Is Processed Food a Luxury Good in India? A Macroeconomic Engel Curve Analysis, 2007–2022
Abstract
Rising incomes and urbanization have substantially transformed food consumption patterns in developing economies. Patterns of food demand at the household and economy-wide levels are commonly studied in terms of changes in the structure of food demand and expenditure patterns on food items over time. This study investigates whether processed food can be considered a luxury good in India by estimating a macroeconomic Engel curve using annual data for the period 2007–2022. It uses time-series data on household final consumption expenditure incurred on purchase of processed foods and gross domestic product measured in terms of aggregate gross value added at basic prices. The data is sourced from the input-output tables of the Indian economy published by the Asian Development Bank on annual frequency. Using a log-log regression model, this study investigates whether an Engel curve exists between household final consumption expenditure on processed foods and gross value added. The results show that household final consumption expenditure on processed foods in India has grown faster than aggregate gross value added during the said period, indicating an income elasticity of demand greater than unity. This suggests that processed foods behaved as a luxury good in India during the study period. The study highlights important implications for processed food policy framing, including strategies for processed food manufacturing, input sourcing, agribusiness development, environmental sustainability, managing health risks associated with consumption of processed foods, taxation, and export promotion and management in India’s evolving food economy.
Keywords
Full Text:
PDFReferences
Asian Development Bank. (2023). India: Input-Output Economic Indicators (National Input-Output Tables), 2000 and 2007–2022. Retrieved October 25, 2025, from https://data.adb.org/dataset/india-input-output-economic-indicators
Baker, P., Machado, P., Santos, T., Sievert, K., Backholer, K., Hadjikakou, M., Russell, C., Huse, O., Bell, C., Scrinis, G., Worsley, A., Friel, S., & Lawrence, M. (2020). Ultra-processed foods and the nutrition transition: Global, regional and national trends, food systems transformations and political economy drivers. Obes Rev., 21(12), e13126. https://doi.org/10.1111/obr.13126
Banks, J., Blundell, R., & Lewbel, A. (1997). Quadratic Engel curves and consumer demand. Review of Economics and Statistics, 79(4), 527–539. https://doi.org/10.1162/003465397557015
Basu, K., & Das, D. (2015). Service Sector Growth in India: A View from Households. UMASS Amherst Economics Working Papers, 2015-10. Retrieved 10 October 2025, from http://www.umass.edu/economics/publications/2015-10.pdf
Central Statistical Organisation. (2008). National Industrial Classification (NIC) – 2008: Statis-tical standard for developing economic databases. Ministry of Statistics and Pro-gramme Implementation, Government of India. https://mospi.gov.in/
Chakrabarty, M., & Hildenbrand, W. (2011). Engel's law reconsidered. Journal of mathemati-cal economics, 47(3), 289-299. https://doi.org/10.1016/j.jmateco.2011.01.006
Cirera, X., & Masset, E. (2010). Income distribution trends and future food demand. Philo-sophical Transactions of the Royal Society B: Biological Sciences, 365(1554), 2821–2834. https://doi.org/10.1098/rstb.2010.0164
Deaton, A., & J. Dreze (2009). Food and Nutrition in India: Facts and Interpretations. Eco-nomic and Political Weekly, 44(7), 42–65. https://www.jstor.org/stable/40278509
Engel, E. (1857). Die Productions-und Consumtionsverhältnisse des Königreichs Sachsen. Zeitschrift des Statistischen Bureaus des Königlich Sächsischen Ministerium des In-nern, 8, 1–54.
Fardet, A. (2018). Characterization of the degree of food processing in relation with its health potential and effects. Advances in food and nutrition research, 85, 79–129. https://doi.org/10.1016/bs.afnr.2018.02.002
Gaiha, R., Jha, R., & Kulkarni, V.S. (2010). Demand for Nutrients in India, 1993–2004. ASARC Working Papers, 2010-16. Retrieved 10 October 2025, from https://ideas.repec.org/p/pas/asarcc/2010-16.html
Ghatak, S., & Kumar, R. (2025). Reassessing India’s Poverty Decline Over The Missing Decade: 2011-12 to 2022-23. Centre for Economic Policy Research, 1–37. Retrieved 10 October 2025, from https://personal.lse.ac.uk/ghatak/Poverty_Est.pdf
Godbharle, S., Jeyakumar, A., & Kesa, H. (2022). Socio-demographic and economic deter-minants of household expenditure on eating out in India – Evidence from India Human Development Survey (IHDS) II. Nutrition and Health, 30(4), 763–770. https://doi.org/10.1177/02601060221139571
Goyal, M., Hickel, J., & Jha, P. (2025). Increasing inequality in agri-food value chains: Global trends from 1995-2020. Global Food Security, 46, 100883, 1-10. https://doi.org/10.1016/j.gfs.2025.100883
Green, R., Cornelsen, L., Dangour, A. D., Turner, R., Shankar, B., Mazzocchi, M., & Smith, R. D. (2013). The effect of rising food prices on food consumption: Systematic review with meta-regression. BMJ, 346, f3703. https://doi.org/10.1136/bmj.f3703
Hausman, J. A., Newey, W., & Powell, J. L. (1995). Non-linear errors in variables estimation of some Engel curves. Journal of Econometrics, 65(1), 205–233. https://doi.org/10.1016/0304-4076(94)01602-V
Hicks, J. R. (1939). Value and capital. Oxford University Press.
