In my discussion on household economics in past two days, I have
discussed the changes in the composition of household savings, debt and avenues
for deployments of savings. (See here
and here)
over past few years. In the concluding part, I would like to highlight some
interesting trends in the household consumption in past 5-6years.
Household expenditure in India has grown at a rate of ~13% CAGR
over 6years during FY12-FY18.
(i) The expenditure on
health has recorded the highest growth of 17.5% during this period. The
available data does not clarify if the rise is due to rise in affordability or
rise in incidence of disease. However, the anecdotal evidence suggests that it
is a mix of both; though the rise in incidence of disease may account for
almost three fourth of the incremental expenditure on health.
(ii) Miscellaneous goods
and services now account for one sixth of the total household expenditure, and
have the highest share in consumption basket after food. Personal care
expenditure accounts for almost 8% of this category.
(iii) Clothing and footwear
account have the same share as education. Footwear is growing at the rate of
16% CAGR. Affordability is one major factor in this. But a more significant
factor is the social reform. A lot of people from socially backward communities
who were traditionally not allowed to use footwear are now using it.
(iv) Household are spending
almost double the sum on communication as compared to recreation and culture.
Spending on festivals etc seems to growing at much slower pace.
(v) Food and non-alcoholic
beverages account for just one fourth of the total household expenditure. The
inflation basket needs to take cognizance of this fact. In this category Meat
is the fastest growing item, growing @16% CAGR. Seafood and Eggs are also
growing over 13%. Milk, edible oils, Sugar are the slowest growing categories.
Non Specified food items (Junk Food) is growing at 20% CAGR.
(vi) Alcohol, tobacco and
narcotics account for 2% of the consumption basket. But the fastest growing
element in this is narcotic which is growing @14% CAGR.
(vii) Expenditure on
transport accounts (15%) for more than health, education and communication
taken together. It is growing at a faster rate of ~14% CAGR vs overall
expenditure growth of ~13%CAGR. The fastest growing element in this category is
"cost of operation of personal vehicles", which is growing over 16%
CAGR. Poor public transport and misplaced priorities of household could be
responsible for this trend.
(viii) Housing (rent, water,
electricity) and house maintenance (furnishing, appliances etc) account for one
sixth of the household expenditure and growing in proportion to the overall
expenditure. In this category, Furniture, carpets and home textile is the
fastest growing segment. Electricity and Water expenses are growing 13-15%
CAGR.
(ix) Education now accounts
for ~7% of total household expenditure and this expense is growing ~15% CAGR.
The consumer inflation basket may not be accounting for this category
appropriately.
A deeper study is needed for this category. The high growth rate
in this category may not necessarily mean higher affordability or improving
skill conditions. The anecdotal evidence suggests that "private education
& coaching", which essentially indicates to abject failure of public
education system, may be a significant part of the expenditure on this item.
(x) The slowest growing
consumption category for households is mineral water, soft drinks & juices.
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