Economic growth, changes in tastes & preferences and urbanisation have led to a changing consumption pattern away from traditional food commodities to processed and high value commodities. The food consumption declines because of shift in consumption away from cereals to high calorie commodities such as meat, milk, fish etc—in other words from low value to high value commodities. With the increase in level of income and improvement in lifestyles, the consumption basket tends to be more diversified—the traditional cereal consumption makes way for non-cereal based food and other items of consumption, mostly non-food items.

The food inflation crossed double-digit mark during last few years. Precisely, it peaked at around 19 percent in 2009–10 and eased down to about 12 percent in 2011–12, which has never been observed before in the food sector. With the rise in prices, the consumption pattern is likely to be impacted across various income/expenditure groups. This also means that relative emphasis on food basket would change among the income and expenditure strata.

There is a clear distinction between the rural and urban consumers in India. Contemporary literature and references have advanced arguments suggesting improvements in lifestyles of the rural consumers largely on the basis of positive impacts that welfare schemes (like Mahatma Gandhi National Rural Employment Guarantee Scheme and others) have generated as also with improvement in social and physical infrastructure in the rural areas. Robust agricultural growth has also stimulated consumption.

Improvement in communication and connectivity has increased the availability of branded products in the rural hinterlands. It is observed that the shift in consumption pattern is more in those rural regions that are experiencing greater improvement in infrastructure. Rural India is urbanizing at a faster pace and its consumption trend shifting sharply towards a more urban consumption pattern.

The household income and food prices strongly influence food consumption patterns. There are number of reasons to think that there may be structural shifts as distinguished from income and price effects. Under this backdrop, it would be pertinent to analyse the components of the food basket to understand the consumption pattern in the country.


The quinquennial rounds of Consumer Expenditure Surveys (CES) of the National Sample Survey Office (NSSO) are the single most pan India source of information covering all States and Union Territories about consumer spending on different food and non-food items. The country level data of latest (68th) round of CES (2011–12) was released in June 2014. In 68th round, the NSS generated information on average household monthly per capita consumer expenditure (MPCE) of about 300 food and non-food items, its distribution over households and persons, and its break-up by commodity group, separately for the rural and urban areas. The above data were provided by twelve classes of MPCE separately for both rural and urban areas.

The reference period used for reporting above information was “Modified Mixed Reference Period (MMRP)”. This was the measure of MPCE obtained by the CES when household consumer expenditure on edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants was recorded for a reference period of “last 7 days”. Expenditure on items of clothing and bedding, footwear, education, institutional medical care, and durable goods was recorded for a reference period of “last 365 days”, and expenditure on all other items was recorded with a reference period of “last 30 days”.



In 2011–12, the total monthly per capita expenditure was Rs. 1,430 in rural India and Rs. 2,630 in urban India. The per capita expenditure in the urban area was 84 percent higher than rural India. The monthly per capita food expenditure was Rs. 757 and Rs. 1,121 for rural and urban areas respectively. In absolute terms, the urban consumer spent about 50 percent more than the rural consumer on food items. The disparity in expenditure on non-food items in rural and urban areas was significant. The urban residents spent 2.2 times more on non-food items as compared to their rural counterpart.

Across MPCE classes, the disparity in terms of ratio of top 5 percent consumers to bottom 5 percent consumers in food expenditure was low as compared to expenditure on non-food both in rural and urban areas (Table 1). Nonetheless, within the food segment, the disparity was relatively higher in urban areas (5.6 in rural areas vis-à-vis 6.9 in urban areas). This disparity in non-food expenditure was still higher, especially among urban consumers (13.2 in rural India vis-à-vis 26 in urban India).

Table 1: Monthly per capita expenditure on food and non-food items.

