India: Beer industry could fuel India’s economic growth if reached its full potential

India’s beer industry already supports the entire agricultural chain, from barley farmers to distributors. But if it reaches its potential by growing beer’s share of total consumption, it can create millions of jobs across various sectors, empowering communities and propelling economic growth.

While India boasts of being the world’s fifth-largest economy, with a GDP of $2.7 trillion and a population exceeding 1.4 billion, the country’s per capita beer consumption remains shockingly low. However, in contrast, the consumption of spirits continues to be relatively high. This phenomenon is largely attributed to the high taxation structure on a low alcohol beverage like beer that affects its availability and affordability to many consumers. This surprising fact hides a golden opportunity—the beer industry can be a powerful engine for the country’s economic growth.

A recent Oxford Economics study titled “The Economic Contribution of Beer in Lower Income Countries” sheds light on this exciting possibility. The study recaps the brewing industry’s impact across dozens of countries, revealing that in emerging markets like India, beer, on average, contributes 1.6% to GDP. But here is the exciting part: with strategic planning, this contribution could double, reaching a significant 2.2% of the GDP without increasing the total alcohol consumption among consumers.

India has among the biggest potential of any country. India’s beer industry already supports the entire agricultural chain, from barley farmers to distributors. But if it reaches its potential by growing beer’s share of total consumption, it can create millions of jobs across various sectors, empowering communities and propelling economic growth.

One hurdle stands in the way of this golden opportunity: illicit alcohol consumption. A staggering 46% of all alcohol consumed in India goes untracked. Collaborative efforts between industry leaders, policymakers, and law enforcement can tackle this issue. By addressing it, India could triple its per capita beer spending, potentially reaching $30 from the current $8 average.

Illicit alcohol is the worst form of harmful consumption of alcohol. It is bad for consumers, communities and businesses. In India, the illicit alcohol market creates serious safety risks for consumers, erodes the rule of law, denies the government much-needed fiscal income and makes growth for legal businesses much harder.

This responsible consumption shift translates into a potential windfall – an additional $36 billion for the economy and nearly 5 million new jobs, primarily in rural areas! But how do they get there?

India’s taxation of alcohol is also at odds with the recommendation of the WHO and other public health recommendations: the recommended way is for tax to be higher when the alcohol concentration (ABV) is higher. But most of the states in India put lower tax on higher ABV. Complex tax structures and a system taxing beer by volume (regardless of alcohol strength) create roadblocks for growth. Streamlining these structures and adopting an alcohol strength-based system, like many developed nations, incentivises investment and makes beer more accessible to consumers. This paves the way for a fairer, more efficient market, allowing the industry to flourish and contribute meaningfully.

The responsible growth of beer goes beyond just economic benefits. It can foster vibrant local businesses like microbreweries, promote innovation, and cater to diverse tastes. This aligns perfectly with the “Make in India” initiative, encouraging domestic production and entrepreneurial spirit.

The Indian beer industry presents a unique opportunity for economic growth, job creation, and positive social development. By working together to address challenges, adopting a modern taxation approach, and promoting responsible consumption, India can unlock this industry’s immense potential. As barley cultivation expands alongside the rise of beer demand across the country, and responsible consumption takes root, it can become a testament to India’s economic strength, cultural vibrancy, and commitment to a sustainable future.

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