RURAL URBAN DIVIDE: A TALE OF TWO INDIAS

A government report lends credence to the notion of “two Indias”, or the distinction between “India” and “Bharat” – a theme often debated in recent years.

At a time when urban India is growing and policy makers have expressed clear preference for the trend, this report, by National Sample Survey Organisation (NSSO), brings India’s deep urban-rural divide into focus, showing disparities in scale and levels of expenditure and consumption and, equally importantly, the difference between the items that rural and urban population spends on. It may also be useful in analysing whether the trend of urbanisation is driven by positive – “pull” factors, such as opportunities for better life in towns and cities – or the “push” factor, i.e., problems forcing people to abandon village life.

According to the Key Indicators of Household Consumer Expenditure in India 2009-2010, July 2009-June 2010, NSS 66th Round, the average Monthly Per Capita Expenditure (MPCE) in 2009-10 was Rs 1054 in rural India and Rs 1984 in urban India, that is, per capita expenditure level of the urban population was on an average 88% higher than the rural counterpart. 

Plight of agriculture and inefficacy of safety net programs widening the divide: The plight of the agricultural sector and inefficacy of the rural social safety net programs are the chief factors responsible for widening of the urban-rural divide. Decline in per capita food production, poor state of rural infrastructure such as power, roads etc. and underperformance of social safety net programs like rural job schemes and public distribution systems have restricted rural income growth. 

The positive impact of India’s thrust on economic growth has so far been largely limited to the urban population and is yet to widely percolate to the rural population. Such a premise implies the need for the government to adopt effective strategies tailor-made for the rural population. Encouraging private sector participation, unilaterally and via public-private partnerships (PPP), to create inclusive and innovative business models to cater to the needs of the rural population is one such strategy being experimented and implemented successfully in other developing countries.  

Key findings:

Average MPCE in 2009-10 was estimated as Rs.1053.64 in rural India and Rs.1984.46 in urban India. Thus the per capita expenditure level of the urban population was on the average about 88% higher than that of the rural population.

The poorest 10% of India’s rural population had an average MPCE of Rs.453. The poorest 10% of the urban population had an average MPCE of Rs.599.

The top 10% of the rural population, ranked by MPCE, had an average MPCE of Rs.2517 – about 5.6 times that of the bottom 10%. The top 10% of the urban population had an average MPCE of Rs.5863 – about 9.8 times that of the bottom 10%.

The consumption inequality within the rural population was also considerable with the top 10% of India’s rural population having an average MPCE (Rs2517) 5.6 times that of the poorest 10% (Rs453). 

The top 10% of the urban population had an average MPCE of Rs.5863 – about 9.8 times that of the bottom 10%. 

Considering the average rural MPCE value of Rs.1054 in isolation would be partially misleading. The rural MPCE median of Rs.895 (about Rs.30 per day) implies that half the rural population had MPCE below this level. 

Furthermore, 40% of the rural population had MPCE below Rs.800 while 60% had MPCE below Rs.1000.

Compared to the rural median MPCE (Rs.895), the urban median MPCE level was 1.68 times higher at Rs.1502 with 30% of the urban population having MPCE above Rs.2100 and 20% having MPCE above Rs.2600.

Among the major States

Kerala (Rs.1835) had the highest rural MPCE. It was followed by Punjab (Rs.1649) and Haryana (Rs.1510). In all other major States, average rural MPCE was between Rs.750 and Rs.1250.

Average rural MPCE was lowest in Bihar and Chhattisgarh (around Rs.780), and also low in Orissa and Jharkhand (around Rs.820), as well as in Uttar Pradesh and Madhya Pradesh (around Rs.900).

Maharashtra (Rs.2437) and Kerala (Rs.2413) were the two major States with the highest MPCE in the urban sector, followed by Haryana (Rs.2321). The other major States with average urban MPCE higher than the all-India average were Andhra Pradesh (Rs.2238), Punjab (Rs.2109) and Karnataka (Rs.2053).

Urban MPCE was lowest in Bihar (Rs.1238). No other major State had urban MPCE below Rs.1500. Orissa, Uttar Pradesh and Jharkhand all had average MPCE between Rs.1545 and Rs.1585. In Chhattisgarh, Rajasthan and Madhya Pradesh, average MPCE was between Rs.1645 and Rs.1670.

