Sugar-sweetened beverages in India: Price elasticity,affordability,and taxation

Abstract

Rising consumption of sugar-sweetened beverages (SSBs) in India is a significant public health challenge, contributing to obesity, type 2 diabetes and other noncommunicable diseases (NCDs). SSB-attributable deaths exceed 10,000 annually. The associated economic burden is projected to reach 2.47% of India's gross domestic product (GDP) by 2060. This study evaluates the impact of taxation as a policy instrument to reduce SSB consumption in India. Data from the National Sample Survey Office (NSSO) 2022–23 household survey and Euromonitor retail sales data were used. SSB affordability was measured using the relative income price (RIP). A three-stage econometric model following Deaton's methodology was applied to estimate own price, cross-price and income elasticities using cross-sectional data. These estimates were used to simulate the effect of a uniform tax increase. Between 2015 and 2024, SSB affordability increased by 33%. The overall own-price elasticity was estimated at −0.8, with low-income households showing greater responsiveness (−0.97) than high-income groups (−0.77). Overall income elasticity was 0.48, rising to 0.59 for high-income households. Low-income households allocate a higher budget share (2.01%) to SSBs than high-income households (1.22%). Tax simulations suggest that a new 18.5% ad valorem excise tax could reduce consumption by ∼10% and increase annual tax revenue by 50%. A uniform 40% peak Goods and Services Tax (GST) had a smaller consumption impact. Findings support implementing excise taxes based on sugar content and a harmonized tax structure across SSBs. Evidence-informed fiscal policies are essential to mitigate NCD risks, as failure to act risks reinforcing harmful consumption patterns.