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The Pattern and Determinants of Indian Household Consumption Expenditure

on Education and Health, 2005-12
Article · December 2020
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Kala Sarovar ISSN: 0975-4520
(UGC Care Group-1 Journal) Vol-23 No.01 November-December 2020
The Pattern and Determinants of Indian Household

Consumption Expenditure on Education and Health, 2005-12
1
Dr. Dyuti Sinha, 2Dr.Maniklal Adhikary
1
Faculty of Economics, Department of Commerce, The Bhawanipur Education Society
College, dyuti.sinha@gmail.com,
2
Professor of Economics, The University of Burdwan, drmaniklaladhikary@gmail.com
Abstract
There is a strong relationship between consumption and development since the rising living standards have
enlarged and enriched the choices and the capabilities of the households. But due to the poorly distributed growth
in the post 19th century, inequalities have widened in depth and spread. Increasing standards of consumption are
usually accompanied with pressure of competitive spending and conspicuous consumption. India, a rapidly
developing and agrarian dominant economy has been bringing many changes in the socio-economic life of her
population since independence. Due to variations in natural resource endowments, physical and climatic
conditions, economic factors like income, prices and the extent of magnetization, demographic factors like
household size and degree of urbanization and cultural factors are likely to influence consumption expenditure
pattern. Such diverse socio-economic, demographic, and cultural factors are reflected in the widening inequality in
the distribution of consumption expenditure in India. These are the facts which motivate us to study the extent and
nature of changing allocation of expenses on various heads of consumption over time. This paper tries to explore
the pattern of household consumption expenditure allocation on two crucial human development indicators,
namely education and health. A country’s allocation of its public expenditures on developmental indicators
implies their relative significance in the country’s list of priorities in terms of its long-term development goals.
This study finds that there has been increasing expenses on education and health from the household level across
all three rounds of consumption expenditure but that implies that public provisioning of education and health has
been poor as a result of which people have to allocate more of their money on health and education. The
Government must try to allocate more funds for the public provisioning of healthcare and education facilities for
all.
1.INTRODUCTION
The global consumption expenditure has grown remarkably since 1950s. There is a strong relationship between
consumption and development since the rising living standards have enlarged and enriched the choices and the
capabilities of the households. But due to the poorly distributed growth in the post 19 th century, inequalities have
widened in depth and spread. Increasing standards of consumption are usually accompanied with pressure of
competitive spending and conspicuous consumption. In the less developed countries, it often has consequences in
terms of widening inequalities and deepening poverty and social exclusion. Economic development not only
brings about significant changes in the socio-economic and cultural life of a population, but it also influences the
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living standards in the long run. India, a rapidly developing and agrarian dominant economy has been bringing
many changes in the socio-economic life of her population since independence. Due to variations in natural
resource endowments, physical and climatic conditions, economic factors like income, prices and the extent of
magnetization, demographic factors like household size and degree of urbanization and cultural factors are likely
to influence consumption expenditure pattern. Such diverse socio-economic, demographic and cultural factors are
reflected in the widening inequality in the distribution of consumption expenditure in India. These are the facts
which motivate us to study the extent and nature of changing allocation of expenses on various heads of
consumption over time.
This paper tries to explore the pattern of household consumption expenditure allocation on two crucial human
development indicators, namely education and health. A country’s allocation of its public expenditures on
developmental indicators implies their relative significance in the country’s list of priorities in terms of its long-
term development goals.
India is well known for its diverse and wide topography. Rural urban differences in consumption patterns thus
giving rise to consumption inequality are very much persistent in India. Over the past decade, the services sector
in India has remained the most vibrant sector in terms of contribution to national and state incomes, trade flows,
FDI inflows, and employment. According to the Economic Survey 2015-16, the services sector contributed about
66.1 per cent of its gross value-added growth in 2015-16 becoming the important net foreign exchange earner and
the most attractive sector for FDI (Foreign Direct Investment) inflows.
Chart 1.1 Identifying the Key Cohorts of the Indian Consumers
Source: VII Pay Commission report, Capitaline, Goldman Sachs Global Investment Research, excerpted from The Asian consumer: India Consumer
Close-up, 2016
Despite the slowdown in the post crisis period (2010-14), India exhibited the fastest service sector growth with a
CAGR (Compound Annual Growth Rate) of 8.6 per cent followed by China at 8.4 per cent. In 2014, India’s
services sector growth at 10.3 per cent was noticeably higher than China at 8.0 per cent. The ILO report on
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‘Global Employment and Social Outlook: Trends 2015’ forecasts that job creation in the coming years will be
mainly in the service sector. This booming growth of service sector is therefore acting as a positive catalyst for
increased consumption expenditure by those directly and indirectly associated with the sector.
According to Goldman Sachs Report titled ‘ The Asian Consumer: India Consumer Close-up’ (2016), India has a
small ‘Urban Middle’ class, relative to its population, comprising largely of 10 million government employees
(including state-run enterprises), 0.85 million small and medium enterprise (SME) owners and 16 million working
professionals (with post-graduate or technical degrees). The Urban Middle is just 5 per cent of the total working
population of 519 million people and 17 per cent of the urban workforce. It is just 2 per cent of the total Indian
population.
According to the World Bank, Final consumption expenditure, etc. (measured as per cent of GDP) in India was
last measured at 70.17 in 2015. The Economic Survey 2015-16 also highlights that private final consumption
witnessed a growth of 7.6 per cent (AE) in 2015-16, as compared to 6.2 per cent achieved in 2014-15 indicating a
trend of increasing demand.
Chart 1.2 plots consumption expenditure as a percentage of Indian GDP over the period 1960-2016. From the
figure, it can be interpreted that consumption as a percentage of GDP is falling at 0.5 per cent which implies that
consumption is growing at a slower rate than GDP. This is very much desirable for any economy. Individually,
both GDP and consumption expenditure are growing but GDP is growing at a very faster pace and with respect to
that, consumption measured as a proportion of GDP is declining. This is a sign of economic progress and
development and it also implies the growth of investment which is much necessary for a country’s growth.
Chart 1.2: Final Consumption Expenditure, etc. (% of GDP) in India, 1960-2016

100
90 y = 89.78e-0.005x
Final consumption as a % of GDP
80 R² = 0.8531
70
60
50
40
30
20
10
0
year
Final consumption expenditure, etc. (% of GDP)
Expon. (Final consumption expenditure, etc. (% of GDP))
Source: World Bank national accounts data, and OECD National Accounts data files.
The booming consumption demand is mainly being created by the class of population engaged in the services
sector empowered with huge disposable income besides those involved in the trading and business activities. With
the global exchange of labour and services, the affluent and the middle-class Indian population has been exposed
to the Western world of consumerism. This exposure funded by the huge disposable income as well as easy credit
terms has been continuously raising the domestic demand by the Indian consumers.
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Table 1.1: Variation in Average MPCE across Sectors in India, 1993-94 to 2011-12
Characteristic 1993-94 2004-05 2009-10 2011-12
MPCE: Urban (Rs.): Current Prices 458.04 1052.36 1785.81 2399.24
Growth rate (per cent, over the previous round) - 129.75 69.70 34.35
Annual average growth rate (per cent) - 11.80 13.94 17.18
Price deflator for urban sector* 173 338 503 599
MPCE: Urban (Rs.) at Constant Prices (1987-88) 264.76 311.35 355.03 400.54
URBAN
Annual average growth rate (per cent) at constant
prices 1.59 2.80 6.41
MPCE: Rural (Rs.): Current Prices 281.4 558.78 927.7 1278.94
Annual average growth rate (per cent) - 8.96 13.20 18.93
Price deflator for rural sector* 176 319 494 580
MPCE: Rural (Rs.) at Constant Prices (1987-88) 159.89 175.17 187.79 220.51
RURAL
Annual average growth rate (per cent) at constant
prices 0.86 1.44 8.71
Source: self-calculated based on inputs from https://data.gov.in/catalog/growth-mpceurp-current-and-constant-prices
*Price deflators for the years up to 2009-10 are taken from NSS Report No.538: Level and Pattern of Consumer Expenditure; they represent price indices for rural
and urban India with base 1987-88=100. For 2011-12, indices have been computed as a continuation of this series, with the help of CPI-AL for the rural sector and
CPI-IW for the urban sector.
Table 1.1 depicts the variation in MPCE across both rural and urban India at both current and constant prices over
a substantial period. The average annual growth rate of MPCE at current prices in urban India is found to have
accelerated most (17.18 per cent) during the period 2009-10 and 2011-12. But it is found that this increase in
consumption expenditure is mainly because of rising prices.
Chart 1.3: Trend in Average MPCE (Rs.) at Constant 1987-88 Prices

