Seminar Series #11: Ishan Janbandhu on prohibition and demand for alcohol

The 11th session of the seminar series will be conducted by Ishan Janbandhu, a PhD scholar at the Gokhale Institute

Speaker: Ishan Janbandhu

Chair: Dr K S Hari, Associate Dean of Research

Title“Prohibition and Demand for Alcohol in Maharashtra: A Micro-Econometric Analysis”

Extended Abstract: Alcohol is an important element of consumption expenditure and an important source of tax revenue for the Government of Maharashtra. This paper deals with the effect of prohibition policy (at the district level) on alcohol participation and consumption. In measuring the consumption levels, this paper departs from simple consumption and introduces pure alcohol consumption. Apart from that, this paper deals with income elasticity, and the price elasticity of various types of alcohol available in Maharashtra. In dealing with the various types of alcohol, it was also possible to compare the impact of prohibition on different types of liquor. To add to these aspects, the paper also introduces the effect of enforcement on alcohol participation and its consumption. Prohibition policy can be considered a non-success at the district level. Instead, raising the prices of different types of liquor, and increased focus on education are the better means to control alcohol menace. Increased income of the household and increases in the prices of alcohol also suggest increases in excise revenue for the government. The price elasticities are -0.86 for country liquor, -0.82 for IMFL, and -0.66 for beer. This is largely similar to the findings of Sornpaisarn (2013) for low and middle-income countries with -0.5 for beer and -0.79 for other alcoholic beverages. Thus, the core link is  that increase in education is likely to increase personal income, and likely to lower alcohol prevalence and quantity consumed. It also results in less than proportional rise in the household budget share for alcohol, increased tax revenue (link from income). Along with this, the government should rely in tax hikes and removal of extreme measures like prohibition.

Concluded: 30 June 2022, 5:00 p.m. to 6:00 p.m., Seminar Hall, Main Building