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Economy

Liquor as Cash Cow for Financing


Being a needonomist and nationalist, I wish to draw the attention of the stakeholders including 28 State and 9 UT governments for accepting the relevance of the liquor as a cash cow in giving considerable revenue for financing its activities and functions in the federal economy of India.

To implement Atamnirbhar Bharat Abhiyan (ABA), we should be honest to accept that the consumption of liquor for the satisfaction of its consumer to be Atamnirbhar based on Atma (soul) is the most potent instrument of reviving the state economies through excise duties.  I have been told that every bottle has a statutory warning that ‘consumption of alcohol is injurious to health’.

Consumption of alcohol is injurious to health

We have to ponder over the issues with honesty and leave hypocrisy at bay. To understand the plight of the consumers of liquor, we have to avoid dry days which cost the government more than its consumers who are