Urban India Rural India
y = 233.43e0.1373x
R² = 0.9952
450
400 400.54
355.03
350 311.35 y = 142.51e0.1034x
300 264.76 R² = 0.9668
250
175.17 187.79 220.51
200 159.89
150
100
50
0
1993-94 2004-05 2009-10 2011-12
Source: self-calculated based on data from https://data.gov.in/catalog/growth-mpceurp-current-and-constant-prices
When deflated to constant prices of 1987-88, it is found that with the passage of time, average MPCE at constant
1987-88 prices has grown at by 13.7 per cent rate in Urban India compared to 10.3 per cent rate of growth in rural
India. Exhibit 1.4.3 traces the trend in average MPCE at constant prices over the period 1993-94 and 2011-12.
Given these facts, it is particularly important to study the pattern of household consumption expenditure on some
of the principal human development indicators: health and education.
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2.1 LITERATURE REVIEW
Pattern of Expenditure on Education: Determinants and Trends

Duraisamy (2000) in a study of returns to education in India finds that the private rate of return to education
increases up to secondary level though the returns 6 to primary schooling are extremely low. He also finds that
returns are generally higher in rural than in urban areas and are higher for women than men (at least at the middle,
secondary and higher secondary levels of education). There are few other known studies of returns to education in
India (see Psacharopoulos and Patrinos (2004)).
In a NCAER study by Tilak (2002) to identify the determinants of household education expenditure in rural India
using the survey data for HDI (1994), the extent of household expenditure on education by different groups of
population, the elasticity of household expenditure on education to changes in household income on the one hand
and government expenditure on education on the other and the determinants of family expenditures on education
were studied. It has been found that there is nothing like 'free' education in India. Household expenditures on
education are sizeable; households from even lower socio-economic background—Scheduled Castes/Tribes, low
income groups—all spend considerable amounts on acquiring education, including specifically elementary
education, which is expected to be provided free to all by the State. Important items of household expenditures
consist of books, uniforms, and fees. Even in the case of government primary and upper primary schools, students
are found to be paying huge amounts of fees—examination and other fees. It is also found that households do not
discriminate much against spending on girls' education (which is contrary to Chaudhuri and Roy, 2006),
substantial differences exist in household expenditures between expenditure on children attending government
schools, government-aided schools and private schools. Among the determinants of household expenditures,
household characteristics— particularly household income and the educational level of the head of the
household— are found to be important. Other important determinants include demographic burden of the
household (size of the household), caste and religion. School related variables chosen—the incentives such as
mid-day meals, uniforms, textbooks, and stationery, etc., and the availability of school within the habitation—are
also quite important. Coefficients of elasticity clearly show that government expenditures and household
expenditures do not substitute each other, instead they complement each other. So, if the government wishes to
mobilise household finances for education, it is important that the government increases its own allocation to
education considerably. Conversely, and more clearly, if government budgets on education are reduced, household
expenditures may also decline resulting in severe under-investment in education.
Tilak (2002) used HDI survey data on rural India, to estimate coefficient of elasticity of household expenditure on
education to (a) government expenditure on education, and to (b) household income. The positive, statistically
significant, and near unity value of the coefficients of elasticity indicated that household expenditures and
government expenditure on education complement each other. Increase in government expenditure would induce
households to spend more and more on education, thus leading to a significant rise in the total expenditure on
education in India. Secondly, household expenditures were also found to be positively elastic to household
economic levels. But the coefficients, though statistically significant, were small in value. It means that a one-unit
increase in household incomes would result in a less than proportionate increase in household expenditure on
education. This is indicative of the strong relationship between poverty and education (Tilak 2000b).
Lancaster, Maitra, and Ray (2003) find significant evidence of gender bias in education expenditures in rural
Bihar and Maharashtra amongst 10-16-year olds but not amongst 6-9-year olds. Kingdon (1998) in one of the few
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studies considers the impact of returns to education on the investment of households in education. She considers
this issue in the state of Uttar Pradesh in India by decomposing the gross gender differential in earnings using the
Blinder-Oaxaca method. She concludes that in addition to labour market discrimination, girls face lower returns to
education. In addition, she finds that ‘contrary to the conventional pattern, returns to the first five years of
education are exceptionally low in urban India, both for men and women, and that returns generally rise with
education level.’
Kingdon (2005), using the same dataset as Tilak asks, ‘Where has the gender bias gone?’ Analysing household
expenditures on education by state, she finds that in the basic education age groups, the discriminatory mechanism
is via differential enrolment rates for boys and girls. Most studies to date, she argues, are unable to pick this up
because they use aggregated household expenditures and therefore suffer from aggregation bias. Also, these
studies use OLS estimation, which fails to allow for the large number of zero expenditures on education.
Chaudhuri and Roy (2006) examined the gender gap in educational expenditure in two states of north India
using the data on education from the Living-Standard Measurement Survey (1997). Intra-household allocation of
educational expenditure constitutes an important channel through which parental discrimination between the boy
and the girl child manifests itself within the family unit. Inappropriate econometric tools may lead to a rejection of
gender bias even when it exists and hence give rise to faulty policy recommendations. Using Heckman's sample
selection model, they find that there are significant gaps in the educational expenditure directed at girl’s vis-a-vis
the boys within the family unit. This discrimination may be either through choice of non-enrolment of girls or
through lower expenditures on her schooling conditional on enrolment. Using controls for caste, religion, and the
level of development in the community, the paper finds that the size and extent of this gap differ across the age
groups of children. The results, in general, are found to be more robust when information is used at the individual
level rather than at the household level. The study revealed that the lower allocation of household resources
towards the females has its roots in the pro-son attitude that is entrenched in our culture. Governmental
interventions can play a complementary role in eradicating this norm. The result with respect to caste homogeneity
in Uttar Pradesh indicates that the local governments need to play a more active role in eradicating age-old
practices within some dominant communities of ignoring education of the females. Improving the access to
schools through the construction of all-weather roads could also go a long way in bringing children to school.
Kambhampati (2008) analyses whether the amount households spend on education depends upon the returns to
education prevalent in the region in which they live. To this end, the author estimated rates of return to education
separately for boys and girls in 33 states and UTs in India. These rates of return were then included in their
education expenditure model. The results clearly indicated that the rate of return to education was highly
significant in increasing the amount spent on education by the household both for boys and girls. However, the
author found that the impact of this variable was much larger at secondary level and for girls. She lists the limited
literature available on returns to education in India which are as follows.
 National Accounts Statistics in India reveal that household expenditures on education are sizeable.
Thus, Tilak (2002) found that households spent approximately Rs.387 per annum even on children
in free elementary education in India in 1994. The typical rural household spent Rs.341 per child
per year on primary education and Rs.474 per annum on a child in upper primary school.
 Using the NCAER data on household expenditure, Tilak (2002) concludes that discrimination
against girls varies by state. In fact, he argues, that it is largely confined to 4 states – Haryana,
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Maharashtra, Punjab and Rajasthan. However, Subramanian and Deaton (1991), analysing this issue
on children in rural Maharashtra, find no evidence of gender bias in education expenditures on 5-9-
year olds and only weak evidence amongst 10-14-year olds.
In a paper by Rikz and Owusu-Afriyie (2014) the determinants of household expenditure on children’s education
are studied using data extracted from the 2010/2011 Egyptian Household Income, Expenditure and Consumption
Survey. Specifically, the paper focuses on the income effect and the effect of other household characteristics on
the patterns of educational expenditure allocation among school-age children. Applying the ordinary least squares
and the generalised method of moment estimation techniques, the paper finds that expenditure on children’s
education significantly increases with increasing of levels household income. Furthermore, the paper finds that
household head’s level of education has an increasingly positive and significant effect on expenditure on
children’s education, with households in which the heads have received at least college education spending the
most on children’s education. Based on the findings, the paper strongly recommends that children from
households, which are less endowed with financial resources and human capital be given educational subsidy or
scholarship.
Chandrasekhar et al. (2016) analyse data from two rounds of NSSO surveys to provide estimates of expenditure
on higher education and loans availed for higher education. The average share of expenditure on higher education
out of total household expenditure was found to be 15.3 per cent and 18.4 per cent for rural and urban households
who participate in higher education. This average was higher in the southern states since individuals from these
states are more likely to be enrolled in private unaided institutions where fees are higher and are more likely to be
pursuing technical education. For reasons like mentioned above, individuals from southern states are more likely
to have outstanding borrowings for education. At the all India level, poorer households are less likely to borrow
possibly because they are risk averse and uncertain about future returns. They however found that individuals
from lower quintiles of the distribution of consumption expenditure were more likely to get fee subsidies or
scholarships, indicating that such schemes reach their intended beneficiaries. One metric that should be tracked at
the policy level is the reliance on non-institutional source of finance and moneylender. In conclusion, they also
highlight the need for additional research on the relative importance of credit constraints vis-a-vis employability in
the decision to pursue higher education. They also pointed out some drawbacks of the information that the NSS
data provides. As per estimates from NSSO's 2011-12 survey of consumption expenditure, the share of
expenditure on education in total monthly expenditure is 3.1 per cent and 5.7 per cent in rural and urban India.
This number is indeed higher if focus is only on households where an individual is pursuing higher education.
However, neither the survey of consumption expenditure nor the survey on social consumption (education) has
any information on sources of financing the education. Existing surveys do not inform us on those who are
financially excluded i.e. those who wanted to avail a loan from the formal institution but were unable to do so.
Bayar and Ilhan (2016) had two objectives: One were to examine the determinants of education expenditure of
Turkish households and the other was to reveal the impact of the different income groups on the education
expenditures. Household Budget Survey (HBS) for the years 2002, 2010 and 2013 conducted by Turkish Statistic
Institution (TurkStat) was utilized for Tobit model estimations. Findings showed that higher Household income
levels leads to higher educational expenditures. They also found that households with better human capital spend
more on their children’s education. However, income elasticity of education expenditure is higher compare for
poorer households compared to the richer ones, which means that poor are more sensitive to income changes with
respect to education expenditures.
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Rikz and Abou-Ali (2016) in their paper focuses on the income effect and the role of other household’s
characteristics such as head’s education and occupation levels, geographic residence, number of children in
different age categories and single parents’ status. The study finds that income is a key determinant for estimating
the magnitude of household’s expenditure on education. Household’s spending on education increases with
income between and within countries but with different magnitudes. Household’s with college degree and
professional occupation heads are likely to spend more on education for their children. This is highly observed in
Tunisia, Palestine, and Sudan. With respect to the number of school age children in household, the study suggests
high levels of spending on education when households have secondary school aged children. This is due to private
tutoring incurred to pass examination required for college entrance. In terms of geographical residence of
household, central provinces of the countries are spending more on children’s education as compared to northern
and southern provinces. This may be explained that heads living in centre provinces enjoys high income levels and
more education resources compared to their counterparts.
Studies on Determinants and Trends of Health Expenditure

