As incomes rise, households ditch government services

One of every five rupees spent by urban households in 2009-10 was on education, medical bills and transport, says the latest government data. This is a continuation of a trend stretching back 20 years or more of these critical services assuming an increasing proportion of the household budget.

Expenditure on these items for rural households is 14% of the total budget, says the data. The surveys carried out by the government’s National Sample Survey Organisation reveals the most authoritative picture of how consumers in rural and urban areas spend. It is from this data that the Planning Commission derives its key poverty measures, used as the basis for expenditures on social schemes.

The average rural household spent Rs 40 a month on education expenses in 2009-10, less than a quarter of their urban counterparts: Rs 162 a month. The average urban household spends around Rs 100 a month on medical bills.

“I see it as a good trend,” says economist Bibek Debroy. “To spend this proportion of the budget on these services, households must have a certain level of discretionary income left over after meeting necessities such as food. This discretionary income has risen,” he says. The share of food in household budgets has fallen, widely seen by economists as a sign of growing affluence.

But rural households still spend over half their monthly budget on food. Urban families spend nearly 40% of their budget on food. The rising share of education and health in the budget points to more households using private schools and hospitals, rather than cheap, subsidised government ones.

“Increasingly, even households in rural areas are moving to private delivery of health and education due to dissatisfaction with the level of services provided by government,” says Debroy.