Time to remit: the effect of remittances on household consumption and dietary diversity in India

Abstract

India has enjoyed over twenty years of rapid economic growth. The benefits of this growth, however, have largely bypassed India's poor; around a quarter of the world's malnourished children reside in India, and their health poses a significant challenge for the Indian government. Although the growth in India's domestic economy did not result in many trickle-down benefits for the hungry poor, anecdotal evidence suggests that food security related indicators has benefited from another factor. Both rural or urban households have become increasingly reliant on remittances and used them to improve their food security. This paper explores the pattern of relationship between remittances and food consumption/diversity utilising data from the India Human Development Survey collected in 2005 and 2011–12. Using Heckman procedure and the instrumental variable approach to correct for selection and simultaneity bias, the paper finds that remittances increase total food expenditure (mainly the expenditure on protein-rich food such as meats, eggs, pulses, vegetables and fruits) as well as food diversity, measured using the Household Dietary Diversity Score, Shannon and Simpson Index. The results are robust to models’ specification and support the existing evidence that remittances represent a mechanism by which households improve their food security.