Average Household Spending on Food Falls Below 50% for the First Time in Modern India

New Delhi: A government paper has revealed that India's food consumption patterns are undergoing significant changes, with the proportion of total household spending on food having dropped considerably in both rural and urban areas, as well as across all states and union territories, since 1947.

It is the first time in modern India (post-independence) that average household spending on food is less than half the overall monthly spending of households and is a marker of significant progress, according to the paper titled ‘Changes in India’s Food Consumption and Policy Implications,’ by the Economic Advisory Council (EAC) to the Prime Minister.

Within food items, the share of expenditure on cereal has declined significantly across rural and urban areas.

“However, this decline was more substantial for the bottom 20 per cent of the households in rural and urban areas. In all likelihood, this reflects the effectiveness of the government's food security policies, which provide free food grains to large numbers of beneficiaries across all states of the country, with a particular focus on the vulnerable bottom 20 per cent of households,” the findings showed.

The significant decline in the share of cereals in household expenditure has allowed households to diversify their diets, with increased spending on milk and milk products, fresh fruits, and eggs, fish and meat.

Schemes like PMGKAY, which provides free food grains to approximately 800 million eligible people across the country, seem to have performed the role of an expansionary fiscal policy where households are spending their ‘saved expenditure’ from cereals on diverse food items.

The paper said that significant changes in the food composition of household expenditure have implications for agriculture policy and the country's health and nutrition policies. The changing consumption basket of Indians will also impact the calculation of the Consumer Price Index (CPI) in the future.

“As household demand shifts and supply factors improve, the government should continue to support agricultural policies that promote the production and accessibility of diverse food items, mainly fruits, vegetables, and animal-source foods,” read the paper.

Agriculture policies will have to be tailored beyond cereals, whose consumption is declining across all wealth classes of society.

“At the same time, support policies like MSP, which overwhelmingly targets cereal procurement, will have a limited impact on the welfare of farmers,” it noted.

The EAC-PM paper also observed a significant increase in the share of household expenditure on served and packaged processed food.

This increase was universal across the classes but more pronounced for the country's top 20 per cent of households and significantly more in urban areas.

“While food processing is a growth sector and a significant creator of jobs, this rising consumption of processed and packaged food will also likely affect health outcomes,” the paper stressed, adding that policies may be required to regulate the nutritional content of these foods and promote healthier alternatives.