Health And Travel Over Food And Housing, India Is Spending Differently
Indians are spending more on health, transport and education while the share of food, beverages, clothing and housing in their budgets is reducing, according to the National Accounts Statistics up to 2019-20 for the current GDP series.
Consumption trends for food, housing and transport showed the largest change, according to a break-up of the national accounts released by the Ministry of Statistics and Programme Implementation last week. The data is presented in constant price terms on a base of 2011-12.
- Food and non-alcoholic beverages remained the largest component of private consumption expenditure but continued to see a gradual drop in share from 30.5% as a percentage of private consumption expenditure in 2011-12 to 27.4% in 2019-20.
- Housing and utilities no longer remain the second-largest avenue for spending, with its share dropping from 16.4% in 2011-12 to 13.3% in 2019-20, led by a fall in spending on gross rentals.
- Spending on transport saw a pick-up from 15.2% in 2011-12 to 18.3% in 2019-20, led by a rise in spending on transport services. Share spent on the purchase of vehicles also saw an uptick albeit a moderate one, while the operation of personal transport equipment cost more.
- Among other miscellaneous goods and services, financial services, including insurance, continued to gain share, even as spending on personal care remained static.
Change in spending patterns of key items is along expected lines, said Vivek Kumar, an economist at QuantEco Research. As per capita incomes rose, consumption trends shifted from discretionary to non-discretionary spending, driving the shift from spending on goods to services, he explained. For items such as health, consumption can be both discretionary as well as non-discretionary, depending on whether the consumer spends on primary, secondary or tertiary healthcare, Kumar explained.
Change in consumption expenditure is a manifestation of a consumer’s personal disposable income. As that has shown a slow and steady rise, there has been an increase in share of discretionary spending.Vivek Kumar, Economist, QuantEco Research
Arun Kumar, global chief economist at Dun & Bradstreet, said some items such as food tend to be inelastic with stable quantities consumed, even when accompanied with a change in quality of consumption. However, other items such as clothing and footwear tend to exhibit greater elasticity, he explained. The gradual shift in private consumption trends is also in line with global trends where more incremental personal income is being spent on betterment and well being by individuals.
Items such as recreation and culture, restaurants and hotels have seen a stagnant share in personal consumption expenditure. In case of some items it is also because of the digital transformation in the segment that the statistics may not fully represent, he said.
Covid-19 & Consumption
National accounts statistics published by the MOSPI is available up to 2019-20. However, the following year saw private consumption fall sharply as the Covid-19 pandemic hit and pushed the Indian economy into two-quarters of recession.
In the third quarter, private consumption, reflected in private final consumption expenditure, contracted 2.3% in Q3 compared to a growth of 0.4% in India’s GDP.
Consumption patterns in 2020-21 will be influenced by the lockdowns and work-from-home, said Singh. However, incoming quarterly data is reassuring and belies concerns of any permanent shifts in consumption patterns over the medium term, said Singh.