Private Final Consumption Expenditure of Households in India:Estimates, Issues and Challenges

We estimate Private Final Consumption Expenditure (PFCE) of households in India using survey data from CMIE Consumer Pyramids (CP). The analysis is aimed at gaining comparability with existing sources of household expenditures and understanding the component of PFCE at the state level. Findings show that estimates from the CP data corroborate to the state wise distribution of food and Non-food expenditures as shown by the NSS Consumption Expenditure survey. The notable difference are in some of the Non-food categories, where the CP data for 2016-17 shows a much lower percentage for appliances, rent and health as compared to the NSS estimates. At the aggregate, the share of rural regions is much higher than of urban regions, with four major states (Bihar, Maharashtra, Uttar Pradesh and West Bengal) accounting for over 42% of PFCE from rural regions, and seven states (Gujarat, Karnataka, Kerala, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal) accounting for over65% of PFCE from urban regions.We argue that the allocation method that uses the NSS item wise expenditure shares rests on strong assumptions and may lead to discrepancies in state level PFCE. Given data challenges from the expenditure side of GDP and limitations of household surveys, most of these aggregates are inadequate for drawing any conclusive inferences about PFCE and its composition.