INCOME AND CONSUMPTION PATTERN OF RURAL HOUSEHOLDS

Transcription

1 CHAPTER Ill INCOME AND CONSUMPTION PATTERN OF RURAL HOUSEHOLDS 3.1 Introduction Income and consuniption pattern of the rural households depend on many factors like assets, level of education, occupation and demographic characteristics. Saving in any community, thus, depends on these factors. The sources of income in the ixral household sector are various. In most of the households the main occul~ation is not the only source of income and in the cultivator households, mort: than 50 per cent of the household income originate from other sources. Non-agricultural sources are the main sources of income for many households in the rural areas in Kerala. This chapter analyses the socio-economic characteristics, sources of income and the income and consumption expenditure pattern of the rural households. The samples selected included 300 households. The villages selected were Payam (here onwards known as V,) belonging to the Iritti block of Kannur district, Paralam (here onwards known as V2) belonging to Cherpu block in Thrissur district end Ramankari (termed as V3 in the analysis) from Veliyanad block in Alappuzha district. Each of these villages has its own agroclimatic and socio-economic conditions and hence, the sample selected also reveal these socio-economic features. The specifications of these villages are given in table 3.1.

2 Table 3.1 Socio-economic features of the sample villages Features Payam (VI)) Paralam (V*) Ramankari (V3) District Kannur Thrissur Alappuzha Block [ritti Cherpu Veliyanad sq.km sq.km sq.km Wards =---I-- Population Sex ratio 994 Main crops Area under paddy 90.46% Coconut, rubber 127 hectares Area under I 396 hectares hectares I coconut 159 hectares Area under other hectares 1 - I - crops Source: Development reports of the panchayats. 96.0% Agriculture Coconut and paddy 578 hectares % Agriculture Coconut and paddy 975 hectares In terms of area ;and population V3 was the smallest whereas with almost double the area and population V1 was the largest of the sample villages. Though agriculture is the main occupation of the people, cropping pattern is different in Vl as compared to V2 and V3. In V1 the nature of land and agro climatic conditions have favoured cash crops whereas in V3 paddy is the main crop as it is in Kuttanadu, the land covered with water. In V2, coconut and paddy have equal importance. The sex ratio in V2 is in tune with the state average whereas in V1 and V2 males exceed females. V3 is reported to be 100 per cent 1itera:e whereas V1 lags with only per cent literacy.

3 Thus while the sample villages have some general characteristics, there are certain characteristics peculiar to the villages also. 3.2 Socio-economic characteristics of the sample The sample selected is a representation of the total population. As far as possible all the different occupation groups are given proportional representation in the sample. As such, the sample consisted of per cent cultivators, per cent agricultural labourers, per cent nonagricultural labourers, per cent salaried households, per cent selfemployed in non-farm sector and 2.33 per cent overseas employed households. The occupation of the head of the household is considered as the main occupation of the household Demographic Characteristics The demographic characteristics have an important bearing on the level of income, consumption expenditure and saving of the society. Features like rate of growth of population, educational level of the head of the household and other members, the age of the members of the household, the size of the family are some of the factors which have a direct effect on the saving of the community, especially in the rural areas. According to ~ eff (1969)' this factor as a determinant of saving had been left out because, this hypothesis had not been validated by extensive empirical testing. The average size of the family in the sample is Expressing the sex ratio in thousands there are females for every thousand males as against 1079 females for every thousand males in the state as per the 2001 census. As ' Leff, Nattianiel H. (1969), Op.cit. p.887.

4 much as per cent of the population belongs to the age group which may be natural in any population group. Population above 60 years and below 14 years are supposed to be unproductive and these two classes together constitute per cent of the population. Table 3.2 Distribution of sample population according to age and sex Source: Survey data. In Vl, the sex ratio is 1041 females for 1000 males which is not in conformity with the village statistics per cent of the population belong to the age group whereas per cent belong to the unproductive age group. The average size of the family in V1 is less than that for all the villages. When two or more variables i.re nominal a x%est can be done to assess the significance of cross tabulations. The association czn be significant if the estimated value is greater than the table X2 value taking into account the degrees of freedom.

5 In V2, the females outnumber males as the sex ratio is 1016 females for 1000 males. The average size of the family is higher at 5.08 and the people in the age group forms only per cent of the population. In V3, the average size of the family -IS 4.67 and sex ratio is 979 females for 1000 males. The village statistics show 995 females for 1000 males. Thus, in all the three villages people in the age groups 15-19, and cumulatively outnumber the other two groups, which, means that more people belong to the productive age group. The X2 test also validates the claim Earners and non-earning dependents The ratio of earners to non-earning dependents indicate to the work participation ratio and the division of the society into productive and unproductive members. The work participation rate at younger ages is comparatively low in the sample. This is in conformity with the state characteristic because of the higher enrollment rate and higher retention rate in the schools, Table 3.3 Earners and non-earni ndents in the sa Total members Earners Non-earning members Ratio of earners to nonearning members Proportion of earners tc total members Average number of ear in the household Source: Survey data. X2 =

6 There are 535 earning members in a total of 1420 members and thus, the ratio of earners to non-earning dependents is 1.: The earning members per household is only 1.?8 which leads to a higher dependency ratio. The lower work participation ]rate of the younger age groups and that of women and the higher proportion of people above 60 probably explains the higher dependency ratio. In the three villages, not much of difference is noted in these ratios. A very high X2 value tells that the number of earning members and dependents are related Number of Earners Number of earners in the household, to some extent, determines the level of income of the household. In the rural areas, where the income is low due to under-employment and lower wage rate, increase in the number of earning members will influence the income level and thus the consumption pattern. Table 3.4 Distribution of sample households according to number of earners I I Per cent of households 1 Number of & I I I earners 1 vies / 1 v2 I v Above 3 + T O O Source: Survey data

7 As majority of the families are micro families there are only one or two earners in per cent of households. There are certain households where the members of different generations live together thus leading to more number of earners. Households having more than two earners amount to per cent Level of Education The level of education of the head of the household and that of other members of the family deternines the nature of occupation they are involved in, the level of income that they get and the motivations for saving. Also the level of education of the female members of the community is likely to have a positive influence on the saving rate. Table 3.5 Distribution of sample population according to the level of education Source: Survey data.

