Trends in Economic Welfare and Inequality: 1983-2010

Trends in Real MPCE

The NSS Reports of various rounds (periods) provide per person monthly expenditure on commodity groups for a large number of expenditure classes. These commodity expenditures are expressed at constant prices by using commodity group price indices.[1] The commodity real expenditures are aggregated to arrive at real expenditure for expenditure classes. The expenditure classes are grouped into three broad groups—bottom 30%, middle 40%, and top 30%. Two slightly over lapping periods are considered for comparative analysis.[2]

Trends in MPCE and social welfare

Fig. 3.1 Trends in MPCE and social welfare

The time series data on real per capita consumption (MPCE) reveal significant improvement in economic welfare over the period considered in this paper-19832010 (Fig. 3.1). As may be observed from Table 3.1, during 1983 and 1997 (first period) the MPCE grew at an annual rate of 1.0% in rural areas and 1.62% in urban areas. During 1993/94-2009/10 (second period/post reform period), the growth rate accelerated to 1.73% in rural and 2.77% in urban (second period). It is evident that the growth rate picked up in the post reform period and the urban areas gained the most from higher growth.

Table 3.1 also provides the growth rate of the real monthly per capita expenditure for the expenditure groups for the two sub periods. Clearly, the growth rate of MPCE was higher in the second period for all expenditure groups. However, the difference between the two periods was modest for the bottom groups and comparatively very striking for the top groups. While the improvement in the growth rate was 0.10% point per annum for rural bottom group and 0.35 for urban bottom group, it was as high as 0.96 for rural top group and 1.32 for urban top group. It is evident that the growth in the post reform period was pro rich and urban groups had higher growth in both the periods.

  • [1] The commodity group price indices, given in Ravi (2000) for NSS commodity groups separatelyfor rural and urban areas of NSS rounds, compiled from disaggregated monthly wholesale priceindices with weights based on NSS household consumption data have been updated using similarmethodology.
  • [2] The NSS used Uniform Reference Period (URP) for the rounds of the first period—1983, 198687, 1987-88, 1988-89, 1989-90, 1990-91, 1992, 1993-94, 1994-95, 1995-96 and 1997; andMixed Reference Period (MRP) for the rounds of the second period—1993-94, 1999-2000, 200001, 2001-02, 2003, 2004-05, 2005-06, 2006-07, 2007-08 and 2009-10. For a few rounds, NSSused both the reference periods. The absolute values of MPCE differ between the two. However, itis unlikely to affect their growth rates. While fitting the trend equation, some years belonging to thepost reform period have been included for augmenting the degrees of freedom. The inclusion willnot affect our comparative assessment.
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