Consumption Inequality And India’s Growth Pattern

Context

The article analyses inequality in India’s growth story and argues that recent policy shifts affecting rural and informal workers must be assessed against persistent urban-rural and consumption-based disparities.
Source: Understanding inequality in India’s growth story, The Hindu, May 7, 2026.

Recent policy shifts: The implementation of new Labour Codes and the proposed replacement of MGNREGA by the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) Bill, 2025 have raised concerns for informal and rural workers.
Official position: These changes coincide with the view that inequality is now less serious than in the early 2010s.
Data concern: Inequality claims require caution because estimates depend on survey design, methodology and comparability across time.

Object of inequality: Inequality may refer to income, wealth or consumption expenditure, and each gives a different picture.
Measurement issue: The Gini index is one way to measure inequality, but estimates vary across sources and methods.
Axis of inequality: Inequality can be assessed across caste, class, gender, religion, rural-urban location and expenditure groups.
Survey comparability: Methodological changes across surveys can limit direct comparison of inequality estimates.

Higher estimate: Analysis based on HCES 2023-24 places consumption expenditure inequality at a Gini index of 0.29, higher than the World Bank estimate of 0.25.
Urban inequality: Urban India is more unequal than rural India in consumption expenditure.
Non-food inequality: Inequality is sharper in non-food expenditure than in food expenditure.
Consumption boom: India’s consumption growth over recent decades has been mainly driven by non-food expenditure.

Urban-centric growth: Growth-inducing activities remain largely urban-centric while agricultural distress continues.
Mean ratio gap: Urban monthly per capita expenditure is above the all-India average, while rural expenditure remains below it.
Non-food disparity: The urban-rural gap is especially visible in non-food expenditure.
Affluence and inequality: The urban sector is both more affluent and more unequal than the rural sector.

Top decile concentration: In urban India, the top 10% contributes 27% of total non-food expenditure.
Spending gap: The mean MPCE of the top decile is six times that of the bottom decile in urban areas and 4.5 times in rural areas.
Urban-rural extreme gap: The top urban decile’s mean MPCE is nine times that of the bottom rural decile.
Richest-poorest gap: The richest 5% consume six times more than the poorest 5% in rural areas and nine times more in urban areas.

Urban food expenditure: In urban India, between-decile inequality accounts for a larger share of food expenditure inequality than within-decile inequality.
Urban non-food expenditure: Between-decile inequality dominates non-food expenditure inequality more sharply.
Rural pattern: The importance of between-decile inequality in non-food consumption is also visible in rural India.
Structural implication: Inequality is not only about individual variation within groups but also about clear expenditure-group divides.

Quick Fact Box: Consumption Inequality, HCES And MPCE

Consumption Inequality:

Meaning: Consumption inequality refers to the unequal distribution of household consumption expenditure across a population.
Core Idea: It measures what households actually spend on goods and services. Consumption data is useful for assessing material well-being because household spending is often more stable than income, especially where earnings are seasonal, informal, or volatile.
Recent Trend: India’s consumption-expenditure Gini coefficient declined from 0.266 to 0.237 in rural India and from 0.314 to 0.284 in urban India between HCES 2022-23 and HCES 2023-24, indicating reduced consumption inequality.

Gini Index:

Meaning: The Gini Index is a statistical measure of inequality in a distribution.
Range: It ranges from 0 to 1, where 0 indicates perfect equality and 1 indicates maximum inequality.
UPSC Relevance: In the HCES context, the Gini coefficient measures inequality in consumption expenditure, not income. Therefore, it should be described as consumption inequality unless the underlying data are income-based.

Household Consumption Expenditure Survey:

Meaning: HCES is a large-scale household survey conducted by the National Statistical Office under the Ministry of Statistics and Programme Implementation.
Purpose: It collects information on household consumption of food and non-food items, and helps assess consumption patterns, living standards, welfare needs, poverty, inequality and CPI weights.
Latest Survey: HCES 2023-24 was conducted during August 2023–July 2024 and covered 2,61,953 households, including 1,54,357 rural households and 1,07,596 urban households.

Monthly Per Capita Expenditure:

Meaning: Monthly Per Capita Expenditure is the average monthly consumption expenditure per person in a household.
Calculation: It is calculated by dividing a household’s total monthly consumption expenditure by the number of household members.
Latest Data: In HCES 2023-24, average MPCE without imputing the value of items received free through social welfare programmes was ₹4,122 in rural India and ₹6,996 in urban India. With imputed values of free social transfers, it was ₹4,247 in rural India and ₹7,078 in urban India.

Urban-Rural Consumption Gap:

Meaning: The urban-rural consumption gap refers to the percentage difference between average urban and rural MPCE.
Recent Trend: The gap declined from 84% in 2011-12 to 71% in 2022-23 and further to 70% in 2023-24, indicating relatively faster growth in rural consumption expenditure.

Food And Non-Food Expenditure:

Meaning: This classification shows how households divide consumption expenditure between food items and non-food items such as conveyance, clothing, medical expenses, education, rent, consumer services and durable goods.
Recent Pattern: Non-food items now form the larger share of household consumption expenditure. In HCES 2023-24, the non-food share was 52.96% in rural India and 60.32% in urban India, while the food share was 47.04% in rural India and 39.68% in urban India.

Decile-Based Inequality:

Meaning: Decile-based analysis arranges households or persons into ten equal groups according to consumption expenditure, from the poorest 10% to the richest 10%.
Application: It helps compare consumption levels across expenditure classes.
Recent Trend: HCES 2023-24 shows that the rise in average MPCE from 2022-23 was highest for the bottom 5% to 10% of India’s population in both rural and urban areas.

Informal Workers And Consumption Data:

Meaning: Informal workers are workers without stable formal contracts, regular wages or employer-backed social security protections.
Significance: Since a large share of India’s workforce is informal, income data may be volatile or under-reported. Consumption expenditure data therefore becomes important for estimating living standards, poverty, inequality and welfare requirements.

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