The International Spirits and Wines Association of India (ISWAI) has released a comprehensive report titled “Economic Value of Indian Alcoholic Beverage Industry” that delves into the substantial economic contribution of the alcohol industry. Valued at USD 52.4 billion, the industry accounted for nearly 2% of India’s GDP in 2021. The report highlights the sector’s vital role in the economy and identifies policy reforms needed to realize its full potential.
The members of (ISWAI), the apex body of India’s premium Alcoholic Beverage sector, presented its comprehensive report titled “Economic Value of the Indian Alcoholic Beverage Industry” to Ms. Veena Kumari Meena, Chief Secretary (Sugarcane Industry & Sugar Development, Excise, and ICD Lucknow) of the Government of Uttar Pradesh and to Mr. Vikas Pratap, Principal Secretary and financial commissioner, taxation, Punjab, and Shri. Varun Roojam, excise commissioner, Punjab recently.
This unprecedented report sheds light on the critical facets of the alcoholic beverage sector and its economic contributions to both India and Uttar Pradesh.
ISWAI’s CEO, Ms. Neeta Kapoor, expressed her gratitude to Ms. Veena Kumari Meena for her valuable time spent on receiving the report. She emphasized that the alcoholic beverage industry is an economic engine for both the nation and all states and that it’s crucial for all stakeholders to recognize its significant economic contribution and importance.
Below are the highlights of the report-
- Key Tax Contributor for States
The report notes that tax revenues from alcohol are the most significant contribution to the economy. State excise duty on alcohol is the third largest source of own tax revenue for states after GST and sales tax. In FY21, total excise duty and VAT collection from alcohol stood at INR 2.4 lakh crore, comprising 25% of states’ tax revenue. The sector contributed 7.7% of India’s total tax collection and 11.7% of indirect tax collection.
Tamil Nadu collected the highest alcohol taxes at INR 34,200 crore, followed by UP, Telangana, Karnataka and Maharashtra. States like Telangana, Tamil Nadu and Andhra Pradesh derived nearly 32% of their tax revenues from the alcohol sector. Customs duty on alcohol also yielded around INR 2,400 crore.
- Supports Farmers’ Livelihoods
As alcohol output rises, demand for grains, molasses and grapes increases, benefiting farmers producing these crops. The report estimates about 12.6 lakh farms and 63 lakh farmers are involved in meeting the demand for extra neutral alcohol (ENA) used in spirits and wines. This accounts for 1% of India’s total operational land holdings.
- Vital for Tourism and Restaurant Industry
Alcohol sales comprise 14-19% of revenues for restaurants, attracting more customers. In pubs and bars, this share is as high as 56%. The report estimates 23-28% of organized sector F&B employment depends on alcohol sales. States like Goa, Maharashtra and Karnataka have developed alcohol-based tourism which benefits local economies.
- Packaging, Retail Industries Gain
In 2021, the sector utilized packaging worth INR 9,680 crore, with glass accounting for 22% of India’s packaging market. Around 75-80% of sales occur through 88,234 retail outlets, generating employment for 4.4 lakh people.
- Huge Scope for Exports
Despite being the 5th largest market globally, India’s exports are low at USD 204 million. The report states that with supportive policies, exports can increase substantially. Indian liquor products are gaining popularity worldwide.
- Rising Domestic Consumption
The report expects consumption to grow with increasing incomes and social acceptance. Around 10-12 million people reach legal drinking age in India annually. Greater premiumization, evolving retail landscape and digital media influencers are other key drivers.
- Need for Regulatory Reforms
The report highlights how state-level variations in alcohol regulation pose challenges for the industry, undermining the single market concept. For the sector to achieve its potential, the report calls for:
- Regulatory uniformity across states
- Market-driven pricing mechanisms
- Streamlined, impartial and stable taxation
- Lower market entry barriers through easier licensing norms
- Process digitization for transparency and efficiency
- Encouraging e-commerce under safeguards
- Increased inter-departmental coordination
The report underscores the need for regulatory reforms to help the industry realize its potential. As Nita Kapoor, CEO of ISWAI stated, “The alcoholic beverage sector contributes significantly to the economy both in terms of enabling growth and providing jobs. It is, thus, essential that relevant stakeholders recognize the economic contribution of our sector.” She highlighted that a progressive excise policy in states like Punjab has led to unlocking excise revenues. The report recommends measures like regulatory uniformity across states, market-driven pricing, lower entry barriers and leveraging technology to streamline processes. These reforms can provide an enabling environment for the industry to operate smoothly and drive growth.
ISWAI’s Secretary-General, Mr. Suresh Menon, emphasized Uttar Pradesh’s strong position as a hub for domestic and global tourism. The tourism department’s statistics for 2022 revealed that the state welcomed 25 crore domestic and 4 lakh foreign tourists, contributing 7% to India’s total tourist footfall. The tourism industry’s contribution to India’s GDP stands at 5.8%, providing employment opportunities to over 3 crore people nationwide.
Overall, the ISWAI report provides detailed insights into the alcoholic beverage industry’s current economic contribution and future growth prospects. It makes a strong case for fundamental regulatory reforms to unlock the sector’s full potential for both domestic consumption and global exports. This can significantly benefit the economy through taxes, employment generation, farmer incomes and macro growth.