Average urban MPCE was only 28% higher than average rural MPCE in Punjab, only 31% higher than average rural MPCE in Kerala, and only 41% higher in Rajasthan. In Maharashtra and Chhattisgarh, on the other hand, average urban MPCE was around 110% higher than average rural MPCE. In West Bengal and Karnataka, too, per capita expenditure in the urban sector was more than double that in the rural.

Pattern of per capita food expenditure in rural India as a whole was estimated at Rs.600 for rural India and Rs.881 for urban India. This means that the share of food in consumer expenditure was 57% in rural India and 44.4% in urban India during 2009-10. It is seen that in rural India, the food share ranges from under 46% in Kerala to 64-65% in Bihar and Assam. 

In the urban sector, the food share ranges from 40.2% in Kerala to nearly 53% in Bihar and Assam. Also, States with low average MPCE tend to have a higher share of food in total consumer expenditure.

Component of food in the value of the average rural Indian’s household consumption included 14% for cereals and cereal substitutes, a little less than 8% for milk and milk products, and 8% on vegetables. 

Among non-food item categories, fuel for cooking and lighting accounted for about 8%, clothing and footwear for 6%, medical expenses for a little over 5%, conveyance and education for about 3½% each, other consumer services for 4%, and consumer durables for 3½%.

For the average urban Indian, over 44% of the value of household consumption was accounted for by food, including 8% by cereals and 7% by milk and its products. 

The share of most of the food item groups in total consumption expenditure was higher in rural India than in urban India, fruits and processed food being exceptions. 

For non-food item groups, the share was usually higher in urban India. The most noticeable differences were in case of cereals (urban share: 8%, rural share: 13.8%), rent (urban: 6%, rural share: 0.5%) and education (urban: 8%, rural: 3.6%).

Trends in level of consumption in monetary and real terms

One indicator of economic status is the ratio of income spent on basic necessities or essentials for life. The NSSO report brings out the rural-urban disparity in levels and patterns of consumption.

For rural India, real MPCE (measured using a price deflator with 1987-88 as base) is seen to have grown from Rs.158.10 in 1987-88 to Rs.187.79 in 2009-10 – an increase of only 19% over 22 years. 

In urban India there has been a substantially higher growth in real MPCE  – from Rs.249.92 in 1987-88 to Rs.355.03 in 2007-08, an increase of 42% in the 22 year-period since 1987-88. The growth in urban MPCE over the 16-year period since 1993-94 has been about 34%.

Cereals have registered the largest decline in share among all the item groups – from 26.3% to 15.6% in rural India and from 15% to 9% in urban India. In the urban sector, practically all the food groups have suffered a decline in share. 

The budget share of cereals was 23-24% for the bottom decile class of rural India but fell with rise in MPCE to about 7-8% for the top decile class. 

In urban India the share of cereals fell from 18-19% for the bottom decile class to 3-4% for the top decile class.

The share of milk and milk products in rural household consumer expenditure was seen to rise with MPCE level from 3-4% in the bottom decile class to 9% in the ninth decile class. For urban India, however, the share was higher for the middle third of the population than for the highest decile classes.

The share of fuel and light in household consumer expenditure was around 10-11% for the bottom decile class in both sectors. With rise in MPCE it was seen to fall to about 6% in the top decile class for rural India and 5% for urban India.

For the rural sector, “beverages, etc.” show a distinct rise in share, while pulses, edible oil, sugar, and “salt and spices” show a fall, and for other groups, the evidence is not very conclusive.

Pan, tobacco and intoxicants exhibit a distinct downward trend, especially in urban areas, while fuel and light appear to show an increase in share in the last decade, especially in urban India, clothing and bedding show an overall fall, and the share of durable goods appears to be picking up. The greatest gainer in share of expenditure is clearly the “miscellaneous goods and services” category (including education and medical care). The share of this group has soared (growing by around 70% of its level in 1987-88) from 14.5% to 24% in rural India and from 23.2% to 37.8% in urban India.

Demographic Characteristics

As per the concept of household used in the survey, the average household size in India was 4.4. The rural household size (4.6) was higher than urban household size (4.1). The sex ratio (females per 1000 of males) at the all-India level was 936. 