MPCE Rural Urban
Food Non-food Total Food Non-food Total
1 315.8 205.6 521.4 414.7 285.8 700.5
2 400.5 265.3 665.8 532.4 376.5 908.9
3 472.4 310.9 783.2 628.2 489.9 1,118.1
4 535.3 369.3 904.6 741.1 621.6 1,362.7
5 599.1 418.7 1,017.8 855.5 769.4 1,624.9
6 659.1 476.9 1,136.0 948.3 939.3 1,887.7
7 721.8 544.3 1,266.1 1,057.8 1,122.7 2,180.5
8 794.9 631.9 1,426.8 1,183.1 1,364.9 2,547.9
9 891.3 754.0 1,645.4 1,342.6 1,720.2 3,062.9
10 1,039.5 967.9 2,007.5 1,576.6 2,316.0 3,892.6
11 1,216.6 1,339.8 2,556.3 1,945.7 3,404.4 5,350.1
12 1,770.4 2,710.8 4,481.2 2,859.1 7,422.7 10,281.8
All 756.5 673.5 1,430.0 1,120.9 1,508.8 2,629.7
Ratio of highest to lowest MPCE Class 5.6 13.2 8.6 6.9 26.0 14.7

If the expenditure and income are to be used interchangeably (for simplicity’s sake), this observation indicates that there are significant urban and rural implications in consumption expenditure, especially among non-food items that are nonessential in nature. Given the fact that there is no direct benchmark in rural and urban distribution of income, the variations in expenditure is a proxy indicator of such divergence in the distribution of income and wealth.

The share of food in total household expenditure was 53 percent and 43 percent in rural and urban India respectively. The consumer expenditure alters with change in food habits, income, life styles, urbanisation, affordability and accessibility. According to the Engel’s Law of Demand, the rise in income and improvement in lifestyle would tend to change the consumption pattern. With improvement in incomes, cereal consumption will be substituted by protein-rich and highvalued food items.

The analysis shows that with rise in per capita expenditure, the share of food spending declined from 61 percent (lowest 10 percent) to 40 percent (top 10 percent) in rural areas, whereas in urban areas, it declined far steeply from 59 percent (lowest 10 percent) to 28 percent (top 10 percent). It was found that about 90 percent of rural population spent more than 50 percent on food items, whereas almost half of urban population spent more than 50 percent of total expenditure on food articles in their homes (Figure 1).

Figure 1: Share of food and non-food expenditure (percentage).

It is to be recognised that NSS data do not cover expenditure away from home precincts—it is likely that there would be significant food expenditure in the urban areas away from home, given the accessibility in eating out opportunity and also present lifestyle-induced food consumption. While it may be argued that it would fall under the category of impulsive food expenditure particularly in cities and towns, the fact, however, is that it could also account for some proportion of food expenditure.

Composition of food items

In total food expenditure basket, the share of expenditure on cereal, milk and milk products, vegetables and processed foods was significant both in rural and urban areas (Figure 2). While the share of cereal consumption was still dominant, the consumption of milk & milk products and processed food have been gaining prominence in rural as well as urban areas.

Figure 2: Distribution of total food expenditure (percentage).


Though the share of food expenditure declined with rise in total expenditure, the same did not hold true for all food items. With the rise in expenditure, the proportionate expenditure on cereal, pulses and pulse products, edible oil, sugar and spices showed a declining trend. The relative expenditure on milk and milk products, egg, fish and meat, fruits, beverages and processed food increased with progression in MPCE classes. The Economic Survey 2011–12 made a similar observation—there has been a structural shift in consumption pattern of the consumer as they become richer. With an increase in expenditure, the consumption of milk and milk products, egg, fish, meat and vegetables both in rural and urban areas is on rise, whereas the share of consumption expenditure of cereals in total consumption basket has gone down.

With the increased awareness level towards diet and health consciousness and in view of less strenuous activities, people realise the need for dietary diversification in order to meet the nutritional needs in terms of macro, micro and phyto nutrients. This leads to reduced intake of carbohydrates and consumption of fruits, vegetables, milk and milk products, and, egg, fish and meat is on rise.

Some recent articles suggest that a change in dietary habits towards protein rich foods has been a key driver of high food price inflation in India. They also suggest that this is a result of:

  • rising nominal wage helped by the expansion of MNREGA scheme;
  • inadequate producer supply response relative to demand; and,
  • shocks from global inflation, as India integrates with the world.

There was a marked increase in proportionate share of expenditure on processed foods in 11th and 12th classes of MPCE in urban areas (Figure 3). This signals the prospects and future of Indian processed food industry. It can be seen that a large part of the shift in food basket was driven by the processed food category, especially by population belonging to top 2–3 expenditure classes in urban areas. This also indicates that increasing incomes and urbanisation will further fuel the demand for processed food.

