India’s Exclusionary Road to Inclusive Development

A historical look at India’s consumer expenditure survey reveals a rather sombre picture of development.

On November 15, the Ministry of Statistics and Programme Implementation (MSPI) withheld the results of the All-India Household Consumer Expenditure Survey conducted by the National Statistical Office (NSO) during 2017–2018 on account of “data-quality issues.”

The leaked version of the 2017–18 survey revealed that there has been an overall decline in the monthly per capita consumer expenditure (MPCE). That is, the MPCE decreased by 3.7% from ₹1,501 in 2011–2012 to ₹1,446 in 2017–2018. Preliminary-level examination of the leaked report showed that national-level poverty has risen, with approximately 30 million people falling below India’s official poverty line over the past six years. Additionally, this burden has been exclusively borne by rural India. That is, rural poverty levels have shot up, whilst the urban level has seen a decline. 

We take a look through EPW archives to understand the history of the consumer expenditure survey and collate data on India’s path to inclusive development. 

Historical Context

Providing a brief history of the consumer expenditure survey, B S Minhas notes that up till the 25th round (1970–71), data on household consumer expenditure was collected annually. However, the early 1970s saw the restructuring of the National Sample Survey and the placing of the NSSO under the direction of an independent governing council. Early into its role, the council decided that consumer expenditure data for the population as well as that of employment and unemployment data would be collected quinquennially instead. In 1985, given the need for a yearly series on consumer expenditure, the council decided an annual survey would be undertaken on a thin sample basis between the intervening rounds of the quinquennial rounds. 

In other words, those who wish to draw pictures of the stark reality of impoverishment and plenty now have not only the massive data set of the quinquennial inquiry of 1987-88 but also the consumer expenditure data of the smaller surveys carried out in 1986-87 and 1988-89. There is indeed a wide choice in the menu on offer by the NSS today …

How Inclusive Has India’s Consumption Expenditure Been?

R Krishnaswamy analyses the 2011–12 Consumer Expenditure Survey from the 68th NSSO round. Estimating the total monthly per capita expenditure and its distribution across decile classes in both rural and urban areas, Krishnaswamy observes that over the years, there seems to be an increase in the ability of rural areas to spend. For instance, annual growth in the consumer expenditure in rural areas between 2004–05 and 2009–10 was 1.90%, which saw a substantial jump to 7.73% between 2009–10 and 2011–12 signifying an annual growth of 3.53% between 2004–05 and 2011–12. Similarly, an upward trend was observed in urban areas. However, rural households continue to be worse off than their urban counterparts in terms of MPCE with the rural–urban divergence in expenditure widening over the period. Overall, rural expenditure has decreased from 61.4% of urban expenditure in 1993–4 to 57.5% of urban expenditure in 2011–12. 

The widening inequality over the years is also reflected in the ratio of spending by the top 10% decile class to that of the bottom 10% rising significantly, particularly in urban areas. While inequality has widened in rural areas even on the basis of a broader measure of top 30% to bottom 30%, in urban areas the inequality on the same basis has marginally narrowed in 2011-12 compared with 2009-10. Overall, while the poverty level might have declined due to faster growth in consumer spending, inequality at the same time has been widening.

D Jayaraj and S Subramanian use the quinquennial consumer expenditure to assess “vertical” or “interpersonal” aspects of equity in the distribution of growth in per capita mean consumption over a 40-year period between 1970–71 and 2009–10. Resonating the findings of Krishnaswamy, they add that urban India has seen the share in mean consumption expenditure decline for all deciles, but the richest two. Moreover, rural India also has seen its growth rate decline for all deciles, except the richest. Overtime, disparity has become more pronounced in urban India. Overall, the data presents a poor image of the inclusivity of growth in India. 

It is hard to desist from observing that there is something seriously crass about the continued divergence between promises of inclusiveness in growth, on the one hand, and, on the other hand, both the actual record in this regard and those aspects of policy that are either neglected or embraced in the pursuit of the country’s 'development.' The intention is neither to present a caricature nor to indulge in minatory finger-wagging. It is simply to underline the sentiment– however tiresomely old-fashioned it might be to assert this– that the facts and values that seem to inform the state’s policy imperatives (as distinct from its rhetoric) in the matter of “inclusive growth” constitute a serious affront to both political morality and enlightened self-interest.

In another article, the authors study consumption growth and horizontal inclusiveness among well-specified socio-economic groups. Here, they note that contemporary policies of inclusivity have shown poor results, especially in the context of caste. That is, caste differences are exacerbated by the rural–urban divide. For instance, while the mean consumption expenditure (in INR) for Scheduled Sastes and Scheduled Tribes in urban India increased from 23.51 in 1983 to 40.99 in 2009–10, the same groups in rural India saw an increase of just 17.37 to 26.36 in the same period. In contrast, the average figures for all castes were 54.71 (2009–10) in urban India and 31.29 in rural. Thus, the policies of inclusivity have, in fact, been quite exclusive. 

Our own method has been to judge inclusiveness by comparing the actual group-specific levels and rates of growth of mean consumption with corresponding ‘warranted’ targets, which are dictated by minimally egalitarian distributions of the product of growth. Judged by these standards, it is impossible to escape the conclusion that the interests of both vertical (or interpersonal) and horizontal (or inter-group) equality have been poorly served by the patterns of growth that have obtained in the country. From both intrinsic and instrumental perspectives, such a dynamically growing want of fairness in the distribution of increments to the national dividend must be viewed with the gravest concern for the social and political implications the phenomenon has for human well-being.

Read More: 

Poverty in India in the 1990s: An Analysis of Changes in 15 Major States | K Sundaram, Suresh D Tendulkar 2003

Explaining Cross-Country Variation in Income Inequality | Bhanoji Rao, 2003

India's 'Poverty of Numbers': Revisiting Measurement Issues | Gaurav Nayyar, Rohini Nayyar 2016


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