The significance of health expenditure in the consumption expenditure basket of any average individual from a
developing country like India is immense. Although the Government supports by providing medical facilities, but
the supply is inadequate compared to the demand. Limited number of treatment centres, hospital beds, doctors,
diagnostic centres cannot cater the infinitesimal demands of the individual patients suffering from varied ailments.
Hence this creates ample opportunities for the private sector to cater the medical services to the patients, though at
exorbitant prices. This leads to excessive expenses made by the patients. Although the government is trying to
meet this demand in the distant rural pockets by opening primary health care centres followed by establishment of
specialized hospitals in the nearby towns and urban centres, the barriers of infrastructure inhibits the consumers in
making use of those services. Absence or poor state of transport and communication services, public transport,
quick connectivity often end up taking the lives of the patients. These issues should be dealt by the Government.
Expenses on health symbolize an important aspect of human development. Therefore, it is very essential to find
out the impact that rising income has on medical expenses which would signify the state of development of the
state in question. Before proceeding into the assessment, let us first study the existing literature available on trends
and determinants of health expenditure in India.
Srivastava and Mohanty (2010) used data from the World Health Survey, India, 2003, covering a nationally
representative sample of 10,750 households and 9,994 adults. Their paper examined the extent of agreement of
monthly per capita consumption expenditure and economic proxies (combined with the wealth index) with the
differentials in health estimates according to two alternative measures. It finds that economic differentials in
health and healthcare utilisation based on economic proxies are not like those of direct measures. There is an
urgent need to integrate an abridged version of the consumption expenditure schedule in population-based health
surveys. The results also indicate that the extent of agreement of the MPCE with the wealth index is weak. Only
31per cent of households are classified in the same quintile of MPCE and wealth index and the health estimates
are sensitive to these two measures. The findings of the study suggest that the MPCE varies directly with the
consumer durables, housing characteristics and housing quality, both in rural and urban areas. In general, the
MPCE increases with the number of consumer durables possessed by the households. However, the bivariate
differentials are not supported by further statistical test. The result of ordinary regression analysis suggested that
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only 13per cent variation in consumption expenditure is being explained by wealth index. However, the agreement
was relatively higher in urban than in rural areas.
Lorenz (2010) pointed out that Out-of-pocket (OoP) household health expenditures are among the most difficult
factors to measure in the context of National Health Accounts (NHA). Yet their measurement is important: OoP
household expenditures are typically the first or second largest source of health care financing in developing
countries. Their incorrect measurement can undermine the credibility of total health spending estimates and thus
NHA statistics, which are an otherwise important resource for policy makers. In most countries, private
expenditures account for the biggest margin of error in national health spending estimates and represent the most
substantial barrier to reliable international comparisons. Differences in accounting methods explain much of the
discrepancy across nations. To further the academic investigation of this important issue, this paper focuses on
OoP household health expenditures in Pakistan’s NHA and suggests steps toward estimating such expenditures
more effectively. OoP health expenditures in Pakistan include a high share (98 percent) of private health
expenditures. Overall, the private expenditures on health as a percentage of the GDP are small compared with that
of other countries. The share of the private expenditures on health as a percentage of total health expenditures is
relatively high in a global context.
Rout (2010) opined that socially constructed gender has significant influence on the health and Household Health
Expenditures (HHE). From the gender and health literatures, three things are clear: most of the studies are macro
in nature and based on secondary data; there is lack of research on the issues of gender and health, and out of
whatever researches exist, most focus on the female sex; and as health conditions are localised, there is a need for
research on the micro aspects of gender and health. In this connection, the author tried to study the gender bias (or
unbiased) in the HHE based on primary data collected from four districts of Odisha, India, by adopting multi-stage
random sampling method. To substantiate the gender bias (or unbiased) in health expenditure, multiple regression
analysis was used, and descriptive statistics were estimated. The result showed that there is a significant difference
between the average male and female HHE in rural, urban, and combined areas but not in tribal areas. A
comparative study of influence of gender on HHE in rural and urban areas showed that the influence of male on
the average HHE in rural areas is more than in urban areas whereas the influence of female on it is higher in urban
areas. But a comparative study of influence of gender on HHE in rural, urban, and tribal areas showed that the
influence of male and female on the average HEE is more in tribal areas than rural and urban areas. To reduce the
gender disparity in HHE long-term and sustained improvements in women’s and men’s health is required. This
may be brought out through expansion of education and economic opportunities among men and women.
Moreover, a strong mental and attitudinal change in both men and women is essential.
Mohanty et al. (2014) studied the pattern, growth, and determinants of household health spending in India and
compares the growth of per capita household health spending and per capita consumption expenditure over the
last two decades 1993–2012. The unit data of various rounds of the National Sample Survey (consumption
expenditure surveys 1993–1994, 2004–2005 and 2011–2012 and morbidity and health care surveys 1995–1996
and 2004) along with data from other secondary sources are used in the analyses. The patterns and growt h of
health spending were analysed by demographic, social and economic attributes and economic well -being was
measured using per capita consumption expenditure. Household health spending was subdivided into age
structure, population growth, real cost of medical care and increased hospitalization. Descriptive statistics,
fixed effect models and simple decomposition methods were used in the analyses. Results suggest that during
1993–2012, the annual growth rate of real per capita household health spending was twice (6.14 per cent) the
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real per capita consumption expenditure (2.60 per cent). On average, per capita household health spending
among the richest consumption quintile was at least eight times higher than that of the poorest consumption
quintile, linking household health spending to ability to pay. Household health spending was income inelastic.
Though medicine accounts for a larger share of household health spending, household spending on medical
tests is growing fast. We found a strong and positive gradient of age on per capita household health spending
after controlling for income and other confounders. During 1995–2004, the age structure, hospitalization and
real cost of hospitalization accounted for a 14, 42 and 26 per cent increase in the cost of hospitalization,
respectively.
Loganathan (2017) expressed his view that in India, health expenditure accounts for less than 5 per cent of the
Gross Domestic Product and the level of out-of-pocket (OOP) spending is 69.5 per cent of total health
expenditures. OOP expenditure exacerbates poverty and has a negative impact on equity and can increase the risk
of vulnerable groups slipping into poverty. This study was conducted to estimate the OOP expenditure on health
and catastrophic health expenditure and their socio-demographic determinants in a rural area of Maharashtra,
India. This was a prospective observational study involving monthly follow up visits, done in 180 households of
three villages under a primary health centre in Wardha district, India. Of the 180 families surveyed, 18.9 per cent
had catastrophic health expenditure over a period of one year. The median total out-of-pocket health expenditure
was Rs.1105.00 with median medical expenditure being Rs.863.85 and median non-medical health expenditure
being Rs.100.00. A total of 151 (83.9per cent) had enough money, 27 (15per cent) borrowed money and two
(1.1per cent) of them sold assets. The significant correlates for the ratio of out-of-pocket health expenditure to
total annual income of the family were the occupation of head of family, caste category and type of village. The
significant correlate for catastrophic health expenditure was type of village. It was found that around one-fifth of
the households had catastrophic health expenditure. People with no healthcare facility located in their village had
higher odds of having catastrophic health expenditure. Private providers were preferred for the treatment of acute
illnesses and medical college hospitals for hospitalization.
Having studied the discussed issues as highlighted by the various national and international authors, we can
summarize that the education and health expenditure of a household depends on a complex set of factors. There
are traces of gender bias in education expenses, with intensities varying across economic classes of the
households. Besides the micro level factors influencing and varying the consumption expenditure on various
commodities of consumption, there are certain factors which are typical of household education expenditure
decision. The amount of public investment on education made by the Government was found to be complemented
by household education expenditure at the elementary level. Returns to education is found to play a significant
role in household decision making in education expenses and they were found to be positively associated. Thus,
the factors which could be best derived from the NSSO data set on consumption expenditure have been used to
estimate the education expenditure determinants and their degree of influence.
2.2 OBJECTIVES OF THE STUDY
1. To study the pattern of allocation of monthly household consumption expenditure on Education across varied
socio-economic features of a household over the past three rounds.
2. To study the pattern of allocation of monthly household consumption expenditure on Health across varied
socio-economic features of a household over the past three rounds.
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2.3 RESEARCH METHOD AND DATA
In this study the union territories have been excluded and twenty-five States have been selected under the domain
of this study ranging from the period 2004-05 to 2011-12. The specific period of study, generally spanning for a
year is called ‘Round’ and these rounds are again categorised into ‘thick’ and ‘thin’ rounds of consumption
depending upon the depth and coverage of the data. The thick rounds of consumption expenditure also called the
‘quinquennial’ rounds are conducted by the NSSO every five years covering large sample size of approximately
about 1, 20,000. On the other hand, the thin rounds of survey are conducted in between the thick rounds which
cover about 35-40 per cent sample of the thick rounds of survey.
In this study, there are two re-categorizations which have been executed. First, the states have been clubbed
together and re-categorized into six distinct regions based on their geographic location. Second, since different
rounds have different classifications of the occupation, based on which the household types are considered, we
broadly re-categorize them into three categories of employment. In case of urban and rural India, the household
type denoting the occupation of the household has been major occupation of the household head. This has been
done as NSS surveys of consumption expenditure do not consider the occupation of each of the members of the
family roster. Moreover, the occupation categories also vary across rural and urban areas and slightly between
rounds. Thus, such manipulation was necessary to represent the data in one single frame. Under ‘regular
employment’ category, ‘self-employed’ and ‘regular wage/ salary earning’ has been clubbed for urban areas and
for rural areas ‘self-employed’ in agriculture and non-agriculture and ‘regular wage/salary earning’ have been
included. For ‘casual employment’, the irregularly paid casual labours in both agriculture and non-agriculture
have been considered. The rest have been categorized under ‘inactive employment’.
The unit level data for all three rounds of consumer expenditure have been extracted and selected for the 25 states
which have been categorized into six distinct geographical regions as follows.
Table 2: Regional Classification of the sample States

