Everything You've Ever Wanted to Know About Alcohol Impact On GDP

ALCOHOL

 Effects of the Alcohol Industry on India's Economy:

The alcohol industry in India now has one of the fastest-expanding global beverage markets. The factors are an expanding urban population and increased disposable income, which are expected to support the growth of the Indian alcohol industry. In addition, the alcohol industry is growing in value as a result of premiumization and expansion in the out-of-home sector.

In 2022, the market for alcoholic drinks will bring in US$47,500 million, according to a Statista report. Additionally, a CAGR of 8.86% from 2022 to 2025 is predicted for the market. The alcohol sector has undergone all of these changes throughout the years, which shows how important it is to the expansion of the Indian economy. Examining how the alcohol industry is evolving and how alcohol's importance is growing, let's look at these issues in more detail.

• How India binges on its booze Economy?

After excessive speeding and lane indiscipline, it ranks as the third most common cause of traffic accidents in India. According to polls, one-third of men and one-fourth of women in India who practise it claims it hurts their physical health, financial situation, and home duties. However, as the last week's events have demonstrated, alcohol plays a complex and crucial role in the Indian economy.

The alcohol industry has an odd paradox running through it. Both ownership and disownership won't apply. State governments frequently accentuate the moral implications of alcohol control, so they have little trouble giving alcohol first priority at a time of crisis. These are the clear motives: In the most recent fiscal year, taxes on alcohol brought in around 2.25 trillion rupees for India's states collectively.

But what is valid for the state is also true for Indian males (who, as the data below demonstrates, are far larger consumers than women). While they self-report its drawbacks and negative effects in surveys, they also have no difficulty jostling in lines outside bars during a pandemic. India has thus never been able to come to an informed decision on safe drinking or whether the government should have such tight control over the alcohol industry.

• Despite the Corona Crisis, the alcohol industry in India is still growing:

The globe is presently experiencing an unprecedented catastrophe in the shape of the Corona Virus epidemic. All economies are currently experiencing some sort of lockdown, and all economic activity has ceased. The first phase of the statewide lockdown was imposed on March 25 and coincided with an abrupt end to the sale of alcohol throughout India. This action was motivated in part by WHO recommendations that claimed that alcohol and cigarettes increase one's vulnerability to the virus. Even though certain limitations on legal economic activity were relaxed with each lockdown phase, the sale of alcohol was not allowed to be sold until May 4th, approximately 40 days after the lockdown had ended.

The decision to permit the sale of alcohol was forced by the states' repeated requests, which came as a result of a severe decline in their tax income. With a projected 12.5% contribution in 2019–20, the alcohol excise tax is the third-largest source of state own tax income.

Why is the nation under lockdown, while states are eager to expand booze stores?

Due to the lockdown, practically all economic activity has ceased, which has resulted in appallingly low state GST collection, which is the state's main source of revenue. They were particularly hard hit by this income loss since it occurred at a time when they had to pay additional expenses for COVID-19 patient care, preventative efforts, and support for the underprivileged and vulnerable groups. The manufacture and sale of alcohol is one of the key sources of income for the states. Alcohol sales were prohibited as part of the lockdown, although this cost the government vital tax income.

Alcohol was not judged "essential" at the time the COVID lockdown was put into place. The economy and tax receipts decreased as the number of days spent in lockdown increased, though. States started appealing to the Centre to allow booze establishments to reopen as a consequence. As a result, Karnataka announced its highest-ever single-day spirits sales, amounting to 197 crores, on the second day after reopening. Similar record sales were seen in Delhi and Uttar Pradesh.

While Covid-19 may alter many facets of employment, daily life, and the economy, India's relationship with alcohol is likely to stay unaltered. The links may even become more powerful.

• Facts and figures about the Indian alcohol business

Even though alcohol, such as wine or fermented juice, is used for medicinal purposes in Ayurveda, among Indians it is generally taboo and a subject that stirs up political controversy. The country's alcohol consumption patterns differ across the board due to different cultural varieties and a patchwork of laws governing Indian states. The spirits industry in the Indian subcontinent has rapidly changed as a result of the emergence of luxury brands at affordable prices and a shift in customer behaviour, particularly among younger consumers. On the one hand, excessive alcohol use can cause long-term health issues. In contrast, on the other, alcohol sales constitute a significant source of income for the majority of Indian states.

Types of alcoholic beverages:

Indian-made Indian liquor (IMIL), Indian-made foreign liquor (IMFL), Wine, Beer, and imported alcohol (IFL) make up the majority of the country's alcohol market. The latter are insignificant participants in the nation's alcohol market due to high import taxes and levies.

