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31-12-2024
Bureau Report
NEW DELHI: Indian household spending on non-food items such as transport, garments and entertainment rose in both rural and urban areas in 2023/24 while outlays on staples like wheat and rice dropped, a government report showed on Friday.
The Household Consumption Expenditure Survey for 2023/24, conducted from August 2023 to July 2024, showed non-food items accounted for about 53% of per capita spending in rural areas, up from about 47% in 2011/12, and 60% in urban areas, up from about 57%.
The shift in spending patterns is expected to lead to a decrease in the weighting of food items in the consumer price index (CPI), which is used by the central bank to frame monetary policy.
Officials from the Ministry of Statistics and Programme Implementation have previously indicated plans to revise the base year for the retail inflation data from 2012 to 2024, incorporating these findings.
Analysts said food is likely to have a smaller weighting in India’s consumer price index in the near future. The urban-rural monthly per capita consumer spending gap narrowed to 70% in 2023/24 from 84% in 2011/12, the report noted.
In nominal terms, rural consumer spending climbed 9.55% year on year to 4,122 rupees ($48.23) per month in the year through July from 3,773 rupees the previous year, while urban spending rose 8.31% to 6,996 rupees from 6,459 rupees, the report showed.
Adjusted for inflation, rural spending grew just 3.5%, while urban spending remained subdued due to retail inflation of about 5.5% in the fiscal year that ended in March.
Compared with 2011/12, rural consumer spending rose 45.4%, outpacing the 38.1% increase in urban areas, reflecting a slight convergence in consumption patterns.
Consumer spending, which accounts for about 58% of India’s economic activity, remains a critical driver of economic growth in Asia’s third-largest economy.
In February, India will conduct another survey of household consumption as well as of items and brands at retailers to obtain a comprehensive picture of domestic spending before revising the consumer price index (CPI), two government officials said. Over the weekend, the government released initial findings of the 2022/23 household consumption expenditure survey, the first in over a decade, showing the share of food in household spending had shrunk substantially.
Meanwhile, High food inflation has become a significant concern for policymakers in India, as food items account for 45.9% of the Consumer Price Index (CPI). Recent surges in the prices of tomatoes, onions, and potatoes (TOP) have highlighted the issue, as these three vegetables, though making up just 4.8% of the food and beverages group and 2.2% of the overall CPI, can drive retail inflation upward due to price fluctuations.
Several factors contribute to the rising prices of these essential vegetables. Their short seasonal crop cycles, combined with their perishable nature, create storage challenges. Additionally, production is often regionally concentrated, making supply chains vulnerable to disruptions caused by weather events such as heatwaves and floods. Growing consumer demand and regional consumption preferences further strain the supply chain, intensifying price volatility.
India’s production of tomatoes, onions, and potatoes has expanded rapidly, with 2022-23 estimates placing production at 20.4 million metric tonnes (MMT), 30.2 MMT, and 60.1 MMT, respectively.
