India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

are expected to see income growth <strong>of</strong> 5.8 percent per year from 2005 to 2025, while rural
incomes are forecast to grow at a rate <strong>of</strong> only 3.6 percent per year. 30
Spending on Food
Regardless <strong>of</strong> where they live, <strong>India</strong>ns spend a substantial share <strong>of</strong> their disposable
income on food relative to other countries. For example, <strong>India</strong>ns’ average food
expenditures as a share <strong>of</strong> their total spending were estimated to be 8 percentage points
higher than those <strong>of</strong> residents <strong>of</strong> China in 2008. 31 However, the share <strong>of</strong> household
expenditures that both rural <strong>and</strong> urban dwellers spent on food fell in FY 2006/07 to
52 percent for rural households <strong>and</strong> 39 percent for those in urban areas (table 3.4). 32 In
some regions <strong>of</strong> <strong>India</strong>, there is a pronounced difference between urban <strong>and</strong> rural
households’ food expenditures. For example, in Maharashtra the absolute amount <strong>of</strong>
money that urban households spent on food was more than double that spent by rural
households in FY 2006/07. 33 Higher urban incomes provide one likely explanation for
this disparity; five times as many rural households as urban ones face food inadequacy
for some months <strong>of</strong> the year. 34
TABLE 3.4 <strong>India</strong>: Share <strong>of</strong> household consumer expenditures spent by rural <strong>and</strong> urban consumers on food <strong>and</strong>
beverages, FYs 2004/05–2006/07 (%)
July 2004–June 2005 July 2005–June 2006 July 2006–June 2007
Rural Urban Rural Urban Rural Urban
55 43 53 40 52 39
Sources: Government <strong>of</strong> <strong>India</strong>, NSSO, Household Consumer Expenditure Among Socio-Economic Groups <strong>India</strong>,
FY 2004/05, August 2007; Household Consumer Expenditure in <strong>India</strong>, FY 2006/07, January 2008; <strong>and</strong> Household
Consumer Expenditure in <strong>India</strong>, FY 2006/07, October 2008.
The portion <strong>of</strong> income that rural <strong>and</strong> urban households allocate to certain foods also
differs. A greater percentage <strong>of</strong> rural households’ expenditures is allocated to staple food
items. Food grains were the biggest food expenditure for rural <strong>and</strong> urban dwellers,
constituting 32 percent <strong>and</strong> 23 percent, respectively, <strong>of</strong> food expenditures in FY 2006/07
(figs. 3.4 <strong>and</strong> 3.5). 35 Expenditure on dairy for urban households was 18 percent,
compared to 15 percent for rural households. The greater income <strong>of</strong> urban households
allows for greater shares <strong>of</strong> nonstaple foods. For example, urban households spent about
15 percent <strong>of</strong> their food budget on beverages, refreshments, <strong>and</strong> processed foods, while
rural households spent slightly less than 8 percent on these items in FY 2006/07.
30 McKinsey Global Institute, “The ‘Bird <strong>of</strong> Gold,’” May 2007, 11.
31 Estimates included consumer expenditures <strong>of</strong> food, beverages, <strong>and</strong> tobacco. EIU, <strong>India</strong> Food,
November 11, 2008.
32 The survey covered the period July 2006 through June 2007. Government <strong>of</strong> <strong>India</strong>, NSSO, Household
Consumer Expenditure in <strong>India</strong>, FY 2006/07, October 2008.
33 Government <strong>of</strong> <strong>India</strong>, NSSO, Household Consumer Expenditure in <strong>India</strong>, 2006/07, October 2008.
34
In FY 2004/05, according to the government <strong>of</strong> <strong>India</strong>, 2 percent <strong>of</strong> <strong>India</strong>’s rural households faced food
inadequacy, compared with 0.4 percent <strong>of</strong> urban households. Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance,
Economic Survey 2007–08, n.d., 246. By international st<strong>and</strong>ards, however, <strong>India</strong>’s rates <strong>of</strong> food inadequacy
are much higher. For example, the World Food Programme recently reported that 35 percent <strong>of</strong> <strong>India</strong>ns are
food insecure <strong>and</strong> 20 percent are undernourished. World Food Programme, “Countries: <strong>India</strong>,” 2009. It is
likely that more <strong>of</strong> these food-insecure <strong>and</strong> undernourished individuals live in rural areas than in urban areas.
35 Government <strong>of</strong> <strong>India</strong>, NSSO, Household Consumer Expenditure in <strong>India</strong>, 2006/07, October 2008.
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