The India-Bharat gap is not widening

Difference between average spending in urban and rural areas declined by 0.6 percentage points between 2004-05 and 2011-12

Photo: Priyanka Parashar/Mint
Photo: Priyanka Parashar/Mint

The seven years between 2004-05 and 2011-12 have been among the most prosperous phases India has ever seen. What makes this phase unique is that the gains from high growth have been more evenly shared between rural and urban India than before.

Real rural consumption expenditure grew at an average annual pace of 3.3% in the period, compared with an anaemic annual pace of 0.8% 11-year period between 1993-94 and 2004-05, at constant 1987-88 prices, according to the National Sample Survey Office.

Despite the rapid growth in urban areas, the rural-urban gap in consumption has remained nearly unchanged. Average consumer spending in urban areas was 87.6% higher than that in rural areas in 2004-05, and 88.2% higher in 2011-12. Even though this period saw much higher growth in urban incomes and consumption than earlier, rural consumption kept pace.

While the average rural-urban difference has remained the same, there are important variations among states. Typically, less developed states tend to have a higher gap between rural and urban consumption, largely because of the small size of their respective urban sectors. States such as Jharkhand, Odisha, Assam, West Bengal and Madhya Pradesh have above-average gaps between rural and urban areas. Two relatively developed states, Karnataka and Maharashtra, somewhat anachronistically fall within the same group. These two states have a long history of large gaps between rural and urban areas, the survey data suggests.

Chhattisgarh tops the list of states that have bridged the rural urban gap the most in the past seven years. It saw the rural-urban gap decline nearly 50 percentage points to 83% between 2004-05 and 2011-12. Tripura, Punjab, Bihar, Goa, Gujarat and Tamil Nadu follow Chhattisgarh in bridging the rural-urban gap, with each state closing that gap by at least 20 percentage points over seven years. Haryana saw the biggest increase in the gulf between rural and urban consumption; the gap rose 40 percentage points to 73% in 2011-12.

This is the second in a several-part series Mint will run over the next few weeks.

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