Another Household Consumption Expenditure Survey (HCES) is under way. After the 2011 edition, the quinquennial survey conducted by the National Statistical Office got delayed. The Centre withheld the results of the 2017-18 survey, citing “data quality” issues. Manish Gupta explains the rationale behind the new survey
Why have a consumption survey?
Consumption in the household sector reflects the levels of living and the demand dynamics in the economy. It is also a proxy for poverty incidence. Studying it throws light on the social/regional disparities and income inequalities.
What is being surveyed is final expenditure on goods and services by households to meet everyday needs —food, clothing, housing, energy, transport, durable goods, health, leisure etc. The HCES generates estimates of household monthly per capita consumer expenditure (MPCE) and the distribution of households and persons over the MPCE classes. Over decades, 50-60% of India’s gross domestic product (GDP) has been private final consumption expenditure.
History of the survey and inadequacies
HCES is traced to the annual National Sample Surveys, where data on household expenditure was collected since 1950-51, from nationwide “probability samples” of households, except for the decade between 1974-75 and 1984-85.
From 1972-73, quinquennial surveys have been conducted on a larger sample of households. Time series data has been generated for rural and urban sectors and for states and UTs. There are, however, concerns about the extent of reliability of the data collected by the interview method from respondents, especially in the urban centres, given the possibility of distortion of data by respondents and recall biases. Another challenge is to determine the appropriate reference periods for collecting data.
HCES ‘23 & digital consumption
The survey period is being divided into 10 panels, each of three months duration. In the first month, HCQ (household characteristics) questionnaire and any one among the set of questions for “food items”, “consumables & services” and “durable items” will be canvassed in the selected households. In the second month, any one of the remaining two questionnaires not canvassed in first month will be canvassed followed by the one that is left in the last month.
Canvassing sequence is being decided randomly. It will be a panel survey for a short duration where each sample FSU and each sample household will be retained for a period of three months. The survey questions are updated to include changing consumption patterns. For instance, e-commerce purchases, OTT subscription spends and other such services increasing in currency are being included.
How HCES will help CPI revision
Knowledge of shifting priorities of consumers are critical inputs for producers/suppliers of goods and providers of services. It also allows the government to formulate policies, and make interventions to address structural issues. Outcomes of these surveys also help revise the base years for the computation of Gross Domestic Product (GDP) and other macro-economic indicators.
The current consumer price index (CPI), which is used by the RBI for its inflation-targetting framework, has been in existence for over a decade now without any revision, though the economy saw significant structural changes in the period. There is an acknowledged need to revise CPI and the wholesale price index (WPI) every five years to capture the structural changes. With the change in income distribution, consumption pattern of a particular class can become more dominant or less. After the pandemic, for instance, the pattern is gravitating towards the high-income groups. Currently, food has a big weight in CPI, but the inflation behaviour in recent years shows it is also driven by non-food items, a more diversified category. In the current CPI, health and education expenditures are captured, but a lot of other services aren’t.