Household Consumption Expenditure Survey (HCES)

The Household Consumption Expenditure Survey (HCES) in India, conducted by the National Statistical Office (NSO), is a critical source of data that provides insights into the spending patterns of Indian households. Read here to learn more about it.

This survey, also known as the Consumer Expenditure Survey, plays a pivotal role in understanding the socio-economic fabric of the country, guiding policy formulation, and assessing the impact of economic reforms on different segments of the population.

The Household Consumption Expenditure Survey (HCES) is usually conducted by the National Statistical Office (NSO) every five years.

Household Consumption Expenditure Survey (HCES)

The Household Consumption Expenditure Survey (HCES) is a critical statistical tool used by governments, policy analysts, and researchers to collect data on the spending habits of households within a country.

• This survey provides detailed information on how households allocate their financial resources across various categories such as food, housing, education, healthcare, and transportation.
• The insights gained from HCES are invaluable for understanding economic behavior, assessing living standards, and formulating policies aimed at economic development and poverty alleviation.

Objectives of HCES

• Measuring Living Standards: By examining how households spend their income, the survey helps in assessing the living standards and quality of life of the population.
• Policy Development: Data from HCES are crucial for government agencies to design and implement effective social, economic, and fiscal policies, including targeted subsidies, social welfare programs, and tax adjustments.
• Economic Analysis: Economists use HCES data to analyze consumption patterns, which are key indicators of economic stability, growth, and the distribution of wealth within a society.
• Poverty and Inequality Assessment: The survey provides essential data for measuring poverty levels, identifying vulnerable groups, and understanding income inequality, which is vital for social policy.
• Inflation and Cost of Living: HCES data contribute to calculating inflation rates and cost of living indexes, helping central banks and governments in monetary policy formulation.

All India Household Consumption Expenditure Survey

The findings of the last Survey, conducted in 2017-18 soon after the demonetization of high-value currency notes and the implementation of the Goods and Services Tax (GST), were never released after the government cited “data quality” issues.

As per the latest Survey,

• The average monthly per capita consumption expenditure (MPCE) in Indian households rose by 33.5% since 2011-12 in urban households to ₹3,510, with rural India’s MPCE seeing a 40.42% increase over the same period to hit ₹2,008.
• The proportion of spending on food has dropped to 46.4% for rural households from 52.9% in 2011-12, while the urban spent just 39.2% of their overall monthly outgoes on food compared with 42.6% incurred 11 years earlier.
• The reduction could translate into a lower weightage for food prices in the country’s retail inflation calculations.

Among the States, the MPCE is the highest in Sikkim for both rural (₹7,731) and urban areas (₹12,105).

It is the lowest in Chhattisgarh, where it was ₹2,466 for rural households and ₹4,483 for urban household members.

The MPCE numbers cited above do not take into account the imputed values of items received free of cost by individuals through various social welfare programs such as the PM Garib Kalyan Ann Yojana (PMGKAY) or State-run schemes.

• These were calculated separately, while including a few non-food items received through such schemes, including computers, mobile phones, bicycles, and clothing.

Methodology

The HCES in India adopts a stratified multistage sampling design to ensure representativeness across urban and rural areas.

• The survey covers a wide range of expenditure items, from necessities like food, clothing, and housing to discretionary spending on education, healthcare, and entertainment.
• Households are usually selected through a random sampling method, and data are collected through personal interviews and expenditure diaries.

The current estimates of the MPCE are based on data collected from 2,61,746 households, of which 1,55,014 were in rural areas, spread over all States and Union Territories.

Challenges

• Underreporting and Recall Bias: Accurate reporting of consumption expenditure is challenging, often leading to underestimation or recall bias.
• Sample Representativeness: Ensuring that the sample accurately represents India’s diverse population with varied socio-economic and cultural backgrounds is a complex task.
• Temporal and Regional Variability: Capturing the seasonal variations in expenditure and regional disparities poses additional challenges.

Impact of HCES

Despite challenges, the HCES remains a vital tool for economic and social planning in India. Its data are extensively used for:

• Policy Making: Informing decisions on subsidies, social welfare schemes, and taxation policies.
• Academic Research: Serving as a primary source for studies on consumption patterns, poverty, and socio-economic status.
• International Comparisons: Facilitating comparisons with other countries on economic welfare and living standards.

Controversies

The HCES has occasionally been at the center of controversies, particularly regarding the publication of data.

• For instance, the 2017-2018 survey results were withheld by the government citing data quality issues, sparking debates about transparency and poverty in India.
• Critics argued that the non-disclosure of data hampers the ability to assess the effectiveness of government policies and programs.

Why in the news?

For the first time in about 11 years, the government on February 24 released the broad findings of the All-India Household Consumption Expenditure Survey carried out between August 2022 and July 2023.

• The data will play a key role in reviewing critical economic indicators, including the Gross Domestic Product (GDP), poverty levels, and Consumer Price Inflation (CPI).
• The Statistics and Programme Implementation Ministry released a factsheet on the summary of the Survey findings and said a detailed report on the survey will be brought out subsequently.

Conclusion

The Household Consumption Expenditure Survey in India is essential for understanding the dynamics of consumption across the country’s diverse populace.

It provides invaluable data that aid in crafting policies for economic development and social welfare. Despite the challenges associated with data collection and interpretation, the HCES is instrumental in guiding the nation’s socio-economic policies and addressing the needs of its citizens.

As India continues to evolve, the significance of accurate, transparent, and comprehensive consumption data cannot be overstated for shaping a more inclusive and equitable society.

-Article by Swathi Satish