India’s soft drinks market is expected to grow to Rs 1.47 trillion by 2030 at a compound annual growth rate (CAGR) of 8.7%, from around Rs 671 billion in 2019, Indian Research Council on international economic relations (Icrier) said in a detailed analysis.
More than 60% of the global market was made up of carbonated soft drinks (CSD), ready-to-drink teas (RTD), energy drinks and sports drinks. The most popular beverages among Indians are soft drinks, bottled water, and fruit drinks and juices.
According to the report, the government should focus on increasing farmers’ income through the use of fruit pulp/puree/juice, as well as taxing fruit-based drinks and juices. To encourage the expansion of India’s juice/beverage industry and farmers, the document proposes to reduce the tax on fruit pulp/puree products from 12% to 5%.
“While India is the world’s largest producer of many raw materials needed to produce soft drinks, around 25-30% of fruits and vegetables grown in the country are still lost in the supply chain,” according to Deepak Mishra, administrator and managing director of Icrier.
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“We are far behind other developing countries in beverage exports. For example, in 2020, we were the world’s 59th exporter of fruit and vegetable juices, while Brazil was in first place. With the PLI program and other incentives, it is possible to improve domestic manufacturing capacity and exports.
Furthermore, the document suggests that taxes in the Union budget for 2023-2024 should be set in such a way as to encourage people to consume healthily. Nutrition taxes should be put in place.
Sugar-based soft drinks, for example, may be subject to the highest GST rate of 28%, but carbonated fruit juices with no added sugar or mineral water should be taxed at the lower rate.
FSSAI product regulations should be aligned with product definitions in GST tax brackets, as moderate taxation can lead to increased revenue collection, increased investment in R&D and product innovation, a reduction in supply chain waste, an increase in farmers’ incomes and India becoming one of the world’s leading beverage hubs.
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