Does food subsidy affect household nutrition?

Abstract

Purpose – Indian households having the below poverty line (BPL) ration card receive rice, wheat, sugar and kerosene from the Indian Targeted Public Distribution System (TPDS) at subsidized rates. The paper uses the National Sample Survey Organization's consumption expenditure survey for the 61st round to study the causal effect of the BPL ration card on BPL households' calorie consumption. The paper aims to discuss these issues. Design/methodology/approach – This causal effect is estimated by comparing per-capita-per-day calorie consumption of the BPL households having BPL card with that of a matched counterfactual BPL household from the same state not having BPL card, using stratified propensity score matching. Findings – The BPL ration card was found to increase calorie consumption from cereals and decrease calorie consumption from non-cereal food items without affecting the overall calorie consumption of household. Thus, TPDS induces households to consume more cereals and less non-cereal without significantly changing the overall calorie consumption. Research limitations/implications – The research methodology controls for selection bias due to observable variables. Further, research needed to devise experimental set up to control for the selection bias due to unobserved variables. Originality/value – The paper uses the targeting error in identifying BPL households in TPDS as a quasi-experiment set up to study the causal effect of the BPL ration card.