Shifting consumer preferences: AI generated by authors
By Dr Akarsh Arora, Dr Amit Singh Khokhar* Indian kitchens are cooling down, while convenience is heating up. The fact sheet of Household Consumption Expenditure Survey (HCES) 2022-23, released on 24 Feb 2024, by the Ministry of Statistics and Programme Implementation (MoSPI), Government of India, reveals a fascinating shift in spending habits. With consumption expenditure rising, Indians are prioritizing comfort over essentials, trading cereals for processed foods.
There’s a noticeable move towards comfort products such as conveyance, toiletries, and demerit goods like pan, tobacco & intoxicants. This transformation in consumption patterns reflects changing lifestyles and priorities among consumers. As society progresses, so do the aspirations and choices of individuals.
Analysing spending trends from the previous HCES (2011-12 to 2022-23), a fascinating shift emerges in how Indian households allocate their food budget. Both rural and urban areas show a downward trend in food expenditure, with rural spending dropping from 52.9% to 46.38% and urban spending from 42.6% to 39.17%.
This shift is accompanied by a decline in expenditure on cereals and a rising preference for processed foods. The expenditure on cereals, a traditional staple, has significantly decreased, dropping from 10.69% to 4.89% in rural areas and from 6.61% to 3.62% in urban areas. Conversely, beverages and processed foods have seen a steady rise in expenditure.
This category, encompassing purchased meals and other processed items, increased its share of total spending in both rural (from 7.9% to 9.62%) and urban areas (from 8.98% to 10.64%). This uptick reflects changing consumption habits, likely driven by factors like busy lifestyles and increased availability of processed options in both rural and urban markets.
The decline in cereal consumption and the simultaneous increase in spending on beverages and processed foods suggest a broader shift towards convenience-oriented and processed food options among rural and urban consumers. This shift may have implications for dietary diversity, nutritional intake, and health outcomes, warranting further investigation into its drivers and potential consequences.
Moreover, there's been a discernible shift in food baskets towards more diverse food choices. Expenditure on fruits (fresh and dry), protein sources like egg, fish, and meat, as well as processed foods, has seen a relative increase. This indicates changing dietary preferences and possibly improved access to a wider variety of food items.
The fall in expenditure on food items coexisted with an overall rising trend in consumption expenditure, which is in line with Engel’s Law in economic theory. The households have transferred their expenses towards non-food items in both rural (from 47.1% to 53.62%) and urban areas (57.38% to 60.83%).
There is increase in expenditure on pan, tobacco and intoxicants, which has risen from 3.21 to 3.79% in rural and 1.61 to 2.43% in urban India
This rise in non-food expenditure reflects improving economic conditions and an enhanced capacity for discretionary spending towards comfort goods. Strikingly, there is a persistent increase in expenditure on pan, tobacco, and intoxicants, which has risen from 3.21% to 3.79% in rural and from 1.61% to 2.43% in urban India.
Another item that contributes to the rise in non-food expenditure are toilet articles and other household consumables. This category, essential for maintaining hygiene and household functionality, has seen a rise from 4.01% to 5.12% in rural areas and from 3.88% to 4.98% in urban areas.
Furthermore, a significant rise in expenditure on conveyance is observed, indicating increased spending on transportation-related expenses. From comprising 4.2% of total rural Monthly per-capita consumption expenditure (MPCE) and 6.52% of total urban MPCE in 2011-12, conveyance expenditure has increased notably to 7.55% and 8.59%, respectively by 2022-23.
This uptick suggests changes in mobility patterns, possibly driven by improved access to transportation infrastructure and increased travel for work, education, and other purposes. Increasing expenditure on durable goods, including long-lasting consumer goods like appliances and electronics, has witnessed substantial growth over the reference period, from 4.85% to 6.89% in rural areas and from 5.60% to 7.17% in urban areas.
This reflects an improvement in the living standard of Indian households. Moreover, healthcare expenditure (including hospitalization and non-hospitalization) has played a role in the increase of non-food spending, particularly notable in rural areas (rising from 6.65% to 7.13%) and to a lesser extent in urban regions (increasing from 5.54% to 5.91%).
Therefore, it is not an oversight to conclude that India’s consumer preferences are advancing. As household consumption rises, families prioritise convenience, trading cereals for processed foods. Rising spending on non-food items like conveyance and durables shows improved living standards, making India an even more attractive market for non-food products.
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*Dr Akarsh Arora is Assistant Professor, Economic Environment and Policy, Institute of Management Technology, Ghaziabad, Delhi NCR; Dr Amit Singh Khokhar is Assistant Professor, Delhi Skill and Entrepreneurship, University, New Delhi
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