Archive for February 6th, 2008

Consumption distribution in India

February 6, 2008

GDP for Indian economy in 2006-07 has been revised upwards to 9.6% (from 9.4%). There is a wide discussion in the media over this huge growth. The revision report is here.

It is nice to see CSO expanding its datasets and trying to be more regular. This time they have given a break-up of the Trade, Hotels and Restaurant category which contributes 16-17% of GDP.

However, what caught my eye is the % distribution of consumption in India (statement 5.2). GDP can be calculated in three waysand the expenditure-wise approach has a category called personal final consumption expenditure. Earlier break-up of this was not available and now CSO has given the same. I have shortened the table and here is what it looks like:

1999-00

2003-04

2004-05

2005-06

2006-07

1 food, beverages & tobacco 51.5 43.6 42.1 42.4 42.7
2 clothing & footwear 5.3 5.1 5 4.7 4.5
3 gross rent, fuel & power 11.4 12.5 12.9 12.6 12
4 furniture, furnishings, appliances & services 3.3 3.4 3.6 3.7 3.9
5 medical care & health services 4.4 5 4.9 4.7 4.4
6 transport & communication 13.1 16.1 16.8 17.3 17.5
7 recreation, education & cultural services 3.4 3.9 4.1 4.1 4.2
8 miscellaneous goods & services 7.8 10.4 10.5 10.4 10.8
Total Consumption 100 100 100 100 100
  • The % of expenditure on food in total consumption has gone down. This is in line with economic theory
  • The decline is maximum in food category, followed by clothing and footwear.
  • People are spending more on transport & communication, recreation, furniture and home appliances. Again, as incomes have increased, we see movement of expenditure to these categories
  • The break-up is actually quite a detailed one and one gets some more interesting findings. Like within transport and communication expenditure is on operation of the personal transport equipment (means maintaining vehicles), communication (mobile phones) etc
  • Within the food category, the decline is across most food items – cereals,bread, pulses etc. The categories which have increased is the humble potato, beverages, pan & intoxicants(hmm alcohol consumption seems to be picking up), and hotels and restaurants.
  • It also tells me that rising food prices will not have that much effect on inflation but rising fuel prices would.

Economics of migration

February 6, 2008

Looking at the recent events in Mumbai, I have written on economics of migration in today’s Mint edition.

Migration has enormous benefits but to make it workable is a mighty task.

Assorted Links

February 6, 2008

1. Ajay Shah continueshis excellent work on MS bid for Yahoo.

2. Ajay Shah sayswrong calls by RBI. I don’t really agree to what he says. One has to understand the constraints that come in policymaking. As I said before, criticising regulators is easy pickings.

3. TTR continues to be optimistic about global growth. He also has a different (and welcome) view over subsidies in education.

4. MR points to confusion over credit crunch

5. WSJ points to a new speech from Richmond Fed President, Jeff Lacker where he says mild recession is possible

6. Econbrowser on predicting recessions


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