Overview of Private Final Consumption Expenditure (PFCE) in FY25
The Private Final Consumption Expenditure (PFCE) in the first half of FY25 demonstrated significant growth, primarily driven by rural demand.
- PFCE grew by 6.7% year-on-year (Y-o-Y).
- Indicators such as sales of two-wheelers, three-wheelers, and tractors highlight the contribution of rural demand.
- The National Bank for Agriculture and Rural Development's (NABARD) survey revealed that 78.5% of rural households reported increased consumption expenditure over the past year.
Rural and Urban Demand Dynamics
Rural demand is expected to continue its momentum, supported by favorable agricultural conditions.
- Anticipated returns from a bumper kharif crop and higher Minimum Support Prices (MSP) for rabi crops are contributing factors.
Urban demand, however, presented mixed outcomes:
- Passenger vehicle sales growth slowed to 4.2% Y-o-Y in the period of April-November 2024, down from 9.2% the previous year.
- Fast-moving consumer goods (FMCG) sales in urban areas showed moderate growth.
- Air-passenger traffic maintained a steady growth rate of 7.7%.
Consumption Expenditure Patterns
According to the 2023-24 Household Consumption Expenditure Survey (HCES), the urban-rural gap in consumption is narrowing.
- Average monthly per capita expenditure (MPCE) is estimated at Rs 4,122 for rural and Rs 6,996 for urban areas.
- When accounting for imputed values of social welfare, these figures rise to Rs 4,247 and Rs 7,078, respectively.
- The urban-rural gap in MPCE decreased from 84% in 2011-12 to 70% in 2023-24.
Economic Growth and PFCE Contribution
The real Gross Domestic Product (GDP) growth for FY25 is estimated at 6.4%, with private consumption playing a significant role.
- PFCE at constant prices is projected to grow by 7.3%, largely driven by rural demand.
- PFCE's share of GDP at current prices is estimated to increase to 61.8%, the highest since FY03.
Industry Insights on Consumption Trends
FMCG companies have observed differences in consumption trends between urban and rural areas.
- Urban consumption was moderate in the October-December earnings period, while rural demand witnessed a pickup.
- Comments from industry leaders indicate urban middle-class financial stress amid sustained rural recovery.
