure surveys since 1950-51. Initially, these surveys were part of annual rounds until the 26th round. From the 27th round (1972-73), the NSSO shifted to conducting large-scale quinquennial surveys on consumer expenditure alongside employment-unemployment. Subsequent surveys were held at five-year intervals, with results published for rounds like the 50th (1993-94), 61st (2004-05), and 68th (2011-12). The 2017-18 survey findings were never released owing to the ‘data quality’ issues.
Following the National Statistical Commission’s recommendations, a survey planned for 2020-21 was delayed due to COVID-19. Eventually, two back-to-back surveys were conducted in 2022-23 and 2023-24 so as to facilitate a decision on revision of the base year for macro-economic indicators, like Gross Domestic Product (GDP), Consumer Price Indices (CPI) etc.
The HCES 2022-23 introduced several updates compared to earlier rounds:
- Expanded Questionnaire: The number of items increased from 347 in 2011-12 to 405, with new additions and merged obsolete items.
- Multiple Questionnaires: Instead of a single questionnaire, separate ones now cover food, consumables/services, and durable goods, alongside a separate form for household and demographic data.
- Multiple Visits: Data collection now involves three monthly visits per household within a quarter, a deviation from the earlier single-visit model.
- Digital Data Collection: The survey adopted the Computer-Assisted Personal Interview (CAPI) method, replacing the traditional Pen-and-Paper Personal Interview (PAPI).
The HCES 2023-24 also used the same methodology as HCES 2022-23, but some questions on household characteristics were dropped to reduce respondent burden.
Disparity between rural and urban average MPCE at its lowest since 1999
In 2023-24, rural households saw a significant jump in average monthly per capita consumption expenditure (MPCE), rising by 9.3% from Rs. 3,773 in 2022-23 to Rs. 4,122. This marks a remarkable increase from just Rs. 1,430 in 2011-12 and Rs. 579 in 2004-05. Urban areas also experienced growth, but at a slower pace of 8.3%, with the average MPCE spend reaching Rs. 6996, up from Rs. 6459 the previous year. In comparison, urban MPCE was Rs. 2,630 in 2011-12 and Rs. 1,105 in 2004-05. The gap between rural and urban spending has narrowed further, now standing at 69.7% in 2023-24, down from 71.2% in the previous year and much lower than the 90.8% difference seen in 2004-05. This is the lowest divide in average MPCE since 1999.
In 2023-24, the income gap between the highest and lowest earners narrowed slightly across both rural and urban areas. The average monthly consumption expenditure (MPCE) of the bottom 5% in rural areas rose to 17% of the top 5%, up from 13% in 2022-23. Similarly, in urban areas, the bottom 5% improved from 10% to 12% of the top 5%.
Notably, the top 5% in both areas saw a decline in average MPCE—by 3 percentage points in rural areas and 2 percentage points in urban areas. Meanwhile, the bottom 5% registered the highest growth in average MPCE among all fractile classes, with a 22% increase in rural areas and 19% in urban areas, highlighting a modest reduction in consumption inequality.
Rural Food Expenditure falls below 50% for the second year in a row in 2023-24
Spending patterns reveal a gradual decline in the share of food expenditure within the average monthly per capita expenditure (MPCE) in rural areas, dropping from 59.4% in 1999-2000 to 46.38% in 2022-23. Notably, 2022-23 marked the first time food expenses fell below 50% of rural MPCE. However, a slight reversal was observed in 2023-24, with the share rising to 47.04%.
In urban areas, the trend in food spending has been less consistent. Starting at 48.06% in 1999-2000, it decreased to 40.51% in 2004-05 but rose to 44.39% by 2009-10. It then dipped to 42.62% in 2011-12 and further to 39.17% in 2022-23, before rising slightly to 39.68% in 2023-24. These shifts highlight the evolving priorities in consumption patterns across rural and urban households.
Rising Spending on Beverages and Processed Foods, Decline in Cereal Expenditure
An item-wise analysis of expenditure on food and non-food categories reveals notable trends in rural and urban areas during 2023-24. Among rural households, food items accounted for 47% of the average monthly per capita expenditure (MPCE). Within this category, beverages and processed foods led at 9.84%, marking a significant rise from 4.19% in 1999-00, followed by milk and milk products at 8.44%, vegetables at 6.03%, and cereals at 4.97%, which has seen a sharp decline from 22.16% in 1999-00. On the non-food front, conveyance topped the list at 7.59%, up from 2.94% in 1999-00, followed by durable goods (6.48%) and fuel and light (6.11%).
In urban areas, food items made up 39.68% of MPCE, with beverages and processed foods leading at 11.09%, up from 6.35% in 1999-00, followed by milk and milk products at 7.19%, down from 8.68% in 1999-00, and cereals at 3.74%, dropping significantly from 12.35% in 1999-00. For non-food items, conveyance accounted for 8.46%, up from 5.52% in 1999-00, followed by durable goods at 6.87% and rent at 6.58%, which grew from 4.46% in 1999-00. These trends reflect a growing shift toward spending on beverages, processed foods, and conveyance, alongside a consistent decline in the share of cereals in household expenditure.