"Desi Daru" is the name of the most popular indigenous alcoholic beverage. It is produced from molasses, a by-product of sugarcane. Along with wine and other alcoholic drinks produced by native tribes, Desi Daru is the main source of income for a significant portion of India's rural population. However, beer was the alcoholic beverage that urban Indians enjoyed the most.

• State's Financial Involvement:

For alcoholic drinks, states use a variety of governance and pricing strategies.

Through their excise rules, the states also have total control over the whole supply chain for alcoholic beverages, from manufacturing and distribution through registration and retail. Foreign investments are welcome in the industry, while several governments provide subsidies for domestic production (such as Maharashtra and Karnataka for wine). In addition, alcoholic drinks rank among the top three sources of income in most states. Additionally, the use of alcohol has helped states and union territories (with legislatures) generate more "own tax revenue" Because alcohol is exempt from the GST, there are still other taxes and fees that must be paid, such as the excise duty on the production of alcoholic drinks intended for human use, the state value-added tax (VAT) on purchases, and licencing and gallonage fees. For the northeastern states, which top the list for the proportion of males who drink, the tax revenue from alcohol is even more significant to the exchequer. Arunachal Pradesh, on the other hand, has the highest alcohol consumption rates for both males (53%) and women (24%). Most of the state's total revenue comes from taxes that the Centre collects and distributes to them, or around half of it.

In the previous fiscal year, Telangana and Tamil Nadu respectively brought in close to Rs 38,000 crore and Rs 40,000 crore in income. Over the last two fiscal years, Telangana has generated Rs 54,000 crore from the sale of alcoholic drinks; it is projected that this year it would reach Rs 40,000 crore. The Delhi government predicted that alcohol sales would generate Rs 9,454 crore for 2022–2023; Rs 700 crore of that sum would come from domestic spirits while Rs 8,754 crore came from imports of alcohol and spirits. This represented a 57.6% rise over the roughly Rs 6,000 crore in alcohol revenue it has been generating in prior years. However, on December 21, when sales of alcohol hit about Rs 2,000 crore, or nearly 25% greater than the pre-COVID level, West Bengal earned its largest monthly alcohol sales income.

The National Family Health Survey (NFHS) 2015–16 found that 29.2% of Indian men between the ages of 15 and 49 reported drinking alcohol. In other words, over a third of the males in that age range are consumers. Only two states (Sikkim and Arunachal Pradesh) have female unemployment rates of more than 10%; the percentage for women is substantially lower, at 1.2%.

Both genders' combined percentage of drinkers is now lower than it was ten years ago. According to the 2005–2006 NFHS, 32% of males and 2% of women in this age group were alcohol consumers. The percentage of males who drink alcohol has decreased somewhat in 17 out of 27 states and Union territories (UTs) during the past ten years, with Punjab, Delhi and Kerala seeing the biggest drops.

Alcohol Consumption:

In contrast to 18.8% of men, women frequently drank alcohol at a rate of just 1.3 per cent, according to a nationwide poll. Male and female alcohol consumption was higher in the northeast and east of India. Moreover, male alcohol drinking was prevalent nationwide, particularly in the South and North. Arunachal Pradesh, Telangana, Sikkim, Manipur, Goa, and Jharkhand were states where males drank alcohol in large quantities. In comparison to the rest of the nation, Telangana, all northeastern states, and all of the women consumed alcohol at high rates. While some states outright forbid alcohol, different states have different legal drinking ages. These comprised a few Manipurn districts, Lakshadweep, Nagaland, Bihar, and Gujarat.

A few times a year, throughout the nation (without exception), "dry days" take place during which no alcohol may be sold. Each year, they took place on election days, Gandhi Jayanti, Republic Day, and Independence Day.

• Taking everything into account

Because of its large and robust customer base, which is increasingly made up of millennials and Generation Z, the alcohol sector rebounded fast from lockout. As alcoholic beverage businesses entered the domestic market, several local brands established themselves in the sector. They are making the most of digital media's potential, which is promoting the segment's growth in a variety of ways. In contrast to the past, alcohol manufacturers may today market their products through digital platforms, social media, concerts, events, and several other places.

About 20 million people are employed in this sector currently, and as it expands, more jobs are anticipated to be produced. An important part of the Indian economy is the alcohol sector. It not only brings in up to 2 lakh crores in revenue for the states, but it also directly employs roughly 40 lakh farmers.

ICRIER predicts that by 2030, 26% of Indian drinkers would move to higher-end brands and 24% will spend money on fresh alcohol categories. Of those who now consume alcohol, 50% are expected to do so. With such a promising development outlook, India is anticipated to control the global alcoholic beverage industry in the future years.