Hirshleifer, J., & Glazer, A. (1993). Price Theory and Applications. Prentice-Hall of India, Pvt. Ltd. New Delhi.
Ministry of Statistics and Programme Implementation. (2024). Household Consumption Ex-penditure Survey (HCES): 2022–2023. Ministry of Statistics and Programme Implemen-tation, Government of India. Retrieved 10 October 2025, from https://www.mospi.gov.in/sites/default/files/publication_reports/Report_591_HCES_2022-23New.pdf
Jeon, Y., Thompson, W., Miller, J. I., Hoang, H., & Abler, D. (2025). Revealing fundamental demand parameters: A new theoretically consistent meta-regression approach to US food demand elasticities. Food Policy, 136, 102951. https://doi.org/10.1016/j.foodpol.2025.102951
Kearney, J. (2010). Food consumption trends and drivers. Philosophical Transactions of the Royal Society B: Biological Sciences, 365(1554), 2793–2807. https://doi.org/10.1098/rstb.2010.0149
Keynes, J. M. (1936). The general theory of employment, interest and money. New York: Macmillan Cambridge University Press.
Kumar, P., Mruthyunjaya, & Dey, M. M. (2007). Long-Term Changes in Indian Food Basket and Nutrition. Economic and Political Weekly, 42(35), 3567–3572. https://www.jstor.org/stable/40276502
Law, C., Green, R., Kadiyala, S., Shankar, B., Kani, C., Brown, K.A., & Cornelsen, L. (2019). Interstate variations in processed food consumption in India. Journal of Agribusiness in Developing and Emerging Economies, 9(4), 310–327. https://doi.org/10.1108/JADEE-05-2018-0061
Lewbel, A., & Pendakur, K. (2008). Estimation of collective household models with Engel curves. Journal of Econometrics, 147(2), 350–358. https://doi.org/10.1016/j.jeconom.2008.09.012
Li, N. (2021). An Engel curve for variety. The Review of Economics and Statistics, 103(1), 72–87. https://doi.org/10.1162/rest_a_00879
Monteiro, C. A., Cannon, G., Levy, R. B., Moubarac, J., Louzada, M. LC., Rauber, F., Khand-pur, N., Cediel, G., Neri, D., Martinez-Steele, E., Baraldi, L. G., & Jaime P. C. (2019). Ultra-processed foods: what they are and how to identify them. Public Health Nutrition, 22(5), 936–941. https://doi.org/10.1017/S1368980018003762
Mottaleb, K. A., & Mishra, A. K. (2023). Income, urbanisation and consumption of processed foods: Implications for nutrition and health policies for India. Journal of International De-velopment, 35(5), 688-715. https://doi.org/10.1002/jid.3686
Nayyar, G. (2012). The service sector in India's development. New York: Cambridge Univer-sity Press.
Pandey, B., Reba, M., Joshi, P. K., & Seto, K.C. (2020). Urbanization and food consumption in India. Scientific Reports, 10(17241). https://doi.org/10.1038/s41598-020-73313-8
Paul, S., & Paul, S. (2023). Transition in dietary quality: evidence from India. British Journal of Nutrition, 129(12), 2054-2066. https://doi.org/10.1017/S0007114522002847
Popkin, B. M. (2017). Relationship between shifts in food system dynamics and acceleration of the global nutrition transition. Nutrition Reviews, 75(2), 73–82. https://doi.org/10.1093/nutrit/nuw064
Popkin, B. M., Miles, D. R., Taillie, L. S., & Dunford, E. K. (2024). A policy approach to identi-fying food and beverage products that are ultra-processed and high in added salt, sug-ar and saturated fat in the United States: A cross-sectional analysis of packaged foods. The Lancet Regional Health – Americas, 32, 100713. https://doi.org/10.1016/j.lana.2024.100713
Purushotham, A., Aiyar, A., & von Cramon-Taubadel, S. (2023). Processed foods, socio-economic status, and peri-urban obesity in India. Food Policy, 117, 102450. https://doi.org/10.1016/j.foodpol.2023.102450
Reardon, T., Tschirley, D., Liverpool-Tasie, L. S. O., Awokuse, T., Fanzo, J., Minten, B., Vos, R., Dolislager, M., Sauer, C., Dhar, R., Vargas, C., Lartey, A., Raza, A., Popkin, B. M. (2021). The processed food revolution in African food systems and the double burden of malnutrition. Global Food Security, 28, 100466. https://doi.org/10.1016/j.gfs.2020.100466
Vandevijvere, S., Jaacks, L. M., Monteiro, C. A., Moubarac, J., Girling-Butcher, M., Lee, A. C., Pan, A., Bentham, J., & Swinburn, B. (2019). Global trends in ultraprocessed food and drink product sales and their association with adult body mass index trajectories. Obesity Reviews, 20(S2), 10–19. https://doi.org/10.1111/obr.12860
Vreyer, P. D., Lambert, S., & Ravallion, M. (2020). Unpacking Household Engel Curves. NBER Working Papers, 26850, National Bureau of Economic Research, Inc. https://doi.org/10.3386/w26850
Wooldridge, J. M. (2002). Econometric analysis of cross-section and panel data. MIT Press.
World Bank. (2025). Global Consumption Database. The World Bank. Retrieved October 25, 2025, from https://datatopics.worldbank.org/consumption/market.
DOI: https://doi.org/10.37046/jaj.v7i2.35366
Refbacks
- There are currently no refbacks.
Copyright (c) 2026 Jai Ram Meena
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