8 Illiterates including children account for 8.24 per cent of the sample reaching to a literacy rate of per cent as against a state average of per cent. People with higher qualifications and with professional qualifications amount to per cent of the total. Another per cent have secondary education. Among the females 9.66 per cent have higher education whereas per cent of the males have graduation or they are professionally qualified. Less number of women go for professional education compared to men. Among the village; V3 is ahead of other villages in the matter of higher education. V1 with per cent of literacy has got the highest literacy whereas V2 has per cent of illiterates. The XZ test also validates our hypothesis that gender and education are significantly associated Occupation and level of education In the Indian context, the level of education is one of the deciding factors of the occupation in which one is engaged in. Generally, those engaged in lower income occupations have less of educational qualifications whereas those with higher education are engaged in higher income occupations. Among the different occupation groups, the salaried group have more education compared to other group:; with per cent having primary education, per cent having secondary education and per cent having higher education. Those who are employed in self-employment activities in non-farm sector also have better education. Agricultural labour households are the least educated with per cent illiterates and per cent having only primary education.

9 From table 3.6 it is seen that many cell values remain blank and in such a situation the calculation of X2 value may not give very accurate inference. As earlier, an attempt was made to compute the X2 value for the situation and within limitations the test reinforced our a priori judgement that education and occupation are notably related. Table 3.6 Distribution of households according to occupation and level of education of the head of the household Occupation 1 Per cent of households according to level of education 1 Cultivators Agricultural Labour Non- Agricultural Labour Salaried Self employed in Non-farm activities Overseas employed Source: Survey Data

10 Sex and Education of Heads of Households per cent households are headed by men and per cent households have female h':ads. Level of education of the male and female heads, exert its influence on the saving behaviour of the households. Table 3.7 Distribution of sample households according to sex and education of heads of households All villages V 1 V2 V3 Source: Survey data. After classifying the households according to sex and education of head of households, it is found that male heads are more educated than the female heads. None of the female heads have higher education whereas 53.8 per cent of the illiterate heads ;ire females. As much as per cent of the female heads have only primary education. Among the male heads 7.38 per cent have higher education whereas only 2.46 per cent are illiterates. In the three

11 villages, the least educated female heads belong to V3 whereas the female heads belonging to V2 have more education than the other two. Among the male heads of households having higher education per cent are in V3 and the rest is divided between V1 and V Size and Pattern of Assets For any economic unit wealth reflects the net result of accumulated saving, revaluation of assgets and capital transfers ever since the unit came into existence. The size and pattern of assets held by the households determine the income enjoyed by the household as also the amount of income saved and the pattern of investment of saving. Table 3.8 Distribution of households according to ownership of land Land area owned Percent of households (in acres) V 1 V2 V I Above I 3 1 Source: Survey data. In the distribution of land there are great disparities. The average extent of land owned by all households is 1.53 acres. However, per cent of

12 households possess less than 50 cents of land on an average. Only 7.33 per cent of households possess rnore than 5 cents of land. In the three villages, the average size of holding is 1.93 acres in Vl, whereas in V2 it is 0.93 acres and in V3 it is 1.68 acres. The larger size of holding in V1 is because the crops cultivated in the area are mainly cash crops. In V3 also, the average size of the holding is comparatively larger because paddy is the main crop cultivated in this area. In V1 only 30 per cent of households possess land area less than 0.5 acres whereas in V2 it is 57 per cent and in V3 it is 52 per cent. 8 per cent of households in V1, 5 per cent in V2 and 9 per cent in V3 own more than 5 acres of land Land Under Different Crops In the three villages studied the extent of land set aside for different crops differ according to the agro climatic conditions. Accordingly there are differences in the nature of land held by different occupation groups. Table 3.9 Nature and extent of land possessed by different occupation groups Occupation groups Non-agricultural labourers Nature and extent of land in acres Paddy Coconut Rubber Cashew Others Total Salaried group Self employed in non farm sector Overseas employed 1.29 Total 7, -- - Source: Survey data '

13 Among the diffi:rent occupation groups, the cultivators possess an average area of 3.02 acres out of which paddy occupies per cent. Agricultural labour households and non-agricultural labour households possess on an average only 0.18 acre and 0.43 acre land. The salaried group of households and the self employed in non-farm activities possess average holding of more than one acre. The largest average holding is with the households where heads are employed overseas. As is shown in table 3.10 the cultivator households in V3 possess the largest land area of 3.54 acres where paddy occupies 3.40 acres. The main crops cultivated in this village is paddy and coconut. The lowest average acreage reported by cultivator households is in V2 where again per cent of land is utilized for paddy cultivation out of the average holding of 2.15 acres. In V1, rubber oc:cupies per cent of the average holding of 2.90 acres of land held by the cultivators. In V1, the households whose heads are employed overseas possess the largest average holding of 9.0 acres where rubber is the main cro:p. Coconut is cultivated in all the three villages with average holdings of 0.40 acre, 0.45 acre and 0.29 acre in V1, V2 and V3 respectively. The largest share in average holding in V1 is for rubber whereas in V2 and V3 it is for paddy Value of Assets - All households The proportion in which assets are distributed between productive and unproductive items holds the key for the level of income and consumption expenditure of households. The households possess both physical assets and financial assets. In the rural areas a good portion of the assets are held in the form of physical assets and very little in the form of financial assets. The

