The National Sample Survey Office (NSSO) surveys households in rural and urban areas every 5 years, and calculates the household monthly per capita expenditure (MCSE) for rural and urban households.
This gives an indication on where people are spending their money, and is meant to provide inputs in policy formulation for fighting poverty. For example, a relatively poor family will spend more on food as a percentage of their income than a richer one, and these kind of inputs can help in decision making.
There are three categories in the survey:
- Clothing, bedding, footwear, education, medical, durable goods.
- Edible oil, egg, fish and meat, vegetables, fruits, spices, beverages and processed foods; pan, tobacco and intoxicants
- All other food, fuel, and light, miscellaneous goods and services including non – institutional medical; rents and taxes.
When I read these categories I thought that the maximum spend will be on the third category because a lot of people live in rented houses which is a major expense for many people; even fuel, travel etc. will come in that category which again forms a big chunk of most people’s expenses. However, the results didn’t show this.
Let’s look at what the survey showed, which was done for the period of July 2009 – June 2010.
At a national level, both the rural and urban areas showed growth in their monthly per capita expenditure, but the Urban per capita expense is almost twice the rural one. This can be clearly seen in the table below.
This is probably not a surprise to anyone since you have seen several examples of the rural – urban divide, and this only works to reinforce what we already know.
The next thing to look at is how much do people spend on food in rural versus urban areas.
You can see that there is quite a significant difference between how much money people have to spend on food in rural and urban areas.
So, we have a situation where 74% of our population is in the rural areas as we saw in the unemployment numbers post, and that large workforce is mainly employed in agriculture; though the share of agriculture in total economic activity is just 19%, and even while they are primarily engaged in agriculture, they have to spend a proportionately higher sum of their income on food!
I don’t know if anyone has a magic bullet to improve this situation, but I believe that when the government eventually allows FDI in multi brand retail and allows large foreign players to set shop in India – some of this will be corrected. There is a lot of food wastage today, and it’s because of an ineffective Public Distribution System (PDS) as well as insufficient infrastructure, too many middle men, farmers not getting their fair share etc.
A lot of investment in infrastructure can only be done if you allow foreign players to come in, and I think it’s only a matter of time when they are allowed to come in, and the consequent heavy investment will improve this situation.