Gujarat's consumer expenditure "not commensurate" with the state's growth rate

By Jag Jivan
Latest information from a well-placed Gujarat official source has revealed that Gujarat’s private consumer expenditure is not commensurate with the overall growth the state has been experiencing. Suggesting dormant capacity of private consumers as compared to many other states, the data – as found reflected in a top document yet to be made public – suggest that in 2011-12 Gujarat’s gross state domestic product (GSDP) at current prices was 611,767 crore, but the private consumer expenditure formed Rs 287,661 crore, or just about 47 per cent of the GSDP. If the data are any indication, this was the lowest percentage spent by an individual state in proportion to its GSDP.

Rs crore at current prices

According to a World Bank definition, “Household final consumption expenditure (formerly private consumption) is the market value of all goods and services, including durable products (such as cars, washing machines, and home computers), purchased by households.” Government officials admit, this suggests that while Gujarat’s growth rate may be “robust”, but when it comes to actual consumer spending, things are not as rosy as they seem on the surface. “Either Gujaratis are not good spenders, or they do not have enough purchasing power compared to at least richer comparable states”, a senior official told Counterview on condition of anonymity.

As percentage of GSDP, Gujarat’s private consumer expenditure was below than such comparable states having good GSDP growth like Andhra Pradesh (66 per cent), Haryana (48 per cent), Karnataka (61 per cent), Kerala (68 per cent), Maharashtra (50 per cent), Punjab 63 per cent), Tamil Nadu (59 per cent), and so on. Significantly, Gujarat’s GSDP was 6.79 per cent of the all-India gross state domestic product (Rs 9,009,722 crore), while private consumer expenditure was 5.6 per cent of the country’s, which was Rs 5,141,896 crore in 2011-12).

The document admits, in the long term a fall in the “share of private consumption expenditure to GDP at market prices” suggests lack of buoyancy, adding, there is a need to increase the “share of private consumption expenditure to GDP.” The poor “share of final consumption expenditure”, in fact, also reflects, according to the document, poor share of services in “the final consumption expenditure.” Suggesting the problem is universal for all progressive states, the document suggests, poor development of the service sector is responsible for this. It would adversely affect on taxes proposed to be levied on goods and services in the form of goods and services tax (GST).

While officials do not admit it in so many words, actually, the data are a reflection of poor spending capacity of Gujarat’s population. In the rural areas, the monthly per capita expenditure (MPCE) of Gujarat was Rs 1,536, which is lower than eight major Indian states out of 1s7 states selected for analysis by the National Sample Survey (NSS), India’s premier statistics gathering organization. The all-India average MPCE is Rs 1,430 for the rural areas. Similarly, in the urban areas, while Gujarat’s MPCE at Rs 2,581 is lower than eight other states, what is particularly shocking is, the all-India average MPCE is higher than that of Gujarat , at Rs 2,630.

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