Western Rajasthan, Maharashtra, Gujarat
Central Madhya Pradesh, Chhattisgarh
Uttar Pradesh, Jammu &Kashmir, Himachal Pradesh, Uttarakhand, Punjab,
Northern
Haryana
Southern Karnataka, Andhra Pradesh, Tamil Nadu, Kerala
Eastern Bihar, West Bengal, Orissa, Jharkhand
North-Eastern Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland, Tripura
Source: Author’s Compilation based on Topographical Location of the States
The following models have been estimated using the data.
Model 1 (R, U): Pooled Regression Analysis: Measuring the impact of selected micro and macro factors in
determining the Education Expenditure, 2005-12
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 
ln education _ exp   0   1 MHCE   2 AGE   3 AGE
2 
  4 HHSZ   5 SEXD
  6 LITD   7 SOCGRPD   8 RELIGIOND   9 LANDOWNSHPD 
  10 TOTLANDPOS   11 REGSALD   12 ECONSTATD

  13 REGIOND   14 OCCUPD   15 STUDSECONDARY

 (Eq.1)
  16 STUDHS   17 STUDGRAD   18 EDUSCORE

  19 MALESTUDENTS   20 FEMALESTUDENTS   21 ROUND  u t 
where
STUDSECONDARY denotes number of children of the age of studying up to the secondary (10th Standard) level (age
group 6 to 15 years)
STUD HS denotes the number of children in the age group 16 to 18 years i.e. Students eligible up to Higher
Secondary
STUDGRAD represents the number of individuals in the age group 18 to 21 years denoted as Students up to
Graduation.
This categorization was done based on the assumption that all individuals in the age group 6 to 21 years have
expenses incurred on education. The cases of dropouts or children never availing school has been ignored
over here.
represents Education Score: the total years of schooling of all the members of the household. It
is expected that expenses on education should go up with increasing number of years of schooling of the
household.
denotes the number of male students in the age group 6-21.
denotes the number of female students in the age group 6-21.
The remaining explanatory variables have already been explained in the previous models.
The monthly education expenditure has been calculated from the data pertaining to the recall period of past
365 days which has been converted to a monthly average figure.
HYPOTHESIS 1: The null hypothesis H0 : i  0 is tested against the Alternative Hypothesis H1 : i  0 ,

