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Changing Contours of Rural India

Omkar Goswami



Rural India is a huge, heterogeneous entity that many of us know little of. Consequently, we often think it as a vast tract of woefully poor people, who labour under the scorching sun with rude ploughs and emaciated bullocks to earn meagre incomes that barely make ends meet. Of course, we are aware of the wealthy farmers of Punjab, Haryana and the western tracts of Uttar Pradesh, and the  apocryphal tales of how many of them bought centrifugal washing machines, only for them to end up churning milk to butter and ghee! In general, however, we know woefully little of our rural heartland, and have hardly any idea of how it has been changing over the last decade.


I’m no expert on the subject. However, thanks to a project financed by the ICICI Bank, we at CERG Advisory have begun to look at a vast amount of data on rural India. In today’s column, I’d like to share with you some evidence on rural consumption expenditure based on household-level data from three rounds of National Sample Survey (NSS), and some evidence from the Census of India, 2001. The findings are the result of joint work of two colleagues, Vishal More and Sameer Narang, and myself.


The three NSS rounds on consumer expenditure are the 50th round (for 1993-94), 55th round (for 1999-2000), and the 57th round (2001-02). The 50th round consists of a sample of 69,206 rural households; the 55th has 71,385; and the 57th — which is considered a ‘thin’ sample — takes into account 25,505 households. The Census data are for the entire rural population.


The first thing worth noting is that rural is not necessarily agricultural. According to the 50th round, the main source of livelihood of over 33 per cent of rural households in India was not from agriculture. Although the classification in Census 2001 is somewhat different, the ratio is quite the same: a bit over a third of rural households have non-agricultural occupations. This is not an arcane bit of statistics. Instead, it hints at something quite important for the future — namely, as this ratio increases, the cyclical nature of Indian agriculture may have lesser impact on rural incomes and consumption than before.


Second, the share of expenditure on food items is going down over time, while that on non-food is rising. In 1993-94, food accounted for 65 per cent of average rural per capita annual expenditure. By 1999-2000, it had reduced to 62 per cent. A drop of 3 percentage points in six years is quite substantive — and it is not because of any fall in the real expenditure on food. Indeed, real outlay on food items increased by over 3 per cent, from Rs.5,663 per capita per year in 1993-94 to Rs.5,861 in 1999-00. Instead, there has been a sharp rise in the per capita real spending on non-food items, which increased by 17 per cent, from Rs.3,029 in 1993-94 to Rs.3,549 in 1999-00.


Third, even within food, there seems to be a significant shift away from ‘necessary foods’ like cereals, cereal substitutes and pulses, in favour of ‘luxury foods’ such as milk, vegetables, fruits, eggs, meat and fish. In 1993-94, only the top 10 per cent of rural India spent more on the latter than the former; by 2001-02, this was so for the top 25 per cent. Of course, the cross-over points vary hugely across states. In Haryana, Punjab and Kerala, 85 per cent of the rural population spend more on milk, vegetables and the like than on cereals. The really interesting states in this category are Rajasthan and Himachal Pradesh, where 75 per cent of the rural populace are spending more on ‘luxury foods’ than on cereal-based necessities.


There is also a depressing aspect to this food story — and it has to do with wealthy states such as Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu. Only the top 20 per cent of the rural population of Maharshtra spends more on luxury foods than on necessities; in rural Karnataka, Tamil Nadu and Andhra Pradesh it is just the top 5 per cent. What it indicates is that the rural heartland of Karnataka, Andhra and Tamil Nadu is still very poor; and it is not for nothing that Chandrababu Naidu and Jayalalithaa were unceremoniously dumped in the last election.


Fourth, as far as non-food consumption goes, there has been a significant increase in the real per capita expenditure on education. In 1993-94, the average per capita spend on education in rural India was Rs.128, or 1.5 per cent of total expenditure. By 2001-02, it had increased to Rs.245 or 2.5 per cent of total spending, measured in constant prices. For the top 5 per cent of rural households, the increase in real expenditure of education has been quite spectacular — from Rs.575 in 1993-94 to Rs.1,158 per person per year.


Fifth, there has been a growth in both the number and percentage of permanent or pucca houses. In 2001, almost 42 per cent of rural households in India lived in pucca abodes. There has also been a growing trend in the use of certain household amenities. In 1993-94, less than 2 per cent of the rural populace used LPG for cooking; this rose to 5.4 per cent in 1999-00; and then to 7.9 per cent in 2001-02. A fascinating fact is that in 2001, 22 per cent of rural households in Himachal used LPG — something that was unearthed by the Census, and not noticed. TV penetration, too, has been quite substantial. According to the 2001 Census, almost 19 per cent of rural households in India owned TVs, with Punjab leading the pack at above 60 per cent, followed by Himachal at over 50 per cent.


Sixth — and this is truly interesting — in 2001, over 30 per cent of rural households in India had at least one bank account, and used banking services. The state that led the pack was Himachal, with a ratio as high as 57 per cent.


I could go on, and on. The point I am trying to make is that there have been phenomenal changes in consumption and savings behaviour in rural India over the last decade. Not all of these are for the better. For instance, only 31 per cent of rural households can claim to have drinking water facilities within their homesteads; and less than 44 per cent have an electricity connection. We clearly have a long way to go. Yet, there is no denying the changes — and understanding these holds the key to making meaningful inroads into rural markets.   


Published: Financial Express, September 2004


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