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15 physical assets are land, builclings, livestock, agricultural tools and implements and other household durable goods. Valuation of most of these assets involves a lot of problems. For the valuation of land, consultation with local people and the prices at which transactions have taken place in the immediate past have been considered. Since land values change with changes in locations, an average value of the area for each type of land has been worked out. For estimating the value of buildings, the year of construction, type of construction, materials used are all considered and proper discounting has been made. Livestock is valued at the prevailing rates in the market whereas adequate discounting is made in the valuation of agricultural equipments, consumer durables and other assets. Financial assets considered include deposits, post office saving, claims on chit funds, insurance and provident fund contributions, jewellery, shares and debentures and government securities. However, currency has been left out since the households are reluctant to disclose the same. Jewellery is included in the financial assets. The chances of under reporting of many of the assets possessed by the households is not ruled out. The details regarding the asset value and asset pattern is presented in table The average value of all assets both physical and financial for all l~ouseholds works out to be Rs out of which per cent is in physical assets and the rest in financial assets. In the three villages studied, variations in the average asset value and asset pattern is found. In Vl, average land holding is more and crops cultivated are mainly cash crops which leads to higher land values compared to V2 and V3. This difference in land value has resulted in substantial diffkrences in the asset values in V1 and the other two

16 tie- T e of asset ( A Physical assets 2 Buildings 3 Agricultural :oo!s P' pumpsets 4 Livestock 5 Consumer durables 6 Assets in self employment Sub total for A B Financial assets 1 Deposits 2 Post office savings 3 Claims of chit funds 4 Insurance & provident fund 5 Jewellery 6 Others 7 Sub total for B 8 Total A+B Source: Survey data. Table 3.11 Asset Pattern and Average Asset Value of All Households All villages V1 V2 Avg. Share Share in Share in Share in Avg' Share in Share in value I u in A TO, &, A Total A Total (Rs. (Rs.) I v3 Avg. Share in Share in value A Total (Rs.)

17 villages. Among the other physical asset values not much of difference is reported among the villages studied. Land and buildings together account for per cent of the total physical assets and per cent of the total asset value. Consumer durables has accounted for 4.57 per cent of the physical assets and assets in self employment shares for 2.35 per cent of the physical assets. Among the financial assets, jewellery has accounted for per cent of the value of financial assets. Other important items of financial assets are deposits in formal financial institutions, insurance and provident fund contributions and claims on chit funds. The share of financial assets in total assets is 6.55 per cent. Among the three villages, in V1, the share of financial assets in total assets is lower at 4.31 per cent as against 9.20 per cent in V2 and 7.51 per cent in V3. The 'lower share of financial assets in VI is due to the higher value of land in total assets Asset pattern of cultivator and non-cultivator households Analysing the asset pattern of the cultivator households and noncultivator households it i:; found that the non-cultivator households possess only half the assets of the cultivator households. The major cause of this huge difference in assets is the value of land possessed by the cultivator households. Another important physical asset is buildings which constitute per cent of the physical assets of c:ultivator households and per cent of the noncultivator households.

18 Table 3.12 Asset pattern of' cultivator and non-cultivator households Cultivators Non-cultivators Assets Average Asset Value (in Rs..) Percentage Share in A Percentag e share in total Average Asset Value (in RS..) Percentage Percenta ge share share in A in total A. Physical assets 1. Land 2. Buildings 3. Agricultural tools and pumpsets 4. Live stock 5. Consumer durables 6. Assets in self employment Sub total for A B. Financial Assets 1. Deposits 2. Post office saving 3. Claims on chit funds 4. Insurance & Provident fund 5. Jewellery 6. Others Sub total for B Total A + B Percentage share in B 168' Percentage share in B Source: Survey data.

19 The lower average value of land and buildings of the non-cultivator households may also be considered in the light of the lower value of these assets possessed by agricultural labourers and non-agricultural labourers who form 54.5 per cent of the total non-cultivator households. In the case of value of consumer durables the cultivator households and non cultivator households do not show much diffeaznce, whereas the non-cultivator households possess more assets used in self-8:mployment. In terms of total physical assets, per cent of the total assets of cultivator households are in physical form whereas for the non-cultivators this forms only per cent of the total. Though only 4.73 per cent of the total assets of the cultivator households are in financial form, in absolute terms, they possess more financial assets compared to the non-cultivator households. In both the cultivator households end non-cultivator households jewellery forms the largest single item of financial asset. Deposits in financial institutions account for per cent of the financial assets of cultivator households and per cent of that of the non-cultivator households. In the three villages studied (table 3.13), cultivator households in V2 possess just per cent of the value of assets of that of V1 and those in V3 possess per cent of the value of assets of those of V1. Thus, the cultivator households in V1 are better off compared to the cultivators in V2 and V1 in terms of wetilth possessed. But this great difference is because of the value of land possessed by the cultivator households in V1. In the matter of financial assets, no significant difference among the three villages was noticed.

20 Type of assets A Physical assets 1 Land 2Buildings 3 Agricultural tools & pumpsets 4Livestock 5 Consumer durables 6Assetsinse1f employment Sub total for A OC B Financial assets 1 Lds Deposits ost office avings laims Of chit Insurance & provident fund 5 Jewellery thers SubtotalforB , Total A+B \ Source: Survev data. value &.) Cultivators Share in Share A in total Table 3.13 Asset pattern of cultivator and non-cultivator households - three villages v1 v2 Non-cultivators Cultivators Non cultivators Avg. OZs.) Share Share in A in total value Avg. Share Share in A in value (Rs.) Share Share in A in total v3 Cultivators Non-cultivators Avg. Share Share Share Share value value. in A in total m A in total Ols.) (Rs.) " I,.$>;'.., ii9, ' -.:,. ~ + < '

21 In the case of non-cultivator households, there are pronounced differences among the three villages. Whereas the non cultivator households own assets worth Rs in V1, these households in V2 and V3 possess assets worth Rs anti Rs respectively. Thus, the non-cultivator households in V1 possess per cent more of assets than those of V2, and per cent more of assets than those of V3. This difference is to be explained in terms of the greater value of land possessed by these households in V1. In the case of financial assets there is not much to be separated among the non-cultivator households of the three villages. Thus, in all households, land alone accounts for a major share in total assets. Land being a productive asset, a proportionate income will be expected for the higher asset classes. However, the higher asset value has not ended up in higher income, unless the households have received income from alternative sources. As pointed out by Panicker (199212, the higher asset value is to be assigned to the higher land value which is due to the high density of population and the resultant rise in the man land ratio, the boom in the land market in recent years thanks to the inflow of remittances from family members employed in the middle cast, to mention a few". Thus, the inclusion of land at its current value has distorted the picture of pattern of asset holdings. The average value of buildings is also significantly higher in Kerala. Thus, the higher value of assets of households does not reflect the higher productivity. Another point worth noting in the asset pattern of the cultivator and noncultivator households i:; that as the value of assets increase, the share of financial assets in the tolal comes down. Panikar, P.G.K. (1992), Op.cit., p.26.