 i  1(1)n. The null hypothesis tests whether the factors theoretically identified as determining factors behind
the expenditure on education have any significant influence in determining the monthly household expenditure on
the same.
Next to education, what households strive for, is medical services. The expenses incurred on health are composed
of two components: institutional medical expenditure (365 days recall period) and non-institutional medical
expenditure (30 days recall period). The institutional medical expenditure has been converted to monthly figure
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and has then been added to non-institutional medical expenditure to yield the monthly household health
expenditure. Thus, accordingly model 2 has been formulated as follows:
Model 2 (R, U): Pooled Regression Analysis: Measuring the impact of selected micro and macro factors in
determining the Health Expenditure, 2005-12
 
ln health _ exp   0  1 MHCE   2 AGE   3 AGE
2

  4 HHSZ   5 SEXD

  6 LITD   7 SOCGRPD   8 RELIGIOND   9 LANDOWNSHPD 

 10 TOTLANDPOS  11 REGSALD   12 ECONSTATD
 (Eq.2)

 13 REGIOND  14 OCCUPD  16 ROUND  u t 
where
health_exp is the monthly household consumption expenditure on medical services, both institutional and non-
institutional converted to 30 days recall period and all the other explanatory variables have their usual
abbreviations as described in the previous models.
HYPOTHESIS 2: The null hypothesis H0 : i  0 is tested against the Alternative Hypothesis H1 : i  0 ,

 i  1(1)n. The null hypothesis tests whether the factors theoretically identified as determining factors behind
the expenditure on health have any significant influence in determining the monthly household expenditure on the
same.
3. RESULTS AND DISCUSSIONS
Education expenditure is an important component of total monthly household consumption expenditure for
households with members who are studying. There is a common consensus that returns to education are positive.
India being a densely populated country with its age-old taboos and beliefs widely discriminates among its fellow
individuals. The country itself does not discriminate, but these discriminations at the micro level shape up the
country’s future. Women are at the centre of such gender discriminations. It has been believed since ages that
women are not required to receive much education as they would get married after an age and would be serving
their life in some other family in which they get married. Instead, following the patriarchal hegemony, men were
encouraged and facilitated to pursue education. Although now, there has been ample steps taken by the
Government and society to remove the discrimination but still it exists.
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Figure 3.1: Mean Proportion of Non-Food Expenditure allocated to Education,

2005-12
18.00
16.00 15.34
14.92
% allocation to Education
13.5313.64
14.00
11.90 11.7511.97
12.00 11.31 11.03
10.91
10.12 10.31 10.2410.54
9.58
10.00 8.89
8.37
8.02 7.80
8.00 6.87
6.00
4.00
2.00
0.00
lower- upper- lower- upper-
poorest middle affluent poorest middle affluent
middle middle middle middle
RURAL URBAN
61st Round 8.02 8.37 9.58 10.91 11.90 11.03 10.24 11.75 13.53 15.34
66th Round 7.67 8.37 9.38 10.76 12.52 10.53 10.52 12.34 14.50 16.39
68th Round 6.87 7.80 8.89 10.12 11.31 10.31 10.54 11.97 13.64 14.92
Source: Author’s calculations computed from NSS Unit Level Data for selected 25 States, 2004-05, 2009-10, 2011-12.
Let us study first the importance of education expenditure in the non-food consumption basket. These mean
proportions were tabulated based on current price figures on monthly household education expenditure and are an
indicative of the trend in proportion of education expenditure across expenditure quintiles.
From the figure 3.1, it is being seen that in both rural and urban India, the proportion of non-food expenditure
incurred on education gradually keeps on increasing with increasing economic status across all three rounds of
consumption. Over the three rounds of consumption, it is seen that proportion of non-food expenditure spent on
education has been either declining or remained stagnant across all expenditure classes in both rural and urban
India. It may also be noted that compared to urban India, rural India has experienced a sharp decline in proportion
of non-food expenditure allocated to education even in real terms. This implies that in real terms the education
expenses in rural may have gone down or the rural total non-food expenditure has increased at a much greater
pace than the rural education expenditure. On an average, the proportion of expenses on education are higher in
urban India than rural India. One major reason behind this phenomenon is the increasing cost of education from
private institutions in urban India are much prevalent than in rural India. Even though rural average monthly
household consumption expenditure is much below the urban average monthly household consumption
expenditure, urban people allocate more expenses on education than the rural ones. Moreover, the importance of
education to urban people is much more than the rural masses owing to the different structures of employment
options.
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To have a clear picture, let us consider the trend in monthly average household consumption expenditure on
Education in rural India (Figure 3.2).
3.2 Monthly Average Household Expenditure on Education in Rural India
Figure 3.2: Monthly Average Household Expenditure on Education in Rural India

1200.00
1000.00
Mean Education Expenditure (Rs)
800.00
600.00
400.00
200.00
0.00
middle- upper- middle- upper-
poorest poorer affluent poorest poorer affluent
class middle class middle
At Current Prices Deflated at 2000-01 constant prices
61st Round 76.45 115.84 165.02 237.12 426.27 70.08 106.19 151.26 217.39 390.75
66th Round 90.66 162.33 238.77 362.20 889.03 53.66 96.08 141.33 214.38 526.21
68th Round 155.19 259.27 373.85 583.18 1112.52 80.89 135.13 194.85 303.96 579.86
Source: Author’s calculations computed from NSS Unit Level Data for selected 25 States, 2004-05, 2009-10,
2011-12
From the figure 3.2, it can be inferred that in rural India, at constant prices of 2000-01, mean education
expenditure among the poorest (bottom 20per cent) quintile of the expenditure class declined from Rs.70.08 in 61 st
round to Rs.53.66 in the 66th round. However, in the subsequent 68th round, the education expenditure increased to
Rs.80.89. The same trend is followed by the poorer, middle class and upper middle class of the rural population as
well. This kind of trend might be the result of certain Govt. schemes like Sarva Siksha Abhiyan (SSA), etc. which
was remarkably effective during that period (2009-10). Later, the quality of education might have deteriorated
which has again led the rural population to incur much expenses on education. But this phenomenon was not
applicable for the rural affluent class. Their mean education expenditure constantly kept on rising over the three
rounds of consumption.
3.3R Pooled Regression Analysis: Determinants of Expenditure on Education in Rural India
Next, we try to find out the impact of selected micro and macro factors in determining the household expenditure
on education. From the table 3.3R, for rural India, it can be said that a typical Hindu household belonging to the
bottom 20 per cent of the rural expenditure class, with male literate head, self-employed in agriculture belonging
to the general caste with land holding in the western region in the year 2004-05 incurs Rs.37 towards monthly
household expenditure on education. Except the female head, all other variables are found to be significant for
rural India.
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The coefficients for the year dummy are negative in the following rounds imply that education expenses for such
kind of households have gone down drastically. This might be due to the various government schemes of
providing free education to the children. Even if household consumption expenditure is zero, these households
incur cost on education which implies the importance of education to such rural households has increased so much
in the recent years.
It is observed that the household’s education expenditure increases with the number of male and female students
in the household and the expenses are more for male children. This denotes the gender bias of the households in
favour of male children for education.
In terms of region, it is found that all other regions have higher expenses on education than the reference category
of western region. With the increase in the expenditure quintiles, the expenditure on education also increases
which is obvious. A typical rural household’s expenditure on education is found to increase significantly with
increasing education score of the household. The more educated a household is, the more it lays emphasis on its
education expenses.
It must be kept in mind, that since education is one of the principal indicators of economic development, the
government is also responsible for providing education through its public services. Hence the proportion of total
tax receipts or the national income that the government spends on such primary sectors like health and education
are particularly important.
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Source: Computed from NSS Unit Level Data pooled and price adjusted for selected 25 States, 2004-05, 2009-10, 2011-12 at
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the Rural level
3.4 Expenditure on Education in Urban India
Let us now attempt to study the pattern of education expenditure in urban India. The urban population being more
literate than the rural population is expected to lay greater emphasis on education, the indicator of which is
considered in terms of expenses incurred on education.
Figure 3.4: Monthly Average Household Expenditure on Education in Urban India

