Food makes up less than half of an Indian household’s monthly bill, a first since Independence

A working paper by the EAC-PM has found that monthly per capita expenditure is up across rural and urban India. But food is occupying a smaller share of this spending than before.

Customers in a departmental store in Mumbai | Photo: Dhiraj Singh

New Delhi: For the first time in independent India’s history, households are now allocating less than half of their monthly consumption expenditure on food—across both rural and urban India.

These findings are part of a detailed analysis published by the Economic Advisory Council to the Prime Minister (EAC-PM).

The working paper, which analysed the data in the household consumption expenditure surveys of 2011-12 and 2022-23, found that overall monthly per capita expenditure in urban and rural India has grown by more than 150 percent over this period.

Five researchers—Mudit Kapoor, a member of the Economics and Planning Unit, Indian Statistical Institute (ISI); Shamika Ravi, a member of the  EAC-PM; Sankar Rajan, an independent consultant with the Center for Research on the Economics of Climate, Food, Energy and Environment (CECFEE) at ISI; Gaurav Dhamija with the Indian Institute of Technology, Hyderabad; and Neha Sareen with the CECFEE—authored the paper.

“Our analysis reveals that food as a share of the monthly consumption expenditure has fallen below 50 percent, which has happened for the first time in modern India,” the paper said. “It is a noteworthy development and a marker of progress for India.”

For households in rural India, the study found that the monthly consumption expenditure on food items fell from 53 percent in 2011–12 to 46.5 percent in 2022–23. This trend, it said, was primarily due to the decline in the share of expenditure on cereals from 10.7 percent in 2011–12 to 4.9 percent in 2022–23.

“This decline in expenditure share is driven mainly by the free provision of wheat and rice under different schemes by the central and state governments,” the paper noted.

How households are spending their money

Apart from the fall in the share of expenditure on cereals, the study also noted a decrease in the share of spending on vegetables during the same period.

On the other hand, among food items, there was a marginal increase in household expenditure on milk and milk products, fresh fruits, eggs, fish and meat.

While expenditure on food fell as a share of overall spending, the analysis found that an increase in the share of the spending on consumables and services compensated for that.

“Within this category, the most significant increase has been the increase in the share of expenditure on conveyance (which includes spending on diesel and petrol) from 4.2 percent in 2011-12 to 7.5 percent in 2022-23,” the paper said.

Notably, the spending on pan, tobacco, and intoxicants—collectively—increased from 2.7 percent of monthly expenditure to 3.2 percent.

“A rural household in 2022-23 typically spent more on these items than fresh fruits,” the paper pointed out. “Another notable change is the increase in the share of expenditure of rural households on beverages, served and packaged processed food from 2011-12 to 2022-23.”

This trend was also largely followed in urban India, where, the paper said, the consumption share of cereals saw the most significant decline, from 42.7 percent in 2011-12 to 39.2 percent in 2022-23.

Also, similar to the trend in rural India was the decrease in the share of expenditure on vegetables and the increase in the share of spending on milk & milk products. The expenditure share of fresh fruits, eggs, fish & meat remained about the same across the period, the paper said.

“However, it is essential to note that the share of (spending on) packaged processed food has increased from 2.3 percent in 2011-12 to 3.2 percent in 2022-23,” it added. “We also witnessed an increase in the share of expenditure on consumables and services from 45.4 percent to 48.2 percent from 2011-12 to 2022-23, and this was primarily driven by an increase in the share of expenditure on conveyance.”

Households across India are spending more

The analysis found that overall, monthly per capita consumption expenditure (MPCE) growth was higher for rural households than urban households.

Rural monthly consumption expenditure increased from Rs 1,430 in 2011-12 to 3,773 in 2022–23—a growth of approximately 164 percent. In urban areas, the average MPCE grew from Rs 2,630 in 2011-12 to Rs 6,459 in 2022-23—nearly a 146 percent increase.

However, there were significant variations across states, both in terms of rural and urban households.

For example, rural households in West Bengal saw their MPCE grow about 151 percent, while this was approximately 214 percent for Tamil Nadu’s rural households. The analysis also found that Sikkim has grown by 394 percent—in terms of its rural MPCE.

“Similar to rural areas, the analysis for urban households suggests that the smaller northeastern state Sikkim has grown by 364 percent in terms of MPCE, which increased from Rs 2,608 in 2011-12 to Rs 12,106 in 2022-23,” the paper said.

Policy implications for the government

The paper noted that its findings, especially on the spending patterns of the bottom 20 percent of households, had several implications for policy and public health.

“Increased consumption of perishable items such as fresh fruits, milk & milk products, eggs, fish & meat also reflects significant improvements in infrastructure related to transport, storage and overall advancement of the supply chain and logistics factors, which have made these products accessible and affordable to the bottom 20 percent of households both in rural and urban areas across the country,” the paper said.

It added that “perhaps reduced consumption of cereals and the government food security policy of providing free foodgrains to poor households” had positively impacted the ability of the bottom 20 percent of the households to diversify their diets.

“The significant growth in consumption of fresh fruits, milk and milk products, fish, eggs, meat, etc., indicates shifting demand patterns of Indian households,” the paper said. “These shifting demands will have far-reaching implications for the agricultural sector across the country, particularly regarding farmers’ cropping decisions and the future support policies of the government.”

(Edited by Madhurita Goswami)