The consumption divide

Approximately every five years, the official National Sample Survey Organisation (NSSO) samples about 140,000 households across the country to find out what they spend their money on.

The results of this survey provide the basis of the official estimates of poverty incidence in the country. The most recent of these 'large sample' surveys was done during 1999-00. In the intervening years, the NSSO does what are called 'thin sample' surveys of around 20,000 households.

The comparability of the two sample surveys has been a source of controversy. Most notably, the thin sample surveys between the large sample years of 1993-94 and 1999-00 generally indicated that poverty incidence was increasing.

However, the large sample suggested that it had dropped by about 7 percentage points across the country. So, inferring trends or major shifts from the thin samples should be done with large doses of caution.

Even with these caveats in mind, the surveys sometimes throw up patterns that ought to provoke some reaction. This is exactly what the latest thin sample results, relating to 2001-02, have done. The main finding, at an all-India level, is that rural-urban disparity has widened over the previous year.

While average monthly per capita expenditure in the urban areas, already almost twice that in the rural economy, grew by about 2 per cent over the previous year, rural spending increased by a tiny 0.7 per cent.

This happened in a year in which the agriculture sector grew by over 5 per cent, while industry grew by less than 3 per cent. Services, of course continued on their merry 7 per cent plus clip. The obvious message is that the fruits of growth are harder to grasp in the rural areas.

The key to this widening disparity lies in the continued growth of the service sector, which clearly has a significant urban bias. To the extent that there has been employment growth in the non-agricultural sectors, it has only been in services; by all accounts employment in industry has been stagnant, if not declining.

The numbers suggest that, despite industrial sluggishness, the service sector provided enough buoyancy in terms of activity and employment to boost average consumption levels.

However, in the rural economy, a combination of stagnating household earnings in agriculture and the very slow, if any, growth in non-agricultural employment, means that consumption levels will not grow.

Both scenarios suggest opportunities. In the urban economy, consumption growth can be boosted by facilitating industrial growth and the willingness of industry to hire more workers.

In the rural economy, investments in infrastructure - power, roads and storage and preservation "" are critical to stimulating agro-based industrial activity and also inducing changes in cropping patterns that may increase overall productivity and, through that, earnings.