Chhattisgarh and Gujarat have consumption and wage growth higher than the all-India level in 2023-24, an analysis by India Ratings & Research (Ind-Ra) showed.

According to Paras Jasrai, Senior Analyst & Economist with Ind-Ra, majority of the States (12) were present in the category of ‘high consumption & low-wage growth’ compared to the national level in 2023-24. The States in this category are majorly the ones having relatively low employment opportunities. The consumption growth in these States has been in the range of 10.5 per cent to 17.7 per cent; however, the range of wage growth has been lower at negative 6.5 per cent to 3.7 per cent.

“Higher transfers received by these States (labour migration) and leveraged consumption could be the reasons for fuelling the high consumption in these states at a time of weak wage growth,” Jasrai said.

This analysis has been made public at a time, when the latest edition of the Household Consumption Expenditure Survey (HCES) revealed that in 2023-24, Monthly Per Capita Expenditure (MPCE) grew by 9 per cent in rural areas, it was 8 per cent in urban areas. The average MPCE in rural and urban India in 2023-24 has been estimated to be ₹4,122 and ₹6,996, respectively excluding the values of items received free of cost by households through various social welfare programmes.

Urban-rural gap

Also, the urban-rural gap in MPCE has narrowed to 71 per cent in 2022-23 from 84 per cent in 2011-12. It has further reduced to 70 per cent in 2023-24, confirming sustained momentum of consumption growth in rural areas, This is excluding the values of items received free of cost through various social welfare programmes.

Meanwhile, Ind-Ra’s analysis highlighted that the rural-urban divide in the consumption data has been reducing with steady growth in rural consumption. Rural MPCE growth outpaced urban MPCE growth in 2009-10. This trend continued in HCES 2011-12 and 2022-23. Notably, this has been the case even in 2023-24. While the growth in the former has been steady at 9.2 per cent, the growth has moderated in the later to 8.3 per cent. “This corroborates the slowdown in urban consumption that has been evident from some high frequency data. As a result, rural MPCE in 2023-24 was 59 per cent of urban MPCE, highest since 1993-94 (61 per cent),” the analysis showed,

Further, a closer look at the data indicates that discretionary spending has slowed down. Food consumption grew 11.3 per cent during 2022-2023 and 2023-2024 compared to 7.8 per cent during 2011-2012 and 2022-2023 owing to high food inflation. On the other hand, spending on consumer durables has slowed down and for others has been stagnant.

Interestingly, at a time when the income growth of households came under scanner, their consumption growth on clothing & footwear shot up to 17.5 per cent during 2022-2023 and 2023-2024 from 7.5 per cent during 2011-2012-2022 2023, respectively, for rural and urban areas. “One of the plausible reasons for this could be the low (below 4 per cent) inflation in clothing & footwear in this period and a pickup in rural wage growth owing to better rabi crop production which grew at a three-year high of 1.4 per cent in 2023-2024,” the analysis said.