Figure 3: Food expenditure on different items by MPCE classes (percentage).


The consumer expenditure in money terms and its proportionate share towards different food items is the conventional way how consumption profile and its directional changes are examined. In addition, it is important to understand that what proportion of population participates on different food items. This is more relevant in the Indian context because one percent increase in consuming population is almost equivalent to 12 million people. Keeping in view the above facts, a comprehensive analysis of consumer profile has been provided in the following section.

Food items like cereals, pulses and pulse products, edible oil, vegetables, sugar and spices are considered as basic food requirements in any household. It can be seen that above 90 percent of households reported consumption of the same in rural as well as urban areas. The incidence of consumption of egg, fish and meat has been either increasing or has been constant with the progression in MPCE classes. The proportion of population reporting consumption of milk & milk products and fruits (fresh and dry) has been increasing with the rise in expenditure (Figure 4). Another important observation is that while there has not been significant change in proportion of processed food consuming population in MPCE class 11 and 12, there was a sizable increase in the share of expenditure towards processed food in these categories, especially in urban India—indicating increase in amount spent by rich people towards processed food.

On the whole, the incidence of consumption among the households shows an increasing trend with increase in MPCE classes particularly for the protein rich commodities, which also re-establishes that diversity in food basket is associated with increase in well-being of the population.

Figure 4: Food expenditure on different items by MPCE classes (percentage).


The changing proportions of expenditure as well as proportion of consuming population of various food items across MPCE classes gives a clue to examine the divergence that exists in different food items (Figure 5). To address the same, 12 MPCE classes were clubbed into two categories— upper half (7th to 12th MPCE class) and lower half (1st to 6th MPCE class) and the ratio between the upper half and lower half was calculated. In addition, ratio of expenditure by the richest class (12th MPCE class) and the poorest class (1st MPCE class) was also estimated.

The disparity was strong across different MPCE classes in fruits, processed food, milk & milk products and eggs, fish and meat. In case of processed food, the disparity is lower in rural areas compared to urban areas, probably because of the fact that market for this segment largely covers the urban areas. So, higher affordability in conjunction with accessibility in the rural areas would induce greater consumption. In terms of nutrition from animal based protein, the situation does not seem to be favourable in rural areas because in case of fruits, milk & milk products, and, egg, fish and meat; the inequality was relatively higher in the rural areas.

Figure 5: Expenditure inequality of various food items.

Quantity of staple vis-à-vis animal protein consumed across MPCE classes

Further, an analysis of the population and quantity consumed across the MPCE classes in terms of staple food items visà-vis animal protein based food articles provides interesting insights. Among all  commodities given in Table 2, the proportionate quantity of cereal consumed had borne a good correspondence with their share in population across MPCE classes. However, in case of pulses and oil, the share of total quantity reported was slightly less than the population share in bottom 40 percent of MPCE classes. The inequality in terms of share in total quantity and population rose sharply in liquid milk, egg, fish & meat consumption— amongst these, the inequality was highest in liquid milk. Bottom half of total population in MPCE classes accounted for less than one third (29 percent) of total liquid milk consumed in rural areas. The same was marginally higher in urban areas (33 percent). On the other hand, top 20 percent of population in MPCE consumed about one third of total quantity of liquid milk in rural as well as urban areas.

The same pattern has been emerging even in egg and fish & meat consumption—indicating that food articles of animal origin are still not that affordable to the lower and lower-middle class people.

If we navigate further into it, the inequality was much higher in case of milk products. Bottom 20 percent of population in MPCE classes accounted for about a meagre 5 percent of total quantity of milk consumed in rural and urban areas, whereas the top 20 percent of population consumed 41 percent in rural areas and 50 percent in urban areas respectively. These findings lead to an argument that while the country has surpassed the global nutritional standards in terms of per capita availability of milk, much needs to be done to alleviate inequality in milk consumption among cross-section of the population. The above findings highlight that the nutrition from animal-based protein is still out of reach for majority of our population—be it rural or urban.

