Sign of progress?
As per a working paper released by the Economic Advisory Council to the Prime Minister (EAC-PM), for the first time in post-independence India, household spending on food has fallen to less than half of overall monthly expenses. The working paper presents this transformation in consumption pattern as a manifestation of a confluence of factors, including government welfare programmes like the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which has provided free food grains to millions, effectively reducing the share of spending on cereals. The fundamental assumption is that “savings” made on consumption of cereals is being used by consumers to purchase a variety of food and non-food products—indicating a trail of economic progress.
This is, however, just one way to read the numbers. The simplistic assumption by the EAC-PM—an independent body constituted to give advice on economic and related issues to the Government of India, specifically to the Prime Minister—ignores the nuances of consumption patterns and their drivers in a socio-economically diverse country like India. More worryingly, since EAC-PM directly advises the prime minister, the reverberations of the working paper’s findings may reflect in policymaking at the top as well. The unprecedented decrease in household food expenditure, when seen against the backdrop of persistently high food inflation, makes very little economic sense. It is very heartening that in the difficult times following the outbreak of the COVID-19 pandemic, the government decided to increase the subsidised (and free) delivery of staple cereals—ensuring that poor households do not completely fall apart. Cereals, which are relatively cheaper than many other food items, typically require less expenditure. Other food items, including meat, pulses, green vegetables etc., come at greater costs, and higher expenditure on these items is not purely a marker of increased consumption in these segments, since inflation also has a part to play. As per a market research firm Kantar, Indian households spent 18 per cent more in the March quarter of 2024 than in the June quarter of 2022, on account of rising inflation.
Multiple reports show that the poverty scenario in India has been improved to a great extent but there is still a long distance to go. Cereals, despite a decrease in spending, require an adequate policy focus in terms of production and distribution. At the same time, efforts need to be made towards reducing the prices of nutritious food items other than cereals, so that even the poorer populations are able to afford them without much burden on their pockets. Only in such a balanced scenario can the food expenditure by households clearly reflect their dietary preferences and patterns.
Despite the apparent economic progress in terms of increased disposable income and diversified consumption patterns, a large portion of Indian households continue to struggle financially. The Kantar report highlights that 34 per cent of households still find it difficult to manage their expenses, even as inflationary pressures ease. This financial stress is disproportionately felt among lower-income groups, revealing the stark inequality that persists across socio-economic strata.
To sum up, the EAC-PM paper rightfully suggests a reconsideration of universal fortification strategies, urging policymakers to promote a broader spectrum of nutrient-rich foods. Despite a gradual easing of inflationary pressures, food prices, particularly of essential items like milk and vegetables, remain elevated, stretching household budgets. Against such a backdrop, policymakers must continue to balance welfare programmes with initiatives that ensure sustainable growth in disposable incomes, healthcare access, and nutritional security to ensure that economic progress reaches every household.