22 3.2.6 Distribution of Assets Asset holding in India has always been highly concentrated. To understand how much of inequalities exist among the rural households in Kerala, there is the need to analyse how wealth is distributed among the different classes. It was Found (table 3.14) that the bottom five asset groups covering per cent of households own just 9.05 per cent of the assets whereas the top five asset classes encompassing 42 per cent of households own per cent of assets per cent of households in the bottom three income classes possess just 2.78 per cent of the total assets whereas the top per cent of households command more than 50 per cent of the total assets. This points to the glaring inequalities that exist in the rural areas in Kerala in the matter of distribution of wealth and assets. However, it must be stressed that the distributio~i of assets gives a distorted picture as far as income distribution is concerned, because the income generation capacity of these assets is not proportionately related. Inequalities in the di:;tribution of wealth persist in all the three villages. In V1, bottom 55 per cent of households have only per cent of assets whereas the bottom 45 per cent of households consumed as much as per cent of assets. Similarly in 'V2, the bottom 49 per cent of households possess only per cent of assets whereas the top 51 per cent of households control per cent of wealth. In V3, the extent of inequalities is greater as the bottom 46 per cent of households have just 8.63 per cent of assets under their command whereas the top 54. per cent of households possess per cent of the assets.

23 Table 3.14 Asset Groups (Rs.) Less than i Above Total Source: Survey data Distribution of households according to the relative share of different asset groups in the assets. All villages Average Per cent Per cent of asset value Share in households (b.) total OO v1 Average Per cent Per cent of asset value share in households (b.1 total i v2 Average Per cent Per Cent of asset value share in households (Rs.) total i v3 Average Per cent Per cent of asset value share in households (B.) total i

24 But it should be emphasized that for the top asset holders, land contributed the majority share, whereas for the poorest section the share of land in the assets was negligible. Another item having a strong impact on the assets of the top asset group IS the value of buildings owned by them.the high value of assets of land and buildings in the total assets of the top asset holders explains the persisting inequ.slities in the distribution of wealth in the rural areas. 3.3 Sources of income for the occupation groups The classification of households into different occupation groups is on the basis of the occupation of the head of the household. However, this source is not the exclusive one for most of the households, as they derive income from supplementary sources or from the earnings of other members of the household. - Table 3.15 Classification of income from main and supplementary sources for the occupational groups Occupation groups Cultivators Agricultural labour Non agricultural labour Salaried Self-employed in non-fam sector Overseas employed from main share in Source: Survey Data

25 In the study, for the cultivator households, only per cent of income come from the mam source and the rest from supplementary sources like agricultural labour, non agricultural labour, household business and from other members of household employed in non-farm sector and overseas. For the agricultural labourers, only per cent of the income originates from the main source. This lower income for agricultural labour households from the main source is because they do not find full time employment in agricultural activities and hence are forced to resort to occupations like rearing cattle and labour in non-agricultural sector. Non agricultural labour households derive as much as per cent of income from the main sources like construction, carpentory and other crafts and trades and per cent of income from other sources per cent of the income of the salaried class originates from the main sclurce of permanent employment and the rest from sources like agriculture, cattle rearing and household business. Only per cent of the income of the households self-employed in non-farm activities originates from the main source whereas for the rest of the income they depend on agriculture and salaries and overseas employment of other members of the household. Those employed overseas derive per cent of the income from the main source, and the rest of the income comes from agriculture and other activities. Thus the main occupation of the head of the household is not the only source of income for all occupation groups. For the cultivator households, the major source of income is not cultivation, but supplementary sources. This leads to the rejection of our first hypothesis which states that the major source of income for the agricultural households is agricultural income. For other occupation groups, the main source provides a major part of the income and other sources only supplement it.

26 Table 3.16 Classification of income from mein and supplementary sources for the occupational groups (villages separate) Percentage Total hare in total source tary v1 Cultivators Agricultural labour Cultivators Agricultural labour non-farm sector Overseas employed v1. - Cultivators Agricultural I I I Overseas Source: Survey data.

27 In the three village studied in V1, for all occupation groups, the occupation of the head of the household is the major source of income and other sources supplement it. In V2, agriculture provides only per cent of income of the cultivator households and major income comes from other sources. For the other occupation groups in V2, the occupation of the head of the household is the main bread winner. In V3, the cultivator households get only per cent of income from the main source and the rest is from other sources such as salaries of the household members employed in the non-farm sector and overseas. In the agricultural labour households only per cent of income originates from the main source as only one crop is cultivated in the case of the main crop under cultivation in the area, namely, paddy. For the other occupation groups in V3, the main occupation provides a major portion of income and other sources only supplement it. 3.4 Income and consumption expenditure pattern The significance of income as the most important determinant of consumption, as hypothesised by Keynes, is not denied by any of the post Keynesian theories of consumption. The estimation of income of rural households is beset with a lot of difficulties. The rural households derive their income from various sources like agriculture, livestock and poultry, wages, household industries and other self employment activities. The estimation difficulties are greater in the case of households engaged in self employment activities in agriculture, crafts, industries, or business. Many members of the households are engaged in the household activity and the income of the different members cannot be separated.