3000.00
Mean Education Expenditure (Rs)
2500.00
2000.00
1500.00
1000.00
500.00
0.00
61st Round 120.03 297.42 546.85 945.22 1823.08 103.85 257.32 473.13 817.81 1577.33
66th Round 176.39 385.17 640.94 1082.03 2216.70 102.55 223.93 372.64 629.08 1288.77
68th Round 249.51 513.84 856.57 1341.26 2610.53 126.01 259.51 432.61 677.40 1318.45
Source: Author’s calculations computed from NSS Unit Level Data for selected 25 States, 2004-05, 2009-10, 2011-12
From the figure 3.4, it can be inferred that in urban India as well, compared to the 61 st round, in 66th round, the
mean monthly household expenditure on education declined across all economic classes. The decline was lowest
for the bottom most economic class and was highest form the top most economic class in monetary terms at
constant 2000-01 prices. This observation where we find that cost of education has declined in 66 th round implies
that the Government must have taken certain subsidizing initiatives to support and universalize education across
economic classes. On the contrary, in the 68th round, the cost of education again increased from what it was in
2009-10 which implies that in this small span, the beneficiaries of education have increased their expenses on
education. This might be due to hike in the tuition fees in the private schools, or a rise in the price of stationaries
or might be due to students taking up private tuitions or due to private tutors increasing their remuneration.
3.4U Pooled Regression Analysis: Determinants of Expenditure on Education in Urban India
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Now, let us analyse the role of the identified micro and macro factors in determining the education expenditure in
urban India. From the output table 3.4U, it is found the income, age of the household head has significant positive
impact in determining the growth education expenditure in urban India.
Household size was found to have a negative impact on education expenditure which is obvious. More the number
of family members, less is the allocation per capita on education. With the increment of every additional member
in the urban household, education expenditure is supposed to go up by 15.2per cent.
Compared to the male headed households, female headed households had 7.01 per cent more expenses on
education which is to be noted. Women are supposed to be more liberal than men. But when it comes to allocating
education expenses. It is the men headed households who spend more on education though by a marginal
proportion.
Compared to General caste urban consumers, STs have 38.9 per cent lower education expenditure, SCs had 19.8
per cent lower education expenditure while OBCs had 9.2 per cent less expenditure on education.
Compared to urban Hindu households, urban Muslims households were found to incur 24.4 per cent lesser
expense on education. For rest of the religion categories the coefficients are insignificant.
In terms of land ownership, landless households were found to incur 11.16 per cent less expense on education than
the households which own land. Total area of land possessed was found to be statistically insignificant in
explaining the education expenditure.
Presence of a regular salaried member in the household came out to be insignificant in explaining the urban
education expenditure.
Economic status of the household, the region in which the household is located, and the occupation of the
household came out to be highly significant factors in determining the urban education expenditure.
Compared to the reference Western region, only the Central region had lower education expenditure by 6.25 per
cent. The Northern region was found to incur 44.53 per cent more expenditure on education, followed by North-
Eastern region (15.33 per cent). Thus, the Central region states were found to incur the minimum expense on
education.
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the Urban level
In terms of economic status, compared to the poorest urban quintile, the lower-middle quintile incurred 68.51 per
cent more expense on education, followed by the middle quintile (110.3 per cent), upper-middle quintile (144.56
per cent) and the affluent quintile (177.7 per cent).
In terms of occupation, compared to the reference category, self-employed, the regular wage/salary earners had
10.65per cent more expense on education, and casual labourers incurred 29.8 per cent less expense on education.
All other occupation categories except these three incurred 16.7 per cent more cost on education. Those who are
self-employed in urban areas probably have their own business set-up for which education is not a requirement.
Urban casual labourers have less remuneration compared to those who are self-employed or those who get regular
salary. Hence urban casual labours family expense on education is remarkably low among all categories. In
addition, their children probably avail the Government schools which reduces their cost incurred on education.
With every additional student in secondary level the household’s mean expenditure on education increases by 9.8
per cent. The presence of a student in the age group 16-18 increases education expenditure by 9.2 per cent and the
presence of a student in the age group 18-21 reduces the education expenditure by 12.9 per cent. This implies that
cost of education is high when students are of school going age. When they enter the college, the cost of education
falls.
Compared to an illiterate headed household, a literate headed household incurs 8.3 per cent more expenditure on
education. Only literates would encourage and would want to spend on education. The total years of schooling of
all the members of the household is found to have a significant positive effect on education expenditure. With
every additional year of schooling (eduscore), the education expenditure increases by 2.15 per cent.
Education expenditure is found to go up with the number of male and female students (aged 6-21). With every
unit increase in male student the education expenditure goes up by 19.57 per cent whereas the same goes up by
16.86 per cent. This shows the gender bias, however minimal, in terms of distribution of education expenditure
among the male and female students of the same family.
Time (round) dummy was also found to be highly significant. Compared to 2005 (61 st round), 2010 (66th round)
saw a decline in education expenditure by 54.68 per cent followed by 48.88per cent decline in 2012 (68th round).
Thus 2009-10 witnessed a notable decline in education expenditure in urban India.
HEALTH EXPENDITURE
Health is one of the primary indicators of human development. The expenses incurred on health gives an
impression on pattern of allocation and distribution of health expenses across varied income categories. Household
expenditure surveys are not a good measure for measuring the differential treatment of family members as it does
not capture information on the treatment seeking behaviour and its related list of variables. In this study the
variable which is our matter of concern is health expenditure. This variable has got two components: Institutional
Medical Expenditure and Non-Institutional Medical Expenditure. The non-institutional medical expenditure data
is available based on a 30-days recall period. But the institutional medical expenditure data is based on 365 days
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recall period. Hence, we convert it into a monthly figure and then add it up with its other counterpart to arrive at
aggregate monthly household health expenditure.
First, the share of health expenditure in total non-food expenditure is studied. From the figure 3.5, it is found that
in 2011-12, rural India exhausts about 27per cent of its total non-food expenditure on health services. In case of
urban India, in 2011-12, an average household allocates about 23per cent of its total non-food expenditure on
health.
Figure 3.5: Mean Proportion of Non-Food Expenditure allocated to Medical

Expenses 2005-12
30.00 28.23 28.01
25.72 26.61 26.55 25.58
24.21 23.98
25.00 22.96 22.35
% allocation to Medical
20.00 17.86
15.19 15.01 15.74
14.68
15.00 13.40 13.06 13.12 12.95 13.23
10.00
5.00
0.00
lower- upper- lower- upper-
poorest middle affluent poorest middle affluent
middle middle middle middle
RURAL URBAN
61st Round 15.19 14.68 15.01 15.74 17.86 13.40 13.06 13.12 12.95 13.23
66th Round 14.21 12.57 12.73 13.12 14.27 12.30 11.64 11.46 11.10 11.53
68th Round 28.23 25.72 26.61 26.55 28.01 22.96 22.35 24.21 23.98 25.58
Comparing between rounds, we find that while the health expenditure as a proportion of total non-food
expenditure in rural and urban India hovered around 16per cent and 13per cent respectively in 2004-05, it reduced
further in the next round. But the 68 th round experienced an upsurge in the share of medical expenses out of the
total non-food budget. The incidence of illness might have unexpectedly increased in 2011-12, for which a proper
expenditure allocation study is required.
3.6 Health Expenditure in Rural India
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Figure 3.6: Mean MHCE on Health across Expenditure Quintiles, Rural India
1600.00
1400.00
1200.00
Health Expenditure (Rs)
1000.00
800.00
600.00
400.00
200.00
0.00
61st Round 131.72 190.49 244.94 328.22 598.61 120.74 174.62 224.53 300.87 548.73
66th Round 142.89 223.87 298.15 403.76 928.24 84.57 132.50 176.47 238.98 549.41
68th Round 246.68 344.44 456.56 641.51 1409.73 128.57 179.52 237.96 334.36 734.77
From the figure 3.6, it is being seen that at constant 2000-01 prices, the rural mean expenditure on health across all
the expenditure quintiles varied from Rs.120.74 for the poorest class to Rs.548.73 on an average for the affluent
rural class. High expenses on medical have various implications. First, if people are not in sound health
conditions, i.e. they suffer from malnutrition then in general the medical expenses will be on a high owing to
frequent incidences of sickness. Second, some people might prefer private clinics and mode of treatment over
public hospitals, for them the medical expenses will be high. From the figure above, the 66 th round witnessed a
decline in mean household monthly expenditure on health compared to 61 st round across all economic classes.
This may be an implication of less incidences of sickness among the sample population, or better utilization of
medical services sourced from public hospitals and primary health care centres. As one moves up the economic
ladder, the medical expenditure also increases keeping at par with the rising economic status. This is obvious as
everyone avails services of that level which they can afford and sustain. In the 68 th round there was an increase in
average expenditure on health. There might be three possible explanations for this. First, incidences of sickness
might have gone up. Second, the cost of treatment has increased. Third, the Government hospitals and PHCs
might not be able to provide good service to the patients because of which they have to resort to private mode of
treatment. To summarize, in 2011-12, across the rural expenditure classes, the affluent were found to have
incurred medical expenditure which is about six times of that of the rural poorest class. This gives us a hint of the
persistent inequality in consumption expenditure.
3.6R Pooled Regression Analysis: Determinants of Expenditure on Health in Rural India

