A recent IFPRI discussion paper investigates the case of pulse subsidies in select Indian states and their impact on consumption and nutrition, investigating whether subsidizing pulses through the Public Distribution System (PDS) would lead to a significant increase in pulse consumption. There is an increasing demand to add pulses to the basket of subsidized goods in the PDS which predominantly supplies subsidized cereals to India’s poorest populations. Pulses are an important source of protein, amino acids, vitamins and minerals and is the cheapest source of proteins in India and are widely consumed, around 89 percent of Indians eat pulses once a week. It is often argued that expanding the PDS to include proteins would contribute to dietary diversity and nutrition, especially among the poor.
The study investigates the case of subsidies on pulses in four Indian states (Andhra Pradesh, Himachal Pradesh, Punjab and Tamil Nadu) and the impact on consumption and nutrition. Between 2004/2005 and 2009/2010, these four Indian states introduced subsidized pulses to their PDS program. Data is drawn from the National Sample Survey’s 61st and 66th rounds which occur every five years. These are nationally-representative consumer expenditure surveys covering around 125,000 households and provide information on the quantity and value of food items (including pulses) consumed per household. The variations in pulse prices and consumption levels over time in these four states were compared with states that did not subsidize pulses. The study estimates the correlation between pulse consumption and inclusion in the PDS through difference in difference models.
The study finds that the change in consumption of pulses due to the PDS subsidy, though statistically significant, is small, and not large enough to meet the goal of enhancing the nutrition of beneficiaries. More specifically, the study finds that introducing a pulse subsidy into the PDS is associated with about a 300 gram increase in consumption per family per month, amounting to a 7.4 percent increases from the baseline level. This translates to 0.12 grams of protein per person per day which the study highlights is insignificant in improving nutritional and health levels. There are some variations in implementation and outcomes between States. For instance, Tamil Nadu subsidized two main pulses (urd and arhar) and made them available at half the market price and obtained the largest impact of the pulse subsidy, equalling 450 grams.
The study finds that the increase in consumption is less than 30 percent of the incrementally subsidized amount, meaning that for every 1 kilogram of pulse subsidized only 300 grams are added to people’s diet. In terms of what happens to the other 700 grams, the study identifies three possible reasons: only some households buy the PDS pulses while the studies estimates are an average over all households, households reduce their market purchases of pulses when they become available from the PDS or some of the PDS pulses are diverted to the black market. The study summarizes that essentially it seems that subsidies have induced substitution away from pulses to other food and non-food items and therefore do not address the protein needs of the population.
In conclusion, the study highlights that these findings are important for policymakers as they suggest that including pulses in the PDS would not lead to a notable increase in nutrition. However, the study does highlight that it is possible that even though consumption and nutrition were not significantly affected by the subsidy, there are likely to be welfare gains as the subsidy on pulses expands the budget of consumers. In this context, the study argues that if consumers have a low valuation of nutrition, a nutritional subsidy will not bring about nutrition gains, and the income effects would work toward increasing other food consumption and the purchase of non-food items. To meet nutritional goals, demand for nutritious foods also will need to be increased.
The full discussion paper can be accessed here.
By Bas Paris