Indian households are increasingly prioritizing non-food expenditures such as transport, garments, and entertainment, signaling a notable shift in consumption patterns for 2023/24. Meanwhile, spending on staple foods like wheat and rice has declined, according to the latest government Household Expenditure Survey.
Non-Food Items Dominate Spending in Rural and Urban Areas
The survey, conducted from August 2023 to July 2024, highlights that non-food items now account for 53% of per capita spending in rural areas, a significant rise from 47% in 2011/12. In urban areas, the figure has climbed to 60%, up from 57% during the same period. This change reflects evolving consumer preferences and economic conditions, as people allocate more resources to discretionary spending.
The growing share of non-food expenses could lead to a lower weighting of food items in India’s consumer price index (CPI), a critical tool for the central bank in shaping monetary policy. Ministry of Statistics officials have hinted at revising the base year for retail inflation data to 2024, aligning it with these findings.
One of the report’s key takeaways is the narrowing gap between urban and rural consumer spending. In 2023/24, the urban-rural monthly per capita spending difference reduced to 70%, down from 84% in 2011/12. This trend points to a gradual alignment in lifestyle and consumption habits across India’s diverse regions.
In nominal terms, rural consumer spending rose by 9.55% year-on-year, reaching 4,122 rupees ($48.23) per month in July 2024, compared to 3,773 rupees the previous year. Urban spending, on the other hand, increased by 8.31%, climbing to 6,996 rupees from 6,459 rupees. However, inflation-adjusted figures tell a more restrained story. Rural spending grew by just 3.5%, while urban spending saw little real growth due to a 5.5% retail inflation rate in the fiscal year ending March 2024.
Long-Term Trends and Economic Implications
Compared to 2011/12, rural consumer spending has surged by 45.4%, outpacing the 38.1% increase in urban areas. This shift underlines a slight convergence in consumption habits and a growing emphasis on non-essential spending in rural India.
Consumer spending, which constitutes approximately 58% of India’s GDP, remains a cornerstone of economic growth in Asia’s third-largest economy. Analysts expect that the reduced focus on food in household budgets could reshape future economic policies and consumption trends. With these insights, India’s policymakers and businesses are better positioned to adapt to the changing landscape of consumer behavior, ensuring sustainable growth in an evolving economy.
