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How the alcohol industry is having an impact on the Indian economy | Arundeep Singla, M.D Alcostar Group



Today, one of the world’s fastest-growing beverage markets is the alcohol sector in India. The reasons are an increasing urban population and rising disposable income, which are anticipated to fuel the development of India’s alcohol market. Furthermore, premiumization as well as growth in the out-of-home segment are driving value growth in the alcohol market.

According to a Statista study, in 2022, the market for alcoholic beverages will generate US$47,500 million in revenue. Furthermore, the market is projected to grow by 8.86% per year (CAGR 2022–2025). All these changes over the years reflect that the alcohol industry is supporting the growth of the Indian economy. Let us delve into how the landscape of the alcohol market is changing and how the significance of alcohol is elevated in the Indian subcontinent.

Increase in the significance of alcoholic drinks

Alcohol was not deemed “essential” at the time the COVID lockdown was implemented. However, as the number of days spent in lockdown grew, the economy and tax collections suffered. States began pleading with the Center to permit liquor stores to reopen as a result. As a result, on the second day after reopening, Karnataka reported a highest-ever single-day liquor sales, totaling 197 crore. Delhi and Uttar Pradesh both experienced comparable record sales.

People became accustomed to the taste of more expensive wines and spirits due to an increase in home consumption during the pandemic. They started choosing premium brands and began emphasising quality over quantity in their beverages as a result. Consumers are increasingly gravitating toward boutique brands and premium niches, and they are willing to pay more for a unique experience. Prior to the introduction of fine dining, there was little alcohol consumption in clubs or restaurants in India. Today, with a thriving fine dining culture present in all metro areas as well as Tier II and Tier III cities, this has completely changed. After being isolated for two years due to the pandemic, an increasing number of young people, especially in cities, are now socialising in restaurants, clubs, pubs, and bars. The demand for alcoholic beverages has further increased as a result of a number of factors, including rapid urbanisation, shifting consumer preferences, and a sizable and expanding middle-class population with rising purchasing power. This demand for alcoholic beverages has been experienced at several levels throughout the nation.

The changing landscape of the alcohol market in India

The Indian subcontinent’s liquor market has changed due to the emergence of affordable premium labels and people’s changing drinking habits, particularly among the younger generation. The Indian-made or -manufactured foreign liquor (IMFL), Indian-made Indian liquor (IMIL), wine, beer, and imported alcohol comprise the majority of the alcohol industry. In India, among these categories, whiskey dominates the IMFL category. Furthermore, vodka is also gaining significance owing to the increase in pubs, hotels, and restaurants, as well as an evolving nightlife and consumer preferences.

According to a Drinks Market Analysis conducted by the London-based International Wines and Spirits Record (IWSR), India is the world’s largest consumer of whiskey. Furthermore, the Indian alcohol market is expanding rapidly, with wine and vodka showing very high demand. Also, according to a study by ICRIER and law firm PLR Chambers, Indian consumers’ changing drinking habits are reportedly reflecting their increased exposure to foreign brands and international travel.

State’s economic contribution

States have a wide range of governance and pricing models for alcoholic beverages.

Furthermore, the states have complete control over the alcoholic beverage supply chain, from production and distribution to registration and retail, through their excise policies. The sector is open to foreign investments, and many states offer subsidies for local manufacturing (like Maharashtra and Karnataka for wines). Furthermore, alcoholic beverages are among the top three revenue generators in the majority of states. Alcohol has also aided states and union territories (with legislatures) in increasing their “own tax revenue” (SOTR) earnings. Since the GST is not applicable to alcohol, other taxes and fees still apply, including excise duty on the manufacture of alcoholic beverages for human consumption, state value-added tax (VAT) on sales, and fees like gallonage fees and licence fees. The contribution of alcohol taxes to the exchequer is even higher for the north-eastern states, which are at the top of the list for the percentage of men who drink. The state with the highest rates of alcohol consumption among men (53%) and women (24%), however, is Arunachal Pradesh. Taxes that the Center collects and shares with the states account for about half of the total revenue of the states.

The government of Tamil Nadu made close to Rs 38,000 crore in revenue the previous fiscal year, and Telangana made Rs 40,000 crore. Telangana has made Rs 54,000 crore from the sale of alcoholic beverages over the past two years, and in the upcoming year, it is anticipated to surpass Rs 40,000 crore in just one fiscal year. For 2022–2023, the Delhi government forecasted alcohol sales would bring in Rs 9,454 crore, with Rs 700 crore coming from local spirits and Rs 8,754 crore from imports of liquor and spirits. This was a 57.6% increase from the approximately Rs 6,000 crore it had been bringing in from alcohol in recent years. West Bengal, on the other hand, recorded its highest monthly alcohol sales revenue on December 21, when sales reached almost Rs 2,000 crore, or almost 25% more than the pre-COVID level.

All things considered

The alcohol industry has quickly recovered after lockdown, which is a sign of its robust and sizable consumer base, which is increasingly made up of millennials and Gen Z. Numerous homegrown brands have carved out a place for themselves in the segment as alcoholic beverage companies have made their way into the domestic market. They are maximising the potential of digital media, which is assisting the segment’s expansion in numerous ways. In contrast to the past, alcohol brands can now advertise their goods through digital platforms, social media, concerts, events, and a variety of other venues.

Currently, this industry supports approximately 20 million jobs, and with its growing landscape, further employment opportunities are likely to be created. The alcohol industry is a significant sector of the Indian economy. It not only provides the states with up to 2 lakh crores in revenue, but it also directly supports nearly 40 lakh farmers.

ICRIER estimates that by 2030, 50% of Indian drinkers will continue to purchase more products in the same category of alcoholic beverages, 26% will switch to higher-end brands, and 24% will spend money on newer alcohol categories. With this robust growth prospective, India is likely to dominate the alcohol beverage market in the upcoming years.

This article was originally published on 

Aabkari Times Editorial Team
Aabkari Times is a monthly news magazine on Liquor, Excise and Alcohol allied industry; being published since 2009 by the expertise of retired excise dept. associates and alco-bev industry professionals as our editorial team. Our magazine contains different new alco-bev strategic and new brand launch articles as well as news on recent govt. policies, trends on alcohol industry and other important data relevant to the distilleries and industry at the mass.

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