Social transfers reduced urban-rural consumption gap despite urban households gaining more: survey

  • The survey showed that rural households’ monthly per capita consumption expenditure improved from 3,773 to 3,860 in 2022-23, when the imputed value of social transfers are taken into account.

Gireesh Chandra Prasad, Rhik Kundu
First Published9 Jun 2024
The impact of social transfers is very visible in the case of cereals and cereal substitutes. The monthly per capita spending in rural households in this case jumped from  <span class='webrupee'>₹</span>185 to  <span class='webrupee'>₹</span>267.
The impact of social transfers is very visible in the case of cereals and cereal substitutes. The monthly per capita spending in rural households in this case jumped from ₹185 to ₹267.

New Delhi: Welfare measures by Central and state governments have helped narrow the urban-rural gap in per capita monthly consumption expenditure of households—a measure of living standard— showed a survey released by the statistics ministry.

Also read |  Why FMCG and consumption sectors should be on your radar as Modi 3.0 takes charge

The household consumption expenditure survey for 2022-23 showed that when the imputed value of welfare schemes are taken into account, per capita household consumption expenditure has shown an improvement, most notably on food. 

This is particularly visible in spending on cereals and cereal substitutes, most notably among rural households, although urban househilds also benefited. Welfare schemes on education and health are not taken into account while imputing the value of social transfers owing to practical difficulties, the survey said.

Rising rural consumption

The survey showed that rural households’ monthly per capita consumption expenditure improved from 3,773 to 3,860 in 2022-23, when the imputed value of social transfers are taken into account.  The same for urban households improved from 6,459 to 6,521. 

Also read | Rural consumption improved 40% over a decade, says government survey

The impact of social transfers is particularly visible in the case of cereals and cereal substitutes. The monthly per capita spending in rural households in this case jumped from 185 to 267. In the case of urban households too, it increased from 235 to 294. 

For overall food, monthly per capita consumption expenditure in rural areas is 1,750, which goes up to 1,832 after the value of benefits are added. The same for urban households goes up from 2,530 to 2,589 after the value of benefits are included.

In the case of non-food items like clothing, bedding, footwear and durable goods, the impact is somewhat less. 

The total food expenditure figure chimes in with another important indicator of poverty – the share of food in total household consumption expenditure. This has come down from 52.9% in 2011-12 to 46.38% in 2022-23. The share of non-food expenditure in the same period has gone up from 47.1% to 53.62%, indicating a diversification in consumption.

Urban consumption higher

At all India level, monthly per capita household expenditure in urban areas is 71% more than that of rural areas, but with benefits, the difference moderates to 69%, data showed. 

Chhattisgarh, Telangana, Karnataka and West Bengal managed to narrow the rural-urban difference in consumption expenditure noticeably due to welfare measures. 

Also read |  For FMCG, rural markets finally deliver some cheer

To be sure, the survey captures the impact of both Central and state schemes. 

“Social transfers are almost all rural which is contributing to the narrowing of the urban-rural difference in per capita household consumption expenditure,” said former Chief Statistician of India Pronab Sen. 

Sen explained that while it is comparatively easier to identify poor rural households for targeting welfare measures due to their locational stability, the same cannot be said about urban areas. To make a big impact on household consumption expenditure, welfare measures have to be targeted, he said, adding, “We cannot afford to go for the relatively easier option of universal transfers.” 

Power shift

The survey results come at a time a new coalition government is taking charge at the Centre, which will be presenting the full-year budget for FY25 next month. Populist measures were conspicuous by their absence in the National Democratic Alliance (NDA) government’s pre-election interim budget for this year. 

“The government will have to balance the priorities of fiscal consolidation and sustaining the capex momentum, which may contain the space available to expand social transfers in a non-inflationary manner,” said Aditi Nayar, Chief Economist and Head of Research and Outreach at rating agency ICRA

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