How Consumer Price Subsidies affect Nutrition

We study the effect of an exogenous increase in food grain subsidy from a program targeting the poor in rural India and find that the increase in income resulting from the subsidy increased consumption of the subsidized grains and certain more expensive sources of nutrition, lowered consumption of coarse grains, the cheaper, yet, unsubsidized staple food, and increased expenditures on nonfood items but had no effect on nutrition in poor households. Estimates of the price effect of the subsidy on nutrition are also negligible; the price subsidy increased consumption of wheat and rice and lowered consumption of coarse grains.