India’s alcohol sector has never been more critical to the nation’s economy. With an estimated market size of $52.4 billion in 2021, roughly 2 per cent of the country’s nominal GDP, the industry is significant and burgeoning. Projections suggest the Indian alcoholic beverage industry could reach an astounding $64 billion over the next five years, ensuring India’s position as the fifth-largest contributor to global market revenues in the near to medium term.
Beyond just market size, the sector has proven to be a boon for government coffers. In the fiscal year 2021, the industry contributed a mammoth Rs 2.4 lakh crore to the government, representing many income streams. Customs duty on alcoholic beverages alone accounted for Rs 2.4 thousand crore.
In the grand scheme, alcohol revenues represent 1.2 per cent of India’s nominal GDP, 7.7 per cent of the total tax collection, and 11.7 per cent of the nation’s indirect tax revenue. It contributes 24.6 per cent of states’ tax revenues at the state level. In a nation grappling with myriad economic challenges, this is non-trivial.
The scope of the alcohol industry in terms of employment is remarkable, providing livelihoods for a staggering 79 lakh individuals both directly and indirectly. This accounts for 1.5 per cent of the total people employed in the country. From production and supply chain management to retail, the sector offers many job opportunities that sustain families and stimulate local economies.
The industry’s impact on packaging material cannot be overlooked when discussing the economic benefits. In 2021 alone, the Indian Made Foreign Liquor (IMFL), Ready-To-Drink (RTD), and wine sectors used packaging material worth Rs 9,873 crore. This is not a minor footnote; it demonstrates the industry’s broad reach into ancillary sectors.
Moreover, glass packaging is significantly impacted, with the alcohol industry accounting for about 22 per cent of India’s total glass packaging market size in FY2021. This indicates the pivotal role that the alcohol sector plays in driving the growth of the packaging industry, which in turn supports various manufacturing jobs and contributes to economic activity.
It is not just the direct revenues, taxes, and employment numbers that should capture our attention; it’s also the industry’s profound ripple effect on various aspects of the Indian economy. From boosting the packaging industry to sustaining nearly 8 million livelihoods, the sector is deeply woven into India’s economic fabric.
Boost for the F&B sector
Alcohol also plays a pivotal role in India’s burgeoning food and beverage sector. With an estimated Rs 1.48 lakh crore in FY 2018-19, alcohol sales accounted for between Rs 20,769 crore and Rs 28,187 crore. This is especially evident in the pub, bar, café, and lounge segments, where alcohol sales constitute up to 56 per cent of total revenue.
The alcohol industry in India is far more than just a lifestyle choice; it’s a substantial economic engine, powering everything from government revenues to employment in agriculture and the food and beverage industry. As India strives to fuel its growing economy, the alcohol sector is a testament to how a well-regulated industry can contribute to national prosperity.
Beyond the immediately visible numbers, the alcohol industry also drives employment in ancillary sectors, including transportation, marketing, and retail. Bottle manufacturers, label printers, and advertisers find a lucrative market in this sector. It is a cascading effect that boosts micro, small, and medium enterprises (MSMEs) as they find numerous opportunities to collaborate with large alcoholic beverage companies.
This interdependence between the alcohol industry and other sectors provides a multiplier effect on employment. As these ancillary industries grow, they create jobs and contribute their share to the GDP and tax revenue, making the alcohol sector an even more significant player in the national economy.
The alcohol industry is a domestic powerhouse with a substantial international footprint. Indian liquor brands have found increasing acceptance abroad, and exports are essential to the industry’s revenue stream. From world-renowned whiskies to beers and wines, India’s alcoholic beverages are making their mark globally. These exports further help bring valuable foreign exchange, improving the country’s trade balance.
Another overlooked yet vital facet of the alcohol industry is its interconnectedness with agriculture. Around 1,235 million litres of extra neutral alcohol (ENA) was used to produce Indian-made foreign liquor (IMFL) and ready-to-drink alcoholic beverages in 2021. The sector relies on grains and molasses as key raw materials. It’s estimated that to produce 741 million litres of ethanol for IMFL, 1.9 million tons of grain are required. This amounts to 0.6 percent of India’s total grain production of 316 million tons in 2021-2022.
This seemingly small percentage translates into significant employment opportunities for farmers. Approximately 724,611 farms and 3,623,057 farmers are involved in grain production for ENA, with an additional 570,243 farms and 2,851,216 farmers engaged in sugarcane cultivation, another critical input. Add to this about 18,000 farmers for wine grape cultivation, and it becomes evident that the alcohol industry is a critical employment driver in the agriculture sector.
The alcohol industry is not merely an economic sector but an ecosystem. It fuels agriculture, boosts manufacturing, adds texture to our lifestyle, and even plays a part in international trade. With 1.5 per cent of India’s employed population depending on it and a substantial contribution to the packaging industry, the alcohol sector’s importance in the economic landscape is beyond question. With thoughtful regulation and social responsibility, it has the potential to continue being a robust pillar of India’s economic growth.
As India faces the future, the alcohol industry presents opportunities and challenges. As a critical component of the national economy, it offers growth, employment, and revenue generation prospects.
The alcohol industry’s role in India is set to grow in scale and what is the need of the hour is to ease its complexities, improve its EODB, and unshackle its growth potential. A multi-pronged approach is essential for India to maximize the economic benefits while mitigating social and health risks.