Let us proceed to analyse the impact of the causal factors in determining the household consumption expenditure
on health. Here a simple linear model has been considered. From the table 3.6R, it can be inferred that in rural
India, almost all variables were found out to be significant on determining the growth of health expenditure. We
find age of the household head has significant negative relationship in affecting the growth of health expenditure.
For a relative change in age, the absolute change in health expenditure is -1.5 per cent.
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Health expenditure was found to increase by 7.5 per cent with one-unit change in household size. That is certain.
More the number of members in a family, more is the health expenditure.
Compared to male headed households, female headed households had greater expense on health (by 4.3per cent
more). Compared to STs, the SCs, OBCs and General caste households incurred greater cost on health. This
implies that in rural India, the STs have the minimal incidences of sickness.
The religion dummy came out to be insignificant on terms of affecting the growth of health expenditure. Similarly,
land ownership dummy was also insignificant in determining the growth of rural health expenditure. Compared to
a rural regular wage or salary earning household, those without regular salary earner had 10.96per cent greater
expenditure on health.
Economic status dummy had significant positive effect on the growth of health expenditure. Health expenditure
grows at par with the economic status.
Compared to the reference Western region, almost all other Regions had lesser health expenditure except Southern
region. This might be because, either the incidences of sickness are less, or the cost of treatment are high in the
Western region.
Compared to rural households that are self-employed in agriculture, all other employment categories had larger
positive impact on the growth of health expenditure.
Literate dummy is found out to be insignificant in deciding the growth of health expenditure. Compared to 2005,
2010 witnessed 18.66 per cent decline in the health expenditure while nothing can be said about 2012 as its
coefficient is insignificant.
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the Rural level
3.7 Health Expenditure in Urban India
Next, we move to study the pattern of health expenditure in urban India.
Figure 3.7: Mean MHCE on Health across Expenditure Quintiles, Urban India
2000.00
1800.00
1600.00
Heath Expenditure (Rs)
1400.00
1200.00
1000.00
800.00
600.00
400.00
200.00
0.00
61st Round 142.87 263.09 402.37 613.80 1474.64 123.61 227.62 348.13 531.06 1275.86
66th Round 124.39 230.88 336.63 471.96 1024.62 72.31 134.23 195.71 274.39 595.71
68th Round 263.36 422.30 604.01 946.73 1725.51 133.01 213.28 305.05 478.15 871.47
From the figure 3.7, it has been found that across all urban economic classes, the mean health expenditure went
down in 66th round compared to 61st round at both current and constant prices. The decline is more pronounced
among the upper expenditure quintiles. Again, in a span of just two years, the 68 th round experienced an increase
in the urban health expenditure surpassing the 66th round figures across each economic class. This gross decline in
health expenditure in 2009-10 might have been due to better functioning of the public health care system which
people could utilize better or it might have happened due to lowest incidences of treatment seeking among the
urban population in 66th round compared to 61st and 68th round.
3.7U Pooled Regression Analysis: Determinants of Expenditure on Health in Urban India