Sex ratio in rural areas was 947 compared to 909 in urban areas.

Inequality in consumption levels

Using the MMRP (Modified Mixed Reference Period) method of MPCE measurement, the Lorenz ratio for the distribution of MPCE was estimated as 0.270 for rural India and 0.362 for urban India.

Comparison of Lorenz ratios from the present survey with those obtained from the survey of 2004-05, using the Uniform Reference Period method of measurement of MPCE, showed a slight reduction from 0.297 to 0.291 in the rural sector and a slight increase from 0.373 to 0.381 in the urban sector of the country.
 
 
Further readings:

 

Key Indicators of HouseholdConsumer Expenditure in India 2009-2010, July 2009-June 2010, NSS 66th Round,

http://www.im4change.org/docs/288Key_Indicators-HCE_66th_R
d-Report.pdf

 

Press Note on PovertyEstimates, 2009-10, Planning Commission, March 2012, http://planningcommission.gov.in/news/press_pov1903.pdf   

 

Asian Development Outlook,April 2012, Asian Development Bank (ADB), http://www.adb.org/sites/default/files/pub/2012/ado2012.pdf

 

http://www.adb.org/news/asias-increasing-rich-poor-divide-
undermining-growth-stability-adb-report

 

60% of rural India lives onless than Rs 35 a day, The Economic Times, 4 May, 2012, http://www.im4change.org/rural-news-update/60-of-rural-ind
ia-lives-on-less-than-rs-35-a-day-14956.html

 

Income gap rises in India:NSSO by Asit Ranjan Mishra, Live Mint, 9 July, 2011, http://www.im4change.org/rural-news-update/income-gap-rise
s-in-india-nsso-by-asit-ranjan-mishra-8893.html

 

‘Inequality has gone up,notwithstanding dip in poverty'-K Balchand, The Hindu, 21 March, 2012,

http://www.im4change.org/rural-news-update/inequality-has-
gone-up-notwithstanding-dip-in-poverty039-k-balchand-13864
.html

 

Reign of the one percent?-N Chandra Mohan, The Business Standard, 26 March, 2012

http://www.im4change.org/rural-news-update/reign-of-the-on
e-per-cent-n-chandra-mohan-13932.html

 

The great Indian povertygame-Sonalde Desai, The Business Standard, 29 March, 2012

http://www.im4change.org/rural-news-update/the-great-india
n-poverty-game-sonalde-desai-14051.html

 

The Rural-Urban divide, http://www.scribd.com/doc/7849672/The-RuralUrban-Divide-in-India

 

Now, rural-urban dividenarrowing by Sanjeeb Mukherjee, 15 March, 2012

http://www.business-standard.com/india/news/now-rural-urba
n-divide-narrowing/467801/

 

An Economic Introspectionof Rural - Urban Livelihoods in India by Anitha Selvaraj,

http://www.indiastat.com/article/29/anitha/fulltext.pdf

 

82% rural Indians lackadequate basic needs, One World South Asia, 23 November, 2010,

http://southasia.oneworld.net/todaysheadlines/82-rural-ind
ians-lack-adequate-basic-needs

 

Urbanisation inIndia-Pranati Datta, http://www.infostat.sk/vdc/epc2006/papers/epc2006s60134.pdf

 

Migration and Urbanisationin India in the Context of Poverty Alleviation-Amitabh Kundu

http://www.networkideas.org/ideasact/jun07/Beijing_Confere
nce_07/Amitabh_Kundu.pdf

 

Urbanization in India, TheWorld Bank

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHAS
IAEXT/0,,contentMDK:21531567~menuPK:2246552~pagePK:2865106
~piPK:2865128~theSitePK:223547,00.html

 

Urbanization: it’shappening, can we cope? by Anil Padmanabhan, Live Mint, 18 July 2011

http://www.livemint.com/2011/07/17233228/Urbanization-it82
17s-happe.html

 

India's growing rural-urbandivide by Barnaby Phillips, Al Jazeera, 16 April, 2009,

http://www.aljazeera.com/focus/indiaelections/2009/04/2009
41575422954810.html
 





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