Authors: Dr. D Dhanuraj and Mr. Rahul V Kumar *
India is one of the world’s most restrictive places for trade and doing business. In 2014, it is ranked 110 out of 152 countries, in terms of economic freedom, by the Economic Freedom of the World Report. Its Freedom to Trade Index was 6.2 (highest score 10.0), 124 out of 152.[i] Doing business in India remains difficult for both foreign and domestic companies. The country was ranked 133 out of 152 countries by the World Bank this year in its Doing Business Score.[ii] Many studies have indicated trade barriers continue to be a major hindrance to India’s development and prosperity, making trade liberalization and further deregulation critical to its economy.
Consumption of alcoholic beverages by Indian consumers predates British colonization and has often been suppressed by taxes and other restrictive policies. India has the world’s fastest growing market for alcoholic beverages consumption. Restrictive policies at the federal and state levels are often carried out under the concern that alcoholic beverages should be heavily regulated in order to prevent public health and safety issues related to drinking. However, these policies have often proven to be defective and harmful to the Indian people. In fact, they have only fuelled more black market exchanges, corruption, price hike and raised more public health concerns due to prevailing cheap, extremely poor quality counterfeit products.
Liquor tariffs and taxes on liquor are high in India. Nevertheless, consumption of imported and domestic produced liquor has been on the rise over the past five years. It is observed that an average Indian liquor consumer pays five to six times the manufacturing cost. Liquor prices in India are significantly higher than 95 percent of the countries in the world. Furthermore, farmers and small businesses also suffer from heavy taxes and strong government intervention with the market.
This policy paper prepared by CPPR with support of Atlas Network offers an analysis on India’s liquor policies and their effect on people. This paper examines the issues facing the liquor industry in India and suggests liberalizing the sector for specific advantages to its various stakeholders.
For the Full Report, click here: Report on Liberalizing Liquor Trade in India
[ii] “Doing Business 2015, Going Beyond Efficiency, Economy Profile 2015, India,” The World Bank, 2014 http://www.doingbusiness.org/data/exploreeconomies/india/~/media/giawb/doing%20business/documents/profiles/country/IND.pdf
*Dr. D. Dhanuraj is the founder Chairman of CPPR while Mr. Rahul V Kumar is the Director (Research) at CPPR.