Household Spending Shifts Toward Non-Essential Goods and Services in 2024-25

Household spending shows a shift towards non-essential goods and services. Alcoholic beverages and tobacco spending saw significant growth, outpacing other categories. Personal care and miscellaneous goods also experienced a notable increase in expenditure. Services sector spending rose, capturing a larger share of total consumption. Essential food item spending increased, with growth in specific product categories.

As the economy recovered from the Covid-19 pandemic, household spending in 2024-25 showed a further shift towards non-essential discretionary goods and services, many of which had witnessed a decline earlier, signalling growing premiumisation and a potential boost to government revenues, reported TOI.

After seeing a decline in 2023-24, growth in household spending on alcoholic beverages, tobacco and narcotics (22.4%) outpaced growth in all other item categories to Rs 2.7 lakh crore, nearly double than what households spent on ‘recreation, sport and culture’ (Rs 1.4 lakh crore), the latest national accounts data released by NSO, with the revised base year 2022-23, showed. Similarly, the ‘personal care, social protection and miscellaneous goods and services’ category saw a rise of 19% to Rs 5.3 lakh crore.

Though the total private final consumption expenditure (PFCE) in real terms increased nearly 6% to Rs 169 lakh crore in 2024-25 — a pace similar to the previous financial year, much of this rise was cornered by services sector as share of spending on services of the total PFCE rose to 45.2% (Rs 76.3 lakh crore) as compared to 44.4% (Rs 70.5 lakh crore) previously.

Among services, other categories like ‘insurance and financial services’ saw a 10% jump and health saw 9% rise. Among essential categories, spending on food items increased 4% to Rs 45.5 lakh crore, with growth in spending on sugary products (11%), ready made food items (9%) and protein rich items like milk & dairy products, fish and seafood (nearly 7 %).