India can become a non-alcoholic beverage hub if govt gets it right on taxation – ICRIER report

INDIA – India, the second most populous country in the world, has the potential to become a non-alcoholic beverage hub if the government of the day gets it right when it comes to taxation, a report by the economic policy think tank ICRIER has revealed.

The non-alcoholic beverage market in India was estimated at Rs 671 billion (US$8.64 billion) in 2019, according to ICRIER.

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Bottled water and carbonated soft drinks still account for the bulk of the non-alcoholic beverages sector while the market for juices energy drinks, tea, milk, coffee-based beverages, and organic drinks is still expanding.

The market is expected to soar to new heights driven by rising awareness about healthy lifestyle & wellness, rising disposable income, and an increasing number of people consuming soft drinks and juices with their meals.

In value terms, ICRIER projects that the market will expand to around Rs 1,472.33 billion (USS$147.66billion) in 2030.

The space to grow is linked to India’s per capita sales volume which was 21.36 liters in 2018,  a modest number compared to the 89.7 liters for Europe in 2020.

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The report revealed that the market may not reach its true potential by 2030, in spite of various subsidies and incentives, due to issues such as the negative perception of the industry and high taxation under GST, the report revealed.

 Under the GST regime, all carbonated drinks, irrespective of their nutrition content or sugar levels are classified as “sin goods” and imposed an additional compensation tax of 12 percent as in the case of alcohol and tobacco while other food products like chocolates and sugar confectionery were not in this category.

Food & Public Distribution Secretary Sudhanshu Pandey, said the non-alcoholic beverage sector contributes significantly to the Indian economy in terms of value addition and job creation, and further lowering of taxation will promote greater participation by the organized part of the industry.

The non-alcoholic beverage market is also facing losses brought by unfair competition from the unorganized sector and counterfeit products owing to the rise in the prices of non-alcoholic beverages.

Other issues that might limit growth like a fragmented supply chain and high logistics costs and reducing adverse environmental effects are currently being worked on by both the government and beverage companies.

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