Alcohol consumption response to pandemic induced income shocks in India

Abstract

The study assesses the impact of the Covid-19 pandemic on household consumption of alcohol in India, considering both income shocks and supply-side factors. based on a nationally representative household survey conducted by CMIE. Using a 2SLS panel regression model and employing an approach akin to difference-in-differences technique, our study finds that the pandemic induced lockdowns resulted in a sharp increase in the share of alcohol in total expenditure across rural and urban India, and for all income levels. Alcohol consumption varies by education level, by caste, religion, and severity of income shocks. The increased alcohol consumption during the pandemic, and more so among the households that faced a severe income shock, despite the supply restrictions, suggest the stronger impact of stress-response-dampening hypothesis and self-medication hypothesis compared to the income effect. Despite state-imposed supply restrictions, including temporary alcohol shop closures and subsequent reopening with higher taxes, the study raises concerns about a disproportionate rise in alcohol consumption among the most economically impacted. This underscores the need for balanced policy responses, considering both economic stressors and public health imperatives, and emphasizes targeted interventions to mitigate the consequences of increased alcohol consumption during crises.