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The Two Faces of Rural India

Omkar Goswami


In 2004-05, the National Sample Survey Organisation (the NSS) carried out its quinquennial  survey of consumer expenditure in India, covering  79,298 rural and 45,346 urban households across the country. Here are some key findings of this 61st round of the NSS.


Among rural households, the average monthly per capita expenditure (MPCE) for India as a whole was Rs.559, or Rs.2,730 per family of 4.88 people. There were, however, considerable differences between the states. The average rural MPCE for Kerala was 81 per cent higher than the all-India figure; Goa, 76 per cent higher; Haryana, 54 per cent greater; Punjab, 52 per cent higher; Himachal, 43 per cent more; and Jammu & Kashmir, 42 per cent greater. These were the better off regions of rural India.


Sadly, many of the eastern states were much worse off. With an average MPCE of Rs.399, people living in the villages of Orissa were 29 per cent worse than the all-India rural average; Bihar, 25 per cent poorer; and Jharkhand and Chhattisgarh, 24 per cent worse off. This theme — of a buoyant north, west and south of India, versus an increasingly marginalised east India — runs through the NSS survey.


The top 10 per cent of the rural population was significantly well off. Their average MPCE in 2004-05 was Rs.1,957 — or an annual expenditure of Rs.85,500 per household of 3.64 people. With there being some 25.7 million such households in rural India, the consumer market for the top 10 per cent alone in 2004-05 was around Rs.220,000 crore. Clearly, there is enormous scope for the major players in rural retail.


There have been significant shifts in consumption patterns. In 1972-73, almost 73 per cent of the rural consumption budget was spent on food items. That dropped to 63 per cent in 1993-94. Eleven years later, in 2004-05, it was down to 55 per cent.


Even within food, there have been major changes. In 1972-73, the share of cereals, cereal substitutes and pulses accounted for 46 per cent of total rural MPCE. This has steadily fallen over time — to just a bit over 21 per cent of rural MPCE in 2004-05. Thus, as rural household incomes have risen, the share of ‘food necessities’ has come down. Analogously, the share of ‘better-off food’ has increased. Rural spend on milk and milk products, egg, fish, meat, vegetables, fruit and beverages has progressively increased  from 17 per cent of total expenditure in 1972-73 to almost 25 per cent of total spend — over a rising base. In the prosperous states, over four-fifths of rural households have been spending much more on better-off food than cereals and pulses.


The other change has been the increasing share of non-food consumption, which has risen from 27 per cent of rural spend in 1973-74 to 45 per cent in 2004-05. More than half of the expenditure on non-food items was on education, medical care, travel and transport, and the like — which are now some of the fastest growing elements of rural household consumption.


Rural India, therefore, is rapidly changing. Significant tracts in the north, west and south of India are not only far better off than before, but also are spending a great deal more on non-food items and better quality of food. This is the growing rural market that companies will be trying to tap.


Yet, vast tracts remain abysmally poor. Only 4 per cent of the rural population of Punjab lived below the poverty line (an MPCE of Rs.365), and 7 per cent in Haryana and Kerala. Turn eastward, and you see 57 per cent of those in rural Orissa lived in abject poverty; 55 per cent in Chhattisgarh; 47 per cent in Madhya Pradesh; 46 per cent in both Bihar and Jharkhand; and a third of the rural population of Uttar Pradesh.  


So, there are two rural Indias. One that is growing in income and consumption, and getting more urban-like in its tastes and needs. And other which remains mired in abject poverty. The former lures businesses. Can the latter shame governments to action?   



Published: Business World, May 2007


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