Addressing a data drought - Hindustan Times
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Addressing a data drought

ByHT Editorial
Feb 26, 2024 12:26 PM IST

Household Consumption Expenditure Survey data has implications for public policies

For at least a decade, economists had no official statistics on consumption spending in the Indian economy. This data vacuum was prolonged – consumption expenditure surveys (CES) have normally been held every five years – because the government decided to junk the findings of the 2017-18 CES citing data quality issues. The publication of the 2022-23 Household Consumption Expenditure Survey (HCES) on Sunday has ended this drought.

The availability of the Household Consumption Expenditure Survey data will allow a much-needed overhaul of many other important indicators in the country PREMIUM
The availability of the Household Consumption Expenditure Survey data will allow a much-needed overhaul of many other important indicators in the country

The availability of this data will allow a much-needed overhaul of many other important indicators in the country, which include critical frameworks such as the GDP series and the benchmark inflation measure namely, the Consumer Price Index (CPI). Both are benchmarked on the latest CES. Such overhauls are not merely academic exercises; they have real-world implications. For example, a fall in the share of food spending in HCES should lead to a reduction in the weight of the food basket in the CPI. Food has been the biggest driver of headline inflation. This could change in a new CPI series with a lower weight for food, especially cereals.

Economists and policymakers will eventually turn to the data published by HCES and we will, in all likelihood, see a rich and informed debate. To be sure, for this debate to begin in earnest, the government will have to publish both the full report as well as the unit-level data from HCES. What it has published at the moment is just a 27-page fact sheet with some summary tables that do give us a brief idea about household consumption (and by extension, income) having increased rather than fallen but do not allow even basic analytical questions such as the nature of consumption inequality. Because HCES involves a significant change in methodology compared to previous CES, it is bound to face much more rigorous intellectual and statistical scrutiny.

Having flagged this caveat upfront, the HCES summary stats do give us some interesting insights into what has changed in India’s consumption economy in the past 11 years. The most important takeaway from these numbers, if one were to extrapolate from trends such as a rise in the share of spending on conveyance and growing dominance of packaged and cooked food in food spending even in rural areas, is that there has been a widening of labour markets and deepening of consumption goods markets even among the poorest people in the country. These dynamics must be understood carefully by policy, politics and markets.

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