Table 2: Percentage distribution of population and quantity of different food items across MPCE classes.

MPCE Class Population Quantity
Cereal Pulses Oil Liquid Milk Milk products Egg Fish & Meat
0-5 0-5 0-5 0-5 0-5 0-5 0-5 0-5 0-5
5-10 5-10 5-10 5-10 5-10 5-10 5-10 5-10 5-10
10-20 10-20 10-20 10-20 10-20 10-20 10-20 10-20 10-20
20-30 20-30 20-30 20-30 20-30 20-30 20-30 20-30 20-30
30-40 30-40 30-40 30-40 30-40 30-40 30-40 30-40 30-40
40-50 40-50 40-50 40-50 40-50 40-50 40-50 40-50 40-50
50-60 50-60 50-60 50-60 50-60 50-60 50-60 50-60 50-60
60-70 60-70 60-70 60-70 60-70 60-70 60-70 60-70 60-70
70-80 70-80 70-80 70-80 70-80 70-80 70-80 70-80 70-80
80-90 80-90 80-90 80-90 80-90 80-90 80-90 80-90 80-90
90-95 90-95 90-95 90-95 90-95 90-95 90-95 90-95 90-95
95-100 95-100 95-100 95-100 95-100 95-100 95-100 95-100 95-100
0-5 0-5 0-5 0-5 0-5 0-5 0-5 0-5 0-5
5-10 5-10 5-10 5-10 5-10 5-10 5-10 5-10 5-10
10-20 10-20 10-20 10-20 10-20 10-20 10-20 10-20 10-20
20-30 20-30 20-30 20-30 20-30 20-30 20-30 20-30 20-30
30-40 30-40 30-40 30-40 30-40 30-40 30-40 30-40 30-40
40-50 40-50 40-50 40-50 40-50 40-50 40-50 40-50 40-50
50-60 50-60 50-60 50-60 50-60 50-60 50-60 50-60 50-60
60-70 60-70 60-70 60-70 60-70 60-70 60-70 60-70 60-70
70-80 70-80 70-80 70-80 70-80 70-80 70-80 70-80 70-80
80-90 80-90 80-90 80-90 80-90 80-90 80-90 80-90 80-90
90-95 90-95 90-95 90-95 90-95 90-95 90-95 90-95 90-95
95-100 95-100 95-100 95-100 95-100 95-100 95-100 95-100 95-100

Note: Figures in bracket indicate cumulative percentage.


Elasticity of different food items

To take the above observations forward, the elasticity of different food items with respect to total monthly expenditure has been estimated (Table 3). Elasticity coefficients reflect the percent change towards specific food items with one percent change in total household expenditure  under the condition of “other things remaining same”. The curve estimation procedure has been used to produce regression statistics for different models.

The expenditure elasticity for basic food items—as mentioned earlier—cereals, pulses and pulse products, edible oil, sugar, vegetables and spices were inelastic both in rural and urban areas, albeit with varying magnitude. Expenditure towards fruits (fresh and dry) was highly elastic in rural as well as urban areas. In case of egg, fish and meat, it was elastic in rural areas, but inelastic in urban areas. The elasticity of beverage was close to unity in both the areas.

Similarly, the elasticity coefficients for processed food suggest that the demand for processed food increases concomitantly with the rise in per capita expenditure in rural and urban India. The expenditure elasticity for milk and milk products was more than unity in rural area while it was almost unity in urban areas—implying that with rise in per capita expenditure, the growth in demand of milk and milk-based products would be proportionately higher in rural areas compared to urban areas.

Table 3: Elasticity of different food items.

