Headwinds for Urban Consumption

Urban Consumption Under Scrutiny

India recently released the first draft of its Household Consumption and Expenditure Survey (HCES) for 2023-24, providing a rare opportunity to examine long-term trends in per capita spending.

The latest data allows for a deeper dive into:

• The evolution of Monthly Per Capita Consumption Expenditure (MPCE) since 2004-05
• Shifts in consumption baskets for key spending categories in urban areas

Tracking Consumption Over Two Decades

A notable feature of the 2023-24 survey is its continuity - it surveys the same households using consistent methodology and questions as the 2022-23 round. This allows for direct comparability with prior harmonized datasets, making it easier to identify structural trends in urban spending behavior.

Observations from the MPCE Data

Long-Term Growth Patterns vs. Recent Slowdown

Chart A, tracking MPCE growth over the last 25 years, highlights a few key trends:

Chart A: Between 2005-12, MPCE doubled every 5 years

Source: MOSPI Household Consumption and Expenditure and Spending Survey (HCES)

• Between 2005-12, MPCE doubled between survey rounds, with annual growth rates exceeding 12%, both in urban and rural areas.
• In the current decade, MPCE growth has stabilized in the 8-9% range—a more measured trajectory.
• Urban spending in 2023-24 appears to be slowing significantly, particularly among higher-income households.

A breakdown of MPCE across income percentiles reveals:

• Households above the 80th percentile (>INR40K monthly spend) showed sluggish growth.
• Households in the 95th percentile (>INR80K monthly spend) actually saw a 2.5% contraction.

Changing Priorities in Urban Spending

One of the more striking shifts in 2023-24 consumption patterns is the increase in spending on essentials.

• The share of food and clothing expenditures rose by 1.2 percentage points, a notable increase compared to 2022-23.
• This aligns closely with food inflation trends, which saw a 3-4 percentage point increase during the survey period.

Chart B: Travel and Processed Food saw the highest increase in spend share

Source: MOSPI Household Consumption and Expenditure and Spending Survey (HCES); *Cons Staples includes personal care items, household and cleaning products; 

A shift toward essentials over discretionary spending could signal underlying economic concerns, particularly among higher-income urban households.

Implications for Consumer Markets

The 2023-24 data provides independent evidence of something heard repeatedly in Q3 FY25 earnings calls—a slowdown in discretionary spending, especially among the upper middle class.

Spending in categories such as travel, durables, services, and luxury goods appears to be softening, suggesting that economic uncertainty or inflation pressures may be driving more cautious consumption behaviors.

Further data releases will provide deeper insights into how consumption is evolving across different economic groups and geographies, offering crucial signals for businesses tracking demand trends.