Consumer Spending Sees First Fall in Over 40 Years on Back of Weak Rural Demand: Report

A leaked NSO report says the average amount of money spent by an Indian in a month fell by 3.7% to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12.

New Delhi: A new government survey apparently shows that consumer spending fell for the first time in more than four decades in 2017-18, primarily on the back of falling rural demand, according to a news report published in the Business Standard on Friday morning.

The leaked National Statistical Office (NSO) survey, titled ‘Key Indicators: Household Consumer Expenditure in India’, allegedly shows that the average amount of money spent by an Indian in a month fell by 3.7% to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12.

“The figures for monthly per capita consumption expenditure (MPCE) are in real terms, meaning these have been adjusted for inflation, keeping 2009-10 as the base year. In 2011-12, the real MPCE had risen 13 per cent over a period of two years,” the news report noted.

While consumer spending declined by 8.8% in 2017-18 in India’s villages, in cities it rose by 2% over the same six years.

The report, quoting economists, claims that the last time the NSO showed a fall in consumption in real terms was in 1972-73. The Wire could not immediately verify the authenticity of the leaked NSO survey.

According to the Business Standard report, the most potentially alarming bit of news is that there has been a dip in food consumption for the “first time in decades”. While rural Indians spent on average Rs 580 on a monthly basis on food in 2017-18, they spent Rs 643 in 2011-12 (both in real terms).

Because the new leaked survey comes over a gap of six years – 2011-12 and 2017-18 – it is unclear when this dip in consumer spending happened, implying that it could be a gradual decline or a more recent and sudden drop caused by more recent disruptions to the economy such as demonetisation and the roll-out of the goods and services tax (GST) regime. 

According to the news report, while the NSO consumption survey was conducted between July 2017 and June 2018, it was approved for a release by an official committee in June 2019. Since then, however, it has allegedly been withheld due to its “adverse findings”. 

“The NSO’s consumer expenditure survey was approved by a working group, formed by the NSC, in a meeting five months ago. Concerned by a falling consumer expenditure being shown by the survey report, the government had formed a sub-committee to look into the data. According to sources, the sub-committee told the government in a report last month that the survey had no defect,” the report said.

Other sources

Earlier this year, in August 2019, Jawaharlal Nehru University economist Himanshu attempted to perform a similar analysis on average consumption expenditure based on other socioeconomic surveys put out by the NSO.

This analysis showed that from 2015-16, there had been a decline in both rural and urban areas.

Also Read: Explained: The Slowdown in India’s Consumption Growth Story

“In 2018, prices, average consumption expenditure in rural areas declined from ₹1,587 per person per month (ppm) in 2014 to ₹1,524 ppm in 2017-18. The decline in urban areas was from ₹2,926 ppm in 2014 to ₹2,909 ppm in 2017-18. It did increase marginally in 2014-15, the first year of the Modi government, to ₹1,667 ppm in rural areas and ₹3,212 ppm in urban areas at 2018 prices. But after 2015-16, it has declined at 4.4% per annum in rural areas and 4.8% per annum in urban areas. From the time that NSSO consumption expenditure figures have been available, there has never been such a sharp decline,” Himanshu noted.