Sector Item Linear Semi-Log Inverse Quadratic Double-Log
Rural Cereals 0.246 (0.858) 0.313 (0.987) 0.245 (0.929) 0.371 (0.957) 0.312 (0.955)
Pulses & pulse products 0.491 (0.942) 0.597 (0.991) 0.443 (0.839) 0.660 (0.993) 0.577 (0.986)
Milk & milk products 1.044 (0.952) 1.252 (0.971) 0.905 (0.78) 1.389 (0.999) 1.366 (0.937)
Sugar 0.586 (0.935) 0.716 (0.992) 0.531 (0.84) 0.809 (0.997) 0.702 (0.978)
Edible oil 0.467 (0.903) 0.583 (0.998) 0.444 (0.89) 0.676 (0.984) 0.582 (0.962)
Egg, meat &fish 1.001 (0.981) 1.174 (0.959) 0.84 (0.755) 1.187 (0.996) 1.216 (0.950)
Vegetables 0.431 (0.916) 0.534 (0.997) 0.402 (0.87) 0.619 (0.994) 0.522 (0.981)
Fruits 1.34 (0.983) 1.548 (0.932) 1.076 (0.693) 1.568 (0.996) 1.691 (0.954)
Spices 0.554 (0.915) 0.684 (0.992) 0.512 (0.853) 0.796 (0.993) 0.675 (0.973)
Beverages 0.937 (0.959) 1.115 (0.966) 0.80 (0.764) 1.216 (0.998) 1.112 (0.974)
Processed food 1.144 (0.978) 1.228 (0.802) 0.804 (0.528) 0.902 (0.998) 1.013 (0.988)
All food items 0.716 (0.976) 0.846 (0.967) 0.608 (0.768) 0.879 (0.999) 0.804 (0.992)
Urban Cereals 0.181 (0.661) 0.259 (0.947) 0.171 (0.922) 0.390 (0.976) 0.264 (0.922)
Pulses & pulse products 0.26 (0.674) 0.371 (0.952) 0.243 (0.916) 0.555 (0.981) 0.385 (0.914)
Milk & milk products 0.616 (0.853) 0.796 (0.992) 0.484 (0.820) 1.038 (0.995) 0.891 (0.918)
Sugar 0.226 (0.630) 0.329 (0.934) 0.222 (0.95) 0.500 (0.960) 0.346 (0.883)
Edible oil 0.271 (0.691) 0.383 (0.965) 0.253 (0.942) 0.555 (0.962) 0.403 (0.903)
Egg, meat &fish 0.531 (0.841) 0.690 (0.990) 0.425 (0.838) 0.898 (0.983) 0.754 (0.912)
Vegetables 0.331 (0.774) 0.447 (0.980) 0.282 (0.878) 0.621 (0.985) 0.457 (0.948)
Fruits 1.006 (0.967) 1.181 (0.928) 0.652 (0.632) 1.310 (0.998) 1.294 (0.964)
Spices 0.268 (0.682) 0.382 (0.961) 0.254 (0.948) 0.554 (0.956) 0.404 (0.894)
Beverages 0.761 (0.961) 0.907 (0.953) 0.514 (0.684) 1.011 (0.998) 0.916 (0.978)
Processed food 1.404 (0.980) 1.457 (0.735) 0.715 (0.396) 1.067 (0.999) 1.247 (0.993)
All food items 0.628 (0.966) 0.747 (0.952) 0.424 (0.686) 0.823 (0.998) 0.717 (0.994)

Note:  1) Figures in bracket indicate R-Square,

            2) All the values are significant at 1% level,

            3) The highlighted cells denote the best fit model

Economic growth, changing life-style, improvement in communication and connectivity and urbanisation leads to change in consumption pattern in rural and urban India. With rise in disposable income/expenditure, the traditional cereal based foods make way for noncereal based high-valued foods and nonfood items. In rural India, about 90 percent of population still spent more than 50 percent of total expenditure on food items, whereas about 60 percent of population spent more than half of total expenditure on food articles in urban India.

The disparity in consumer spending was relatively less in rural India in comparison to the urban India. With rise in per capita expenditure, the relative share of food expenditure declined both in rural and urban India, albeit the reduction was sharp in urban India. Cereal, vegetables, milk and milk products, and, processed food occupied major share in food basket. The higher disparity has been witnessed in consumer spending on milk and milk products, egg, fish and meat, fruits (fresh and dry) and processed food, substantiated by elasticity values of these items.

Another sector, that is, processed food, has been gaining prominence. However, the higher proportion of spending on processed food has been witnessed in top 2–3 MPCE classes. The two-way analysis of population and quantity across MPCE classes shows that the high valued and protein rich food is still unaffordable to the population belonging to lower and middle income groups in the country.