Estimation of private final consumption expenditure in India: Issues regarding data availability and validation

Private Final Consumption Expenditure (PFCE) is the major component in Gross Domestic Product (GDP). In Indian national accounts statistics, PFCE is estimated by commodity flow method using survey or study based ratios on different uses of production, for each of the disaggregated level of commodities following classification of individual consumption according to purpose (COICOP). The PFCE represents final consumption expenditure by households and nonprofit institutions serving households (NPISHs). An alternative source of data for household consumption expenditure is the household consumption expenditure survey (HCES) conducted by the National Sample Survey Office (NSSO) of India. This survey is conducted at 5-yearly intervals and collects information from households about consumption expenditure on different items for a defined reference period. The survey results are widely used for poverty estimation in India. It is very common practice among data users to compare the two sets of estimates on final consumption expenditure of households. This paper examines the two sets of data at detailed item level and highlights the issues of their non-comparability.