Worrying Signs? Indians Spend More On Transportation Than On Education & Healthcare: Survey

At a time when many countries across the world are battling recession, one of the key reasons behind India¡¯s economic resilience is that our country¡¯s private consumption, which is the money spent by households on goods and services, accounts for 60% of the GDP. That is why, there is a need to closely analyze any trend changes in consumer spending, since this can have a far-reaching impact on the economic trajectory of the country.

India¡¯s Ministry of Statics and Programme Implementation recently revealed the Household Consumption Expenditure Survey (HCES) 2022-23, which offered many interesting insights into spending patterns of Indian households.

Indians Spending More On Transportation Than On Education: Survey

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According to the survey, carried out after a long gap of 11 years, per-capita Monthly Household Consumption Expenditure (MHCE) in India has more than doubled between 2011-12 and 2022-23, with spending in rural families registering a compounded annual growth rate (CAGR) of 9.2% in the said period as against city dwellers¡¯ 8.5%, as per ET report.

This doesn¡¯t come as a surprise as increased government support, including in the form of direct benefit transfers, has helped boost disposable incomes of poor households which form a greater proportion of the rural Indian population. Between July 2022 and August 2023, in rural areas non-food items made up for 54% of household consumption (up from 47% in 2011-12) while for urban households their share inched higher to 61% from 57% during the comparable period.

However, what surprised many is the sharp jump in average household spending on conveyance. At 14% of non-food expenses, both rural and urban households in the country spent more on travel fare and fuel than on education and healthcare. As per HCES 2011-12, though most Indians use public transport, the expenditure on petrol was higher than the amount spent on travel fare. But what about the money spent on purchase and maintenance of vehicles?

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Also Read: Bengaluru Loses Rs 19,725 Crore Every Year Due To Traffic-related Issues

Why Its A Worrying Sign

While the ¡®fact sheet¡¯ of the HCES 2022-23 survey released late last month doesn¡¯t separately classify the ¡®expenditure for purchase and maintenance of personal transport equipment¡¯ under the category of ¡®durable goods¡¯, as per the previous survey 28% of rural Indians¡¯ durable goods expenditure was towards the purchase and maintenance of private vehicles.

Given that the spending on durable goods saw the biggest jump after conveyance as per the latest survey with rural households topping the chart, even a conservative assumption that the share of vehicle purchase and maintenance cost stands unchanged from the levels seen 2011-12 would mean that Indian villages have been spending much more on vehicles over the last 11 years.

While this is a positive indicator of economic growth, the substantial share of expenditure on vehicles and conveyance is a worrying sign. Globally, the practice is to club both conveyance and vehicle acquisition cost together under the head ¡®transportation expenses¡¯. But in India, vehicle acquisition cost comes under durable goods.

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As per ET estimates, on a conservative basis, 11.2% of the total monthly outgo of urban households is towards vehicles and conveyance while this figure stands at 9.5% for rural India.

Now, one may interpret that this expenditure is lower than in the US (16.9%) and countries in the European Union (12.1%). But then, when we look at share of expenditure on transportation in India as a percentage of non-food consumption, it climbs to 18% and almost matches the levels in the US, a country that is about 3x bigger than India and is known for high spending on cars and fuel.

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