28 For the occupation groups like cultivators and those engaged in rural industries and trades, net income has been derived after deducting from the gross income the operation costs including the imputed value of family labour and own material inputs. Hence, margin of error is expected in the calculation of income. For the other occupational groups this is likely to be less than that is calculated for the self-employed group. The chances of under reporting of income is expected in the case of all occupational groups. For the calculation of consumption expenditure:;, spending under all heads of consumption for all members of the family have been collected separately. For regular items of expenditure monthly data have been collected whereas for other items annual data have been collected. Even with all this precautions taken chances of over reporting of expenditures is not overruled. Expenditures on consumer durables are also included under the consumption expenditure Income distribution in the sample households In the calculation of income, income from all sources of all the members of the household are collected. In the case of members having occasional employment, average number of days per month getting employment together with average wages are collected, whereas in the case of those having regular employment monthly salaries are considered. For the selfemployed in farm sector and non-farm sector, net income for the year from the enterprise is accounted which includes the remuneration for the self employed resources also. For those who are employed overseas, their remittances and the income from the household property are taken into consideration.

29 Table 3.17 Pattern of income distribution in the sample households (villages separate) Income class (h.) Per cent of households All villages Average income (h.) Per cent share in total income Per cent of households V1 Average income (h.) Per cent share in total income V2 Per cent Per cent of Average share in income households total (&.), income V3 Per cent Per cent of Average in income households total (&.) income , I & above Source: Survey data

30 The income distribution in the sample households is rather skewed as more income has got concentrated in the hands of few households. The bottom four income classes covering 66 per cent of households have only per cent of income, whereas 34 per cent of households in the upper income groups enjoy per cent of income. The difference between the average income of the lowest income class ant1 that of the highest income class is Rs In the three villages studied, in V1, 73 per cent of households coming under the four income classes enjoy only per cent of the total income while 27 per cent of households in the four upper income brackets have per cent of income, the range between the average income of the lowest income group and the highest income group being Rs In V2, 63 per cent of households in the lowest four income groups have only per cent of income whereas in the higher income brackets 33 per cent of households get per cent of income. The difference between the average income of the lowest and highest income groups is lower at Rs , compared to V1. In V3, 58 per cent of househ.olds in the four income classes in the bottom get only per cent of incon-~e while 42 per cent of households in the top four income brackets enjoy per cent of income, the range between the average income of the lowest and the highest income groups being Rs which is greater than that of V2, but less than that of V Average income and consumption expenditures of occupation groups Under the head consumption expenditures all items under food and non- food including expenditares on consumption durable~ are included. Data on expenditures on each itern of food were collected on a monthly basis. Data for expenditures on non-food items like clothing and footwear, medical care arid

31 health services, transport expenses, education, and pan and intoxicants were collected for each members of the family on a monthly basis, whereas for expenditure on heads such as electricity and water, communication and entertainment and sanitary goods and cosmetics, data were collected for the household as a whole as a monthly basis. Data on expenditure, which do not occur frequently, namely, clothing and footwear, consumer durables and other household goods, and religious and cultural activities were collected on an yearly basis for the household as a whole. Table 3.18 Average Income and consumption expenditure of occupation groups (Rs.1 Occupation groups Cultivators Average consumption Consum Per Per Average expenditure ption capita capita income. consu- Income Non-food Total ratio mption Agricultural Labour Salaried employed in non-farm C sector Overseas Employed Total Source: Survey Data

32 In table 3.17 average income for all households is Rs The average consumption expenditure on food for all households is Rs and for non-food items the average expenditure is Rs leading to an average expenditure of Rs The consumption income ratio is 0.80 for all households. The per capita income for all households amounts to Rs and per capita consumption comes to Rs However, for the different occupation groups average income, average consumption expenditures and consumption income ratio changes. The cultivators with an average income of Rs are well off compared to agricultural labour households and non - agricultural labour households. These households spend an average amount of Rs on food and Rs on non-food items, leading to a total expenditure of Rs and an average propensity to consume of The average income of the agricultural labour households is Rs which is only per cent of the income of cultivator households. Their annual expenditure on food and non-food items is Rs and Rs respectively. The total cor~sumption expenditure for this group is Rs resulting in a consumption income ratio of 1.13, which points to the fact that these households live beyond their means. To meet the excess of expenditures over income, they have resorted to borrowing or sale of existing assets. The average income of the non-agricultural labour households exceeds that of agricultural labour households by Rs These households on an average spent Rs on food ancl Rs on non-food items. The salaried class is better off with an average annual household income of Rs The average annual consumption expenditure is

33 Rs.75615, expenditure on food and non-food items being Rs and Rs respectively. The self-employed in the non-farm sector as a group derives more income than other groups except the group of households where the heads are employed overseas. The average income of these households is Rs and the consumption expenditure on food and non-food items are Rs and Rs respectively. The total consumption expenditure is Rs and the consumption income ratio i:; The highest income group among the different occupation groups is the overseas employed with an average income of Rs These households spend an average amount of Rs.77119, the division between food and nonfood items being Rs.2682'2 and Rs respectively. The APC of these households is the lowest at Consumption expenditure on non-food items as a percentage of total expenditure is the highest for this group. Consumption expenditure on food and non-food items in absolute tenns is the highest for the self-eniployed in non-farm sector followed by the salaried group and overseas employed. However, as a per cent of income, the highest expenditure on food is for the agricultural labour households, who spend per cent of their income on this item. Only for this group expenditure on nonfood items is less than that for food items. The lowest income occupation groups, namely, the agricultural labour households and the non-agricultural labour households have the highest average propensity to consume with figures of 1.15 and 0.95 respectively.

34 Table 3.19 Average income and consumption expenditure of occupation groups (villages separate) Average consumption Per cap~ta Occupation Average ex enditure., in non-farm Source: Survey data.

