India's food consumption expenditure trends reveal a reassuring shift

The HCES data not only points to a secular decline in the share of food items in the spending basket, but also reveals a shift in the composition of food expenditure itself

A new working paper titled “Changes in India’s Food Consumption and Policy Implications: A Comprehensive Analysis of Household Consumption Expenditure Survey 2022-23 and 2011-12”, published by the Economic Advisory Council to the Prime Minister, has highlighted some interesting aspects of the trends in India’s food consumption. A simple comparison of the data from the Household Consumption Expenditure Surveys (HCES) of 2011-12 and 2022-23 reveals that there has been a significant increase in households’ average monthly per capita expenditure (MPCE) in rural and urban areas across all states and Union Territories in the country. In fact, rural households registered a higher growth rate at 164 per cent relative to urban households, whose MPCE rose 146 per cent. Besides, the urban-rural gap in average MPCE has declined by 13 percentage points. In this context, the paper does well to document changes in food-consumption patterns, which constitute a large part of the household expenditure in a developing country like India.

The data further shows the share of household expenditure on food has declined substantially in both rural and urban areas. For the first time, average household spending on food is less than half the overall monthly spending of households, indicating significant welfare improvement across households. This is consistent with the Engel Curve hypothesis, which postulates that as a household’s income increases, the share of income spent on food decreases. The HCES data not only points to a secular decline in the share of food items in the spending basket of Indians, but it also reveals a shift in the composition of food expenditure itself — from cereals to milk and milk products, fresh fruit, eggs, and fish and meat. In other words, the food-consumption basket is transitioning away from items that deliver calories to those rich in proteins and micronutrients. Owing to changes in food-consumption patterns at a broader level, there is a strong case for modifying the weightings of the consumer price index. However, before undertaking this exercise it would be prudent to wait for the HCES 2023-24 results, which are due early next year.

Notably, the decline in the share of expenditure on cereals has been sharp for households in the bottom 20 per cent of income distribution. Similar trends are observed for quantities of various food items at the per capita household level. This not only points towards diet diversification but also highlights the effectiveness of the government’s food-security efforts, which have enabled the poor and vulnerable households to spend what they have “saved” from expenditure on cereals on diverse food items. The bottom 20 per cent clearly seem to be better off than before, as is evident from their increased spending on conveyance, durable goods, and jewellery.

In this regard, to further improve diet diversity, which is necessary to address the problem of malnutrition, the government can extend its price support beyond rice and wheat. This will also help diversify production and make agriculture more sustainable. It is now well established that states such as Punjab and Haryana need to move away from the paddy-wheat cycle. On the negative side, the data shows the share of expenditure on pan, tobacco, and intoxicants has increased from 2.7 per cent to 3.2 per cent, with an average rural household in 2022-23 spending more on these items than fresh fruit. The share of expenditure on packaged and processed food items has also gone up, with adverse consequences for public health. The government would be well advised to spread mass awareness regarding such products to nudge consumption preference in the right direction, particularly in the lower-income groups.