26 November 2019
Consumer Expenditure Survey
Source: By Suresh Seshadri: The Hindu
The story so far: On November 15, the government announced that in view of “data quality issues” the Ministry of Statistics and Programme Implementation had decided not to release the results of the all-India Household Consumer Expenditure Survey conducted by the National Statistical Office (NSO) during 2017-2018. It asserted that any findings from the survey that had been referred to in media reports were essentially “draft in nature”. It also noted that these reports had concluded that the results had been withheld due to the ‘adverse’ findings in the survey which showed consumer spending was falling. The Central government decided to junk the survey findings. It also said it was “separately examining the feasibility of conducting the next Consumer Expenditure Survey (CES) in 2020-2021 and 2021-22 after incorporating all data quality refinements in the survey process”.
What is the CES?
The CES is traditionally a quinquennial (recurring every five years) survey conducted by the government’s National Sample Survey Office (NSSO) that is designed to collect information on the consumption spending patterns of households across the country, both urban and rural. The data gathered in this exercise reveals the average expenditure on goods (food and non-food) and services and helps generate estimates of household Monthly Per Capita Consumer Expenditure (MPCE) as well as the distribution of households and persons over the MPCE classes.
How is it useful?
The estimates of monthly per capita consumption spending are vital in gauging the demand dynamics of the economy as well as for understanding the shifting priorities in terms of baskets of goods and services, and in assessing living standards and growth trends across multiple strata. From helping policymakers spot and address possible structural anomalies that may cause demand to shift in a particular manner in a specific socio-economic or regional cohort of the population, to providing pointers to producers of goods and providers of services, the CES is an invaluable analytical as well as a forecasting tool. It is, in fact, used by the government in rebasing the GDP and other macro-economic indicators.
What exactly do the surveys show?
Since the government has questioned the quality of the data obtained in the latest survey, it would be instructive to look back at the findings from the previous CES (undertaken between July 2011 and June 2012) to obtain an insight into the kind of information the survey produces.
Apart from the omnibus ‘Key Indicators of Household Consumer Expenditure in India, 2011-12’ the Ministry released as many as six detailed reports on varied aspects of household consumer expenditure based on the survey. These included the ‘Level and Pattern of Consumer Expenditure 2011-12’, ‘Household Consumption of Various Goods and Services in India, 2011-12’ and the invaluable ‘Nutritional Intake in India, 2011-12’. There were also detailed findings on the energy sources used by households for cooking and lighting and another report on the Public Distribution System and other sources of household consumption.
At a broad level for instance, the survey showed that average urban MPCE (at ₹2,630) was about 84% higher than average rural MPCE (₹1,430) for the country as a whole. Similarly, while food accounted for about 53% of the value of the average rural Indian household’s consumption during 2011-12, in the case of urban households it accounted for only 42.6% of the average consumption budget. And while education accounted for 3.5% of the rural household’s average spending, an urban household spent almost 7% of its monthly consumption budget on it.
What is Consumer Expenditure Survey, and why was its 2017-2018 data withheld?
The most noticeable rural-urban differences in the 2011-12 survey related to spending on cereals (urban share: 6.7%, rural share: 10.8%), rent (urban: 6.2%, rural: 0.5%) and education.
Several researchers had also pointed to the widening inequality revealed by the 2011-12 survey: in terms of sharp variations between States with better socio-economic indices and those still aiming to improve, the urban-rural divide and the gap between the highest spending and the lowest spending fractiles.
For instance in the case of rural households, the 5th percentile (the bottom 5%) of the MPCE distribution was estimated at ₹616, while the top 5% reported MPCE above ₹2,886. Similarly, in urban India, the 5th percentile of the MPCE distribution was at ₹827, the median was ₹2,019 and only the 95th percentile reported MPCE above ₹6,383.
The report on nutritional intake also showed a big gulf in the consumption patterns of urban and rural households and a similar chasm between the top 5% and the bottom 5% on food products contributing to nutrition. On an average, the top 5% population in rural India spent ₹7.09 a day on cereals and ₹2.39 a day on pulses and pulse products. The bottom 5% on the other hand spent ₹3.43 per day on cereals and ₹0.72 on pulses and pulse products. In urban areas, the poorest 5% spent ₹118.42 per month on cereals while the top 5% spent ₹224.51 on that food type. Average protein intake per capita per day was seen to rise steadily with MPCE levels in rural India from 43 g for the bottom 5% of population ranked by MPCE to 91 g for the top 5%, and in urban India from 44 g for the bottom 5% to about 87 g for the top 5%.
Why has the latest survey become controversial?
Media reports citing a leaked version of the 2017-18 survey have posited that the data revealed a decline in the MPCE, making it the first such drop since 1972-73. In real terms (adjusted for inflation) the MPCE slid by 3.7% from ₹1,501 in 2011-2012 to ₹1,446 in 2017-2018. While the inflation-adjusted consumption expenditure in rural areas declined by 8.8% over the six-year period, urban households reported a marginal 2% increase, the media reports showed. The government, in its November 15 statement clarifying the official position, said the survey results had been reviewed.
The Ministry said, “It was noted that there was a significant increase in the divergence in not only the levels in the consumption pattern but also the direction of the change when compared to the other administrative data sources like the actual production of goods and services.” The government added, “Concerns were also raised about the ability/sensitivity of the survey instrument to capture consumption of social services by households especially on health and education. The matter was thus referred to a committee of experts which noted the discrepancies and came out with several recommendations including a refinement in the survey methodology.”
Economists have questioned the government’s contention on ‘data quality’ and pointed to other macro-economic indicators including data from the NSSO’s Periodic Labour Force Survey (PLFS), released in May, that clearly revealed a decline in employment and stagnation in wage levels. And the Centre’s own GDP estimates from the April-June quarter of the current fiscal year had shown that private final consumption expenditure, the mainstay of demand in the economy, had slumped to an 18-quarter low.
What happens next?
The government’s decision to withhold the survey’s findings deprives policymakers of invaluable contemporary consumption data that would have helped drive their intervention strategies. Instead of a six-year gap, the next survey’s findings — depending on when the Ministry decides to actually undertake it, 2020-21 or 2021-22 — would end up coming after 9 or 10 years after the 2011-12 round.
Also, as a subscriber to the International Monetary Fund’s Special Data Dissemination Standard (SDDS), India is obliged to follow good practices in four areas in disseminating macroeconomic statistics to the public. These comprise the coverage, periodicity, and timeliness of data; public access to those data; data integrity; and data quality. With the IMF’s ‘Annual Observance Report’ for 2018 already having flagged concerns about India’s delays in releasing economic data, the country risks falling afoul of its SDDS obligations.
With the Advisory Committee on National Accounts Statistics also having separately recommended that 2017-18 would not be used as an appropriate year for rebasing of the GDP series, the very credibility of GDP data going forward could come under greater scrutiny.