35 In V3, the average income for all households is 27 per cent more than that in V1 and 11 per cent more than that in V2. However, the consumption income ratio is higher in V3 compared to V1 and V2. The higher consumption income ratio in V3 is because of higher expenditure on non-food items. In V3, expenditure on non-food items is 28 per cent more than that in V2 and 51 per cent more than that in V1 in absolute terms. In terms of per capita income V3 is ahead of V1 and V2 by nearly 12 per cent and in per capita consumption, V3 exceeds the other two villagas by 25 per cent. Among the cultivator households V3 has reached the highest average income of Rs followt:d by V2 with Rs and V1 with Rs APC of the cultivator households is the highest in V1 followed by V2 and V3 with figures of 0.89, 0.83 and 0.82 respectively per cent of consumption expenditures of these hous~:holds in V1 is on food, whereas in V2 it is marginally lower at and in V3 it is very low at per cent. Among the agricultural labour houst;holds, the average income is the highest in V2 with Rs In V3 and V1 the average income of these households is Rs and Rs respectively. Consumption expenditures on food, as a per cent of income is the highest in V1, which comes to per cent. The APC is the highest in V1 with 1.16 followed by V2 with 1.14 and V3 with The average income ol'the non- agricultural labour households in V1 is Rs and their consumption expenditures are Rs.4864 leading to an APC of per cent of these expenditures are on food items and the rest on non-food items. In V2 non- agricultural labour households have got an average income of Rs.62797, the highest for the group among the three villages

36 studied. Consumption expenditures for non-food items amount to per cent of the total. The lowest average income among the non-agricultural labour households is reported by the group is in V3, i.e., Rs Consumption expenditures have exceeded income by 0.02 per cent leading to an APC of Expenditure on food iimounts to per cent of the total. Per capita income (PCI) for non agricultural households in V1 is Rs and per capita consumption (PCC) is Rs Figures for PC1 and PCC in V2 for the non agricultural labour households are Rs and Rs respectively. In V3, these values are Rs and Rs respectively. The salaried group in V3 has reported the highest average income among the three villages which is Rs followed by V2 with Rs and V1 with Rs Even though average income of the group is the lowest in V1, APC is lower in V1. V2 has an APC of 0.66 and V3 has an APC of Coming to expenditure on food and non-food in V1, these households have spent per cent on food whereas in V2 the expenditure on food is per cent of the consumption expenditure and in V3 it is per cent. The average income of the households self-employed in non- farm sector in V1 is Rs , the highest recorded among the three villages. In V2 this group has got an average income of Rs whereas in V3 the figure is Rs Consumption income ratios are 0.54, 0.70 and 0.64 in V1, V2 and V3 respectively. The overseas employed are the highest income group in V1 with an average income of Rs , the total consumption expenditure being Rs The consumptiori income ratio for these households in V1 is very low at where food accounts for only per cent. In V2, this group of

37 households stand third in terms of the average annual income with Rs Consumption expenditures, on an average amounts to Rs leading to an APC of In the consumption expenditures food accounts for per cent and the PC1 and PCC are Rs and Rs respectively. In V3, households employed overseas have reported an average income of Rs The consun~ption income ratio for these households is Expendihlre on food accounts for per cent of the total consumption expenditures. The PC1 for the group is Rs and PCC is Rs Income and Consumption Expenditures of Income Groups Consumption expenditure of households vary with income. Generally, there is a tendency for the lower income groups to spend beyond their income. Many of the households receive low income with which they may riot be zble,ome to make both ends meet. They meet the excess of consumption over in- either by borrowing or by sale of assets that they already possess. Table 3.20 Average income and consumption expenditures of different income gi-oups!rs.) Less than I & above 2061s Source: Survey data. Average consumptiori expenditure Food Non-food 1 Total 126? , :H : Consumption income,tio Per capita income Per capita ( mplion

38 Considering the average income and consumption expenditures on food and non-food items of the different income groups, for the lowest three income groups APC is greater than one. For the lowest income group, average household income is Rs and average consumption expenditure is Rs leading to a consumption income ratio of In the consumption expenditure per cent is for food and the rest for non-food items including consumer durab'les. In the Rs income group, the average income is Rs.30051, consumption expenditures being Rs resulting in an APC of Expenditure on food accounts for per cent of the consumption expenditures. Per capita income in this group is Rs.7684 and per capita consumption is Rs.9544 In the Rs income bracket the average income of the households is Rs the consumption expenditure being Rs.44278, thereby the APC is per cent of the consumption expenditures is for food items and the rest for non-food articles ~f consumption. The PC1 and PCC of this group are Rs.9176 and Rs.3984 respectively. From the Rs onwards the APC becomes less than one leading to positive saving. Average income of this group is Rs and consumption expenditure is Rs Out of these consumption expenditures per cent is for food items. In the topmost income class, the households enjoy an average income of Rs out of which consumption expenditure amounts to Rs , which is 59 per cent of the total. The share of food articles in this consumption expenditure amounts to only per cent of the total. The per capita income for this group is Rs and per capita

39 Table Average income and consumption expenditures of different income groups (villages separate) (Rs.) Average Average consumption expenditure Consumption income ratio Per capita income Per capita consumption i i i i ki &above v2 Less than Less than , above I I I I I 9.78 j Source: Survey data.

40 I I i consumpt~on is Rs Thus, the share of expenditure on food artlcles declines as the income increases whereas the share of non-food items increase. Consumption income ratio and the per capita consumption show a downward trend as the income level increases. The higher income groups spend morc on unnecessary consumption goods like consumer durables which increases the share of non-food items of their consumption expenditure. In the three villages studied in V1, the consumption income ratios are greater than one for the lowest three income groups which shows a decline from 1.42 to 1.16 and 1.08 as the level of income increases. The share of food expenditure, as a per cent of total consumption expenditure also decline as the levels of income increases. From the Rs income group onwards, consumption income ratio has come down below one to 0.89, which steadily declines to 0.41 in the top most income class. From per cent for the Rs income class, the share of food in total expenditure came down to per cent for the highest income bracket. In V2, also the APC is above one for the first three income groups, which means negative saving from current income for these groups. For the income group Rs APC is 0.87 which falls further to reach 0.51 for the top most income bracket. The share of food articles in the total consumption expenditure is greater for the first two income groups whereas the share of non-food items has increased to per cent for the highest income group. The highest consumption income ratio is recorded for the Rs income group in V3 which decreased to 1.02 for the Rs income group and becomes less than one for the Rs income group. APC falls steadily to reach 0.16 for the Rs income group, but rises

