Spending Diversification in Rural-Urban India: An Inter-State Analysis

Abstract

Economic reforms in 1991has improved the economic condition in India, explored the new job opportunities- especially in the service sector, increased the degree of urbanization, enhanced the educational level and influenced the lifestyle of the consumers. As a result consumers’ taste and preference have changed. The expenditure pattern between food and non-food baskets has changed. In this paper, the basic objective is to analyse the changing monthly per capita consumption expenditure pattern and the degree of diversification of spending of food and nonfood baskets both in rural and urban India and its constituent states during the period of 1983 – 12. Based on five different rounds of NSSO data the expenditure in the commodity basket has differentiated in terms of food and non-food baskets. Here, we have used Theil entropy measure to show the extent of diversification of food and non-food baskets in India and its constituent states during the period under study. Our estimates reveal that with the development of the economy the expenditure share on food basket has declined compared to non-food one both in rural-urban India and its constituent states. Initially the degree of diversification is quite higher in non-food basket compared to food one but over time consumers’ food expenditure has highly diversified than non-food one in all the constituent states both in rural-urban areas during 1983 – 12.