We now move to table 3.7U, where the role of the micro and macro factors in determining the growth of health
expenditure is examined. At the micro level, the gender of the household head, the literacy status of the household
head was found to be insignificant in determining the growth of medical expenditure. Household income, age of
the household head, family size of the household was found to be significant in determining the growth of health
expenditure. Those urban households with land holdings were found to have 8 per cent more health expenditure
than those who did not own land. Those urban households which are not salaried incurred 6.78 per cent more
expenditure on health. Regional dummy was found to be partially significant for certain regions. Economic status
of the household was found to be highly significant in the growth of health expenditure. Higher a household’s
position in the expenditure quintiles, high is health expenditure and vice-versa.
In terms of occupation of the household, compared to those who are self-employed, regular wage/salary earning
and casual labour households had 8.4 per cent more health expenditure whereas those in occupation other than
these three had 12 per cent more health expenditure.
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the Urban level
Time dummy was found to be highly significant in determining the growth of urban health expenditure. Compared
to 61st round, the 66th round experienced a 26.6 per cent decline in the urban health expenditure and 68th round
experienced a decline of 19.57 per cent in urban health expenditure over the 61st round.
3.8 DISCUSSIONS
On the non-food front, the prime emphasis is laid on to health and education sectors which are the primary pillars
of human development. These two sectors are not only privately funded by the consumers but also funded by the
Government which is responsible as the principal facilitator of such services to its residents who pay taxes. So,
with public money, provision of such basic and essential services is must. In the budget of 2018-19, a total of
Rs.1.38 lakh crore has been allocated for health, education and social protection which is a 13per cent rise over the
previous year’s allocation of Rs.1.22 lakh crore in 2017-18. In the previous three years the allocation share of
budget towards education and health as a proportion of the GDP has been declining. According to the Economic
Survey, share of education expenditure was 3.1 per cent of GDP in 2012-13 which fell to 2.8 per cent in 2014-15
and registered a further drop to 2.4 per cent in 2015-16. Thus, the Government expenditure on education as a
proportion of the GDP has been decreasing consistently even though public investment in social infrastructure is
particularly important for economic progress. The accelerated growth in GDP is not being equally percolated to
the education and the health sector. Although in monetary terms the outlay for education sector has been
increasing but when measured in terms of proportion of the GDP, it is found that the share is on a decline. This is
not good for the economy. All developed economies spend about 6-7 per cent of their GDP on education.
Considering health sector, India currently spends over 1per cent of GDP on health, which is far below Singapore
which has the lowest public spend on health at 2.2per cent of GDP among the countries with significant universal
health coverage (UHC) service according to latest National Health Profile Data (2018). The Centre is trying to
improve the health sector by targeting the poor and those in need. It has launched the Pradhan Mantri Jeevan
Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) besides providing life cover
under Pradhan Mantri Jan Dhan Yojana (PMJDY) recently. Thus, ample initiatives are found to have been
initiated to cover a greater number of people under the medical insurance schemes of the government. At present,
the total expenditure on health is below 4 per cent of the GDP while the Government expenditure is below 1.3 per
cent of the GDP. The new National Health Policy (NHP) assures to increase this to 2 per cent by 2025 which was
already targeted in the last NHP (2002) but failed to achieve. The Centre also plans to launch its National Health
Protection Scheme (NHPS) -Ayushman Bharat with an aim to cover 10 crore poor families with an annual health
coverage Rs.5 lakh per family. This will probably be the world’s largest such government-run insurance scheme.
For an economy as huge as that of India, the Government needs to spend at least 4 per cent of its GDP in health.
Until and unless the quality of human capital improves, there is will be no sustained economic and human
development.
3.9 POLICY SUGGESTIONS
Given the fact, that the Government has been actively introducing many new schemes to improve the living
standards of the citizens, it is the need of the hour to ensure that such schemes and programs be implemented
123 | P a g e
effectively, and the targeted beneficiaries get what they are entitled to. For such implementation, effective
monitoring is necessary.
Ample measures and programs have been introduced by the government to remove poverty at the rural and urban
level. But eradicating the malady from the roots is not that easy. By now, the factors which are responsible in
contributing to the social malice has been well identified. Accordingly, many poverty eradication programs have
been introduced. Since the population is huge, a major problem that is faced is in identifying the real victims of
poverty and in bringing them under the scheme. Thus, it should be ensured that the welfare measures for targeted
beneficiaries should reach them effectively. Intertwined with poverty is the problem of malnutrition. The
Government has been responsibly trying to cope up with this problem by way of providing the basic minimum
food to the poor and needy through the Public Distribution System. But the system suffers from many drawbacks
in reaching to the targeted beneficiaries. Remoteness, social oppression, illiteracy leading to unawareness are
mainly responsible for the non-receipt of the benefits of the Government schemes among the poor and needy
people. Therefore, targeted implementation of the Government schemes with efficacy and monitoring is very
much essential. Social awareness and intervention are required to reduce the consumption of goods of habitual
consumption leading to health hazards. People should be made more aware about the health hazards of consuming
such unhealthy items. Imposing penalty or increasing the tax rate on such commodities of addiction were hardly
effective in reducing their consumption. The PDS should cater only to those who need it. Taking income as the
sole criteria of determining the beneficiaries is not a good idea as many resort to deceitful ways of getting false
income certificates and recommendations from ruling political affiliations to be included under the schemes.
Therefor political intervention in the working of the administration must be stopped. Moreover, those in charge of
implementing the schemes should be honest, diligent and self-sufficient so that they do not depend on private
agencies or outsource their work at the ground level. This often leads to the leakage and thereby the deserving
poor beneficiaries are deprived and those with political influence and dishonest means get enrolled for the
schemes.
Economic inequality is a major concern for India. Over the years, although poverty has declined substantially,
economic inequality has reduced marginally. This is due to poor targeting of the schemes introduced by the
Government for reducing poverty and inequality and the widespread corruption and non-monitoring of the
schemes. The gap between the rich and the poor has widened over time. The Government has not been much
successful in transferring the tax collections from the rich and redistributing them among the poor due to the
corrupt practices and poor targeting and mapping of the beneficiaries. The tax structure is such that many tax-
payers hide their actual income in order to evade taxation. The huge unorganized sector comprising of the
informal sector gets excluded from the purview of taxation. Instead of taxing the income, end-user taxation should
be introduced. Steps should be taken to bring the unorganized sector under the tax system and the rate of tax
should be revised and nominal. This will lead to a more inclusive growth.
3.10 CONCLUSION
To remove poverty and inequality, the pillars of human development should be given prime importance.
Government intervention and participation as a facilitator of quality education and health services is very much
needed. Geo-mapping of the population should be clubbed with allocation and establishment of world-class
124 | P a g e
infrastructures for institutions of health and education. For quality facilities to reach at the remotest corner of the
country the development the transport system in such areas in concurrence with social security, protection and
superfast connectivity (both virtual and physical) with the outer world is necessary. With the intervention of
political powers into the system and lack of proper infrastructure, India has lost many good doctors and teachers
from the mainstream who are the real architects of human capital. The scope of doing independent work is limited
here because of which many competent citizens have moved to foreign countries leading to brain-drain.
In education and health separately, the Government should allocate at least 4 per cent of its GDP every year.
Improvement and extension of health care services to the remotest villages is very much necessary. Considering
education, gender gap in access to education must be removed. Although ways to universalize primary education
has been quite successful, the dropout rate in secondary and higher education is extremely high. Newer secondary
schools and colleges should be constructed in the remote villages with development of roads and social
infrastructure.
REFERENCES
Bayar, A. A., & Yanik İlhan, B. (2016). Determinants of Household Education Expenditures: Do Poor Spend
Less on Education?. Topics in Middle Eastern and North African Economies, 18.
Chaudhuri, K., & Roy, S. (2006). Do parents spread educational expenditure evenly across the two genders?
Evidence from two North Indian States. Economic and Political Weekly, 5276-5282.
Chandrasekhar, S., Rani, P. G., & Sahoo, S. (2016). Household Expenditure on Higher Education in India: What
do we know & What do recent data have to say? (No. 2016-030). Indira Gandhi Institute of Development
Research, Mumbai, India.
Kambhampati, U. S. (2008). Does household expenditure on education in India depend upon the returns to
education?. Henley Business School University Whiteknights Reading RG6 6AA United Kingdom.
Kingdon, G. G. (2005, October). Private and public schooling: The Indian experience. In Prepared for the
conference:“Mobilizing the Private Sector for Public Education” Co-sponsored by the World Bank Kennedy
School of Government, Harvard University (pp. 5-6).
Loganathan, K., Deshmukh, P. R., & Raut, A. V. (2017). Socio-demographic determinants of out-of-pocket
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NHA and Adjustment with National Accounts.
Mohanty, S. K., Chauhan, R. K., Mazumdar, S., & Srivastava, A. (2014). Out-of-pocket expenditure on health
care among elderly and non-elderly households in India. Social indicators research, 115(3), 1137-1157.
Rizk, R., & Abou-Ali, H. (2016, May). Out of Pocket Education Expenditure and Household Budget: Evidence
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Rizk, R., & Owusu-Afriyie, J. (2014). Determinants of household expenditure on children’s education in
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126 | P a g e
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The Pattern and Determinants of Indian Household Consumption Expenditure

Article · December 2020

Dyuti Sinha Maniklal Adhikary

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The Pattern and Determinants of Indian Household

Chart 1.1 Identifying the Key Cohorts of the Indian Consumers

Chart 1.2: Final Consumption Expenditure, etc. (% of GDP) in India, 1960-2016

Chart 1.3: Trend in Average MPCE (Rs.) at Constant 1987-88 Prices

2.1 LITERATURE REVIEW

Pattern of Expenditure on Education: Determinants and Trends

Studies on Determinants and Trends of Health Expenditure

2.2 OBJECTIVES OF THE STUDY

2.3 RESEARCH METHOD AND DATA

Table 2: Regional Classification of the sample States

North-Eastern Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland, Tripura

Source: Author’s Compilation based on Topographical Location of the States

The following models have been estimated using the data.

denotes the number of male students in the age group 6-21.

denotes the number of female students in the age group 6-21.

HYPOTHESIS 1: The null hypothesis H0 : i  0 is tested against the Alternative Hypothesis H1 : i  0 ,

HYPOTHESIS 2: The null hypothesis H0 : i  0 is tested against the Alternative Hypothesis H1 : i  0 ,

3. RESULTS AND DISCUSSIONS

Figure 3.1: Mean Proportion of Non-Food Expenditure allocated to Education,

3.2 Monthly Average Household Expenditure on Education in Rural India

Figure 3.2: Monthly Average Household Expenditure on Education in Rural India

3.3R Pooled Regression Analysis: Determinants of Expenditure on Education in Rural India

the Rural level

3.4 Expenditure on Education in Urban India

Figure 3.4: Monthly Average Household Expenditure on Education in Urban India

3.4U Pooled Regression Analysis: Determinants of Expenditure on Education in Urban India

Figure 3.5: Mean Proportion of Non-Food Expenditure allocated to Medical

3.6 Health Expenditure in Rural India

3.6R Pooled Regression Analysis: Determinants of Expenditure on Health in Rural India

the Rural level

3.7 Health Expenditure in Urban India

Next, we move to study the pattern of health expenditure in urban India.

3.7U Pooled Regression Analysis: Determinants of Expenditure on Health in Urban India

3.9 POLICY SUGGESTIONS

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