41 ,1 t, :, J' steeply to become 0.78 for the highest income group. hi^ sudden increase in consumption expenditure is to be attributed to some high value purchases by a few households in this income bracket. Thus, all the three villages show a uniform pattern in the case of consumption income ratio, ratio of consumption expenditures for food to total consumption expenditures, per capita income and per capita consumption of the different income groups Size of the household and consumption expenditures The size of the household is a crucial factor in determining the division of income between consumption and saving. As the size of the farnily increases the consumption expenditures will rise. The rapid growth of population in the rural coinmunities have negative impact on saving even though some scholars like ~aldor(1957)' have hypothesised that rapid growth of population leads to increase in saving rate. But Keynesian saving function ( imply that saving rate is virtually neutral to changes in the rate of population. snyder5 (1971) finds that saving is unaffected by households size, i.e., large and small households are likely to have positive saving. When classified according to the size of the household the consumption expenditure steadily rises as the size of the family increases. When the size of the family is 3, the total consumption expenditure is Rs.45008, which has increased to when the size of the family is 7 and above. The consumption income ratio has also increased from 0.73 in the case of households with 3 members to 0.95 in the case of households v~ith 7 members Kaldor, Nicholas (1957) "A Model of Econonlic Growth", Economic Jounlal 67(268), pp.54:-626. Keynes, John Meynard (1936). Op.cit., p.238. Synder, Donald W., (1971), Arr.Econometric Analysis of Consumption und Sav!ag in Sierra Leone, unpublished Ph.D dissertation, The Pennsylvania State Universiej, p.143. Quoted in Snyder, Donald, W. (1974) "Econometric Studies of Household Saving", Journal of Development Studies, Vol.10, N0.2, pp

42 Table 3.22 Average income and average consumption expenditures of households according to size of the households. Size of the household income Consumption Expenditures 1 Up to6members Up to 7 members ::2:: 1 ::t3:: 1 :5: 1!:2: 1 Above 7 members Source: Survey Data or more. Expenditures on food in the case of households with 3 members is per cent of the totiil which has decreased to per cent of the totai for the households with seven members or more, even though in absolute terms, expenditure on food has increased from Rs to Rs The average income has also shown an increasing trend with increase in the size of the family, pointing to the fact of more earning members. In V1, income does not show any steady tendency as there are fluctuations with increase in size of the family. APC falls from 0.78 in the case of households with three members to 0.70 for families with four members and increases further to reach 1.29 in the case of households with 7 members. Expenditure on food as a share of total consumption expenditure falls from per cent for households with 3 members to per cent for households

43 1 Size Table 3.23 Average income and consumption expenditures of households according to size of the households (villages separate) 1 ofthe Average Consumption Expenditures household income Food I Non-food I Total v1 AF'C I 5 members / Up to3 members members ! / members members Source: Survey Data. with 7 members or more. In V2 also, income changes are not steady as there are fluctuations with change in size of the family. However, consumption expenditure on food steadily increases. The expendittaes on non-food iterns also show fluctuating tendencies, the highest average of Rs being

44 recorded by the households with seven members wheras the lowest is recorded by households with three members. In V2 income consumption ratio is the lowest for households with seven members while it is the highest for households with 5 members. In V3, average income fluctuates for households with changes in number of members. However, the highest average income is recorded for the households with 7 members and above. Consumption expenditure shows a steady tendency to rise and the APC fluctuates with changes in number of members. Again, the highest APC is recorded for the households with the largest number of members in the case of V3. Share of expenditures on food items decrease from per cent of the total in the case of households with 7 members or more. Thus, the size of the family is an important determinant of consumption expenditure. There is a positive relation between the two variables. Households with more than four or five members are usually joint families, though not in the strict sense of the terms. As a result, with increase in thz number of members, the number of earners also increases, which results in higher income of these families. However, with increased income there is an increase in consumption expenditures Income and Expenditures of Savers and dissavers of Occupation groups Not all households in a particular occupation group or in a particular income group are savers or dissavers. In each occupation group and in each income group there are savers and dissavers. The saver save not necessarily because they have higher incomes nor dissavers dissave just because they have lower income. Even though income exerts its influence in determining the saving by households, the influence of factors like consumption expenditure

45 patterns and motivations for saving cannot be neglected. Usually, the consumption expenditures of savers in the lower income households on food items is more than that on non-food items. These households spend less on unnecessary consumption and on consumer durables. The dissaving households in the lower income groups spend more on non-food items like pan and intoxicants which make them dissavers. Among the higher income dissaving households, consumption expenditures on food is lower whereas that on non-food items is greater. An analysis of the expenditures on food and non-food items by the' saving and dissaving households in the different occupation groups and in different income classes give an idea regarding the pattern of consumption expenditures of these households. Table 3.24 Average income and consumption expenditures on food and non-food items by saving and dissaving households of occupation groups Source: Survey data.

46 Among the cultivators 56 per cent are savers whose average income is Rs which is Rs rnore than that of the 44 per cent of the dissaving households. Consumption expenditures of the saving households amounts to Rs out of which per cent is for food items. The dissaving cultivator households have spent an average amount of Rs out of which per cent is for food articles. In the agricultural labour households 21 per cent are savers and the rest dissavers. From an average income of Rs the saving households consume Rs out of which per cent is in food articles. The average income of the dissaving households is Rs whereas the consumption expenditure is Rs.39123, per cent of which are for food items per cent of non-.agricultural labour households are savers who get an average income of Rs and they consume only per cent of this income. The dissaving hou:;eholds get an average income of Rs and their average consumption expenditure amounts to Rs The expenditure on food accounts for per cent of this per cent of the households with salaried income are savers who get an average income of Rs and consume Rs on an average. Only of this is for food and the rest for non-food items. The dissaving households in the salaried group, with an average income of Rs consume Rs on an average, where the share of food articles comes to only per cent. In the self-employed group per cent are savers who get an average income of Rs and consume Rs per cent of this consumption expenditure is for food articles. The dissaving households.in this group amounts to per cent who get an average income of Rs These households consume an average amount of Rs out of which only per cent is for food. All the households

47 employed overseas are savers who get an average income of Rs and consume per cent. Of this, the share of food items amounts to per cent of the total consumption expenditure. Table 3.25 Average Income and Consunlption Expenditures on Food and Non-food Items bv Savers and Dissavers of Different Occupation Groups (villages separate) -- 1 Savers I Dissavers 1 Cultivators Agrl. Labourers , I I I Salaried lemptoyed I125640I I I I lnon farm sector Overseas employed Cultivators

