How effective is a fat subsidy? Evidence from edible oil consumption in India

• Published in: Journal of agricultural economics Vol. 74; no. 2; pp. 327 - 348
• Main Authors: Jumrani, Jaya, Meenakshi, J. V.
• Format: Journal Article
• Language: English
• Published: Oxford Wiley Subscription Services, Inc 01.06.2023
• Subjects: Beneficiaries; Beverages; Consumption; difference in differences; Drinks; Edible oils; Fats; Fiscal policy; food; Food groups; food policy; Healthy food; Households; India; Intervention; Malnutrition; nutrition and health; Oil consumption; Oils; Palm oil; Rural areas; Rural communities; Spillover effect; Subsidies; Sugar; Taxation; taxes and subsidies; Variants; Vegetable oils; Vegetarianism; India
• ISSN: 0021-857X; 1477-9552
• DOI: 10.1111/1477-9552.12510

Taxes on fats and sugar‐sweetened beverages are deployed in the developed world to encourage healthier diets. How effective might such fiscal instruments be in emerging economies? We evaluate the impacts of a subsidy for palm oil, introduced as part of the public distribution system in three Indian states. Using variants of the difference‐in‐differences approach, we find that palm oil consumption increased, particularly in rural areas, as a result of the subsidy, and traditional oils were displaced by cheaper palm oil. However, the intervention did not significantly alter overall edible oil consumption. These results are robust to different specifications, alternative estimation samples, and the exclusion of households who may have been potential beneficiaries of other interventions. Impacts were higher in Tamil Nadu than in other states, and were higher for vegetarian households in rural areas. There was only weak evidence of spillover income effects on other food groups. Given India's dual burden of malnutrition, our analysis suggests that fiscal policy interventions have the potential to effectively nudge consumer choices towards healthier edible oil consumption.