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The big picture on consumption

The big picture on consumption
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First Published: Wed, Jul 13 2011. 11 20 PM IST
Updated: Wed, Jul 13 2011. 11 20 PM IST
The National Sample Survey Office, in its survey of key indicators of household consumer expenditure in India for 2009-10, says that for rural areas, the bottom 10% of the population has an average monthly per capita expenditure of Rs 452.98. That’s more than the Planning Commission’s poverty line of Rs 450 per month for the rural areas. For urban areas, the bottom 10% of the population has an average monthly per capita expenditure of Rs 599.27, which too is more than the Rs 578 per month poverty line dreamt up by the Planning Commission. In terms of the Planning Commission’s definition, therefore, the poor in this country are less than 10% of the population. They must be very happy.
How much have the poor benefited from growth after economic liberalization? The NSSO data for 1993-94 say that the bottom 5% of the population in rural areas had an average per capita expenditure of Rs 100.40. The next 5%’s average expenditure was Rs 130.70. Taking the average of these two classes as Rs 115.55 (admittedly a rough estimate), we find that the expenditure of the bottom 10% of the rural population has increased by Rs 337.43 per month between 1993-94 and 2009-10. Adopting the same methods, the increase for the top 10% of the rural population is Rs 1,830.34 per month. Of course, a large part of this increase is due to inflation. But the point is that the rural rich have gained far more than the rural poor. In percentage terms, however, the lowest 10% gained more, but then, the base was abysmally low.
Using the same methods, we find the monthly expenditure of the bottom 10% of the urban population is up by Rs 445.12 between 1993-94 and 2009-10. The increase in expenditure of the top 10% of urban India over the period was Rs 4,580. It’s not really a surprise that the rich gain more than the poor—after all you only have to look around to see the evidence.
Have the poor-but-not-abysmally-poor done better? The 10% of the urban population above the bottom 10% spent Rs 210.8 per head per month in 1993-94. In 2009-10, this group spent Rs 830.96. In contrast, the 10% of the urban population below the top 10% spent Rs 698.30 per head in 1993-94. In 2009-10, this group spent Rs 3,050.69. Once again, notice the huge difference in incremental income.
Another method of looking at inequality is in comparing the income of the people at the bottom of the food chain with those at the top. In 1993-94, the monthly expenditure of the top 5% of the urban population was 12.4 times that of the bottom 5%. In 2009-10, we do not have data for the top and bottom 5%. But the top 10% of the urban population spent 9.8 times more than the bottom 10%. In the rural areas, the top 5% of the population spent 8.7 times more than the bottom 5% in 1993-94. In 2009-10, the top 10% spent 5.5 times more than the bottom 10% in rural India.
You could also compare the difference between urban and rural incomes. In 1993-94, average urban consumption was 1.6 times rural consumption—in 2009-10, this had gone up to 1.9 times.
Let’s take a look now at how well the states have done in the last decade or so. The table shows the ranking of the major states in monthly rural and urban expenditure per capita, according to the NSSO numbers. Interestingly, the consumption data are at odds with the story of the recent growth spurt in Bihar. In rural consumption, the state has slipped from the 13th rank in 2000-01 to 17th in 2009-10. In urban consumption, it has remained resolutely last.
A similar contrarian picture emerges for Gujarat. In spite of the anecdotes of investment and progress in that state, it has slipped from the fourth rank in rural consumption in 2000-01 to 8th in 2009-10. The state has a similar story in urban consumption, slipping from the fifth rank in 2000-01 to rank No. 9 in 2009-10. Madhya Pradesh and Jharkhand are two states that have improved their rankings in rural consumption. Haryana has improved its urban consumption ranking dramatically, no doubt due to the development of Gurgaon and areas adjoining Delhi.
Madhya Pradesh has improved urban consumption substantially. Tamil Nadu, on the other hand, seems to have slipped in urban consumption. Kerala remains on top of the rural consumption rankings, although it has lost its first rank in urban consumption to Maharashtra, no doubt thanks to growth in Mumbai.
Manas Chakravarty looks at trends and issues in the financial markets.
Comment at capitalaccount@livemint.com
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First Published: Wed, Jul 13 2011. 11 20 PM IST