48 Average income Savers Total Dissavers cent Of Income households Agrl. Labourers Non-agrl' Labourers Salaried group Self non farm sector Overseas em~loved Source: Survey data. In V1, all the households coming under the categories of self-employed in non-farm sector and employed overseas are savers per cent of cultivators with APC of 0.74 are savers and per cent of this consumption expenditure is for food. For the dissaving cultivator households, consumption income ratio is 1.18 where the share of food is Only per cent of agricultural labourers are savers who have an APC of 0.90 whereas for the dissavers APC is The share: of food in the case of savers and dissavers are per cent and respectively. Among the non-agricultural labour households dissavers outnumber savers. 80 per cent of the salaried households are savers with an APC of 0.61 and dissavers have an APC of The share of food in the consumption expenditures is per cent and per cent for the savers and dissavers respectively. In V per cent of cultivator households are savers with a consumption income ratio of 0.64, share of food being per cent. The dissaving cultivator households have an APC of 1.21 and the share of food is

49 Only per cent of agricultural labour households liavc posilivc saving, who have an APC of 0.81 and the share of food in consunlption expenditures is per cent. The dissaving households with an APC of 1.24 set aside per cent of these expenditures for food articles. Alllong thc non-agricultural labour households savers consume an average amount of Rs out of an average: income of Rs 'where per cent of the consumption expenditures is for food items. fiouseholds dissaving during the period have an average income of Rs and consume an average amount of Rs and the expenditures on food articles out of this is per cent. 85 per cent of the salaried group households and per cent of thc households self-employed in non-farm sector are savers and the consunlption income ratio for both thcse groups is Dissavers among the salaried group and self-employed in non-fann sector have average propensities to consume of 1.19 and 1.06 respectively. There are no dissavers aniong thc households employed ove-seas. In V3, per cent of savers among cultivators, agricultural labou~.crs, non- agricultural labourers, salaried group and the self-employed are 67.65, 26.31, 38.88, and respectively. Consumption income ratios fol- these groups are 0.73, 0.90, 0.78, 0.63 arid 0.57 respecti\/ely. For thc dissaviilg households, the consumption income ratios are 1.32, 1.36, 1.27, 1.63 and 1.38 for cultivators, agricult~~ral labourers, non- agricultui-al lnboure~~s, salaried group and self-employed in non-faml sector in that order. As in V1 and V2 nil the households in the category of enlployed ovcrseas arc savcrs. The general pattern of consumption among the savers is that, /~II- IIIC higher income occupation groups the share of non food itcms in tol;rl

50 expenditure is greater compared to the lower income occupation groups. Among dissavers in the lower illcome occupation groups the share of food is greater than that of non food items, whereas among the higher income occupation groups the share of non-food items including consumer durables is far more than the share of food items Income and Consumption Expenditure of Savers and Dissavers in the Income Groups Among the different income groups, more of the households in the lower income classes are likelp to be dissavers as they find it difficult to make both ends meet whereas among the higher income classes, majority of the households are likely to be savers in spite of the fact that their consumption on luxuries are greater Table Average income and consumption expenditures on food and non-food items by saving and dissaving households in different income groups Source: Survey data. 1:

51 On the basis of income earned by the households during the year, in the lowest income group of households 4 per cent are savers who get an average income of Rs and consume only Rs For these households expenditure on food exceeds the non-food expenditure. The dissaving households in this group get a higher income than the saving households, but their consumption income ratio is 1.48, per cent of the consumption expenditures are for food articles. In the income group Rs.25,000-35,000, the per cent of saving households comes to per cent who consume only per cent of their income per cent of this expenditure is for food articles per cent of households in this group are dissavers who consume 30 per cent of the income that they receive out of which per cent is for food and the rest for non-food. In the Rs.35,000-50,000 income class, the per cent of savers has increased to per cent with an average income of Rs and consumption expenditures of Rs.35326, where food articles account for per cent of the total consumption expenditures. The dissaving households in this group get an average income of Rs.40224, but consume Rs.48514, the.4pc being, The share of food in consumption expenditures is per cent and so on. In the Rs income group all households ale savers who consume only per cent of the income, where the share of food is per cent. In the topmost income bracket only 7.14 per cent of households are dissavers and the share of food in this total consumption expenditures are lower than that of savers in the group. Thus, among the lower income groups saving households spent a larger share of their consumption expenditures on food, which means that they curtail unimportant consumption expenditures to make positive saving. Compared to

52 savers in the lower income groups the share of expenditure on food is lower for the dissavers. One reason for this high expenditure on non-food items by the dissaving households may be the higher proportion of income spent on intoxicants like liquor and tobacco products. Comparing the percentage of expenditure on food and non-food items among the savers and dissavers in the middle and upper income groups it is found that the percentage of income spent on food by the savers is higher as compared to the dissavers. Hence the hypothesis that the proportion of income spent on food is higher for the saving households in the higher iricome groups may be accepted. Thus, the savers in this group are in a position to save because they have reduced the expenditures on comforts and luxuries. The percentage share of non-food expenditures of the dissavers in the middle and upper income groups are far greater than that for the savers. For different groups respectively, these shares are per cent, per cent, per cent and per cent. The share of non food items for the savers in the above income groups are per cent, per cent, per cent and per cent respectively. Thus the reason for higher consumption expenditure of the dissaving households is not necessary consumption, rather it is. because of either unnecessary consumption or consumption of luxuries. Again the percentage of savers shows a steady increase to reach 100 per cent with the Rs income group, even though it falls slightly for the Rs income category and the Rs and above income category which points to the influence of income on the saving of the households.

53 Table 3.27 Average income and consumption expenditures on food and non-food items by saving and dissaving households in different income groups Savers (villages separate) Dissavers Income Consumption Per Consumption expenditure cent Of expenditure Income ( Rs) house- Non- households Food I 1 Total food v1 Less than : Above : - Source: Survey data.