India’s soft drinks market is expected to grow at a CAGR of 8.7% to reach ₹1,47,233 crore by 2030, from around ₹67,100 crore in 2019, according to estimates by Economic Policy Think Tank, ICRY. The report, commissioned by the Indian Beverage Association, however highlighted challenges such as high GST taxation which fuels the informal and counterfeit market.
Nearly 80% of the soft drinks sector, which includes soft drinks, juices, ready-to-drink tea and sports drinks, is still unorganized in the country. He added that India is not among the top 50 countries in global beverage and export trade and its per capita sales volume (21.36 liters in 2018) is lower than other developing markets.
Arpita Mukherjee, Professor, ICRIER, one of the authors of the report, said that given the abundant supply of raw materials, India has the potential to become a global hub for soft drinks. Total job creation in this sector is estimated at 6,91,491, from both upstream and downstream operations, the report adds.
With a growth forecast of 8.7% CAGR through 2030, the report highlighted the slowdown in growth estimates. He added that the industry’s previous recorded growth was a CAGR of over 13% in 2010-2019. “Within similar food categories, the growth of non-alcoholic beverages lags behind others like chocolate and sweets and salty snacks,” the report said.
The report states that the sector is facing major challenges such as unfair competition from the unorganized sector and counterfeit products, high GST and additional tax on soft drinks, among others. “A high tax of 40% (28% GST + 12% offset) on soft drinks, regardless of their nutritional value or sugar content, has created a large counterfeit market and an informal sector,” says The report.
The report also pointed out that the 28% GST rate, as well as the 12% tax on soft fruit drinks or drinks, regardless of fruit content, are not in compliance with FSSAI regulations. He therefore recommended that product definitions in GST tax tiles be aligned with FSSAI product regulations.
The economic policy think tank also recommended that taxes be designed to promote healthy consumption and be based on nutrition or sugar content. “ICRIER recommends that moderate taxation can lead to greater revenue collection, improve investment in R&D and product innovation, reduce supply chain waste, increase farmer incomes and make India one of the world’s leading beverage hubs,” he added.
Jagadish Prasad Meena, Secretary General of the Indian Beverage Association (IBA), added: “With growing agricultural diversification and demand-side push factors, India has the potential to be the world leader in beverage processing through enabling policies and tax incentives. This ICRIER report attempts to provide a policy roadmap for government to focus on key levers to help connect beverage companies’ global supply chains with farmers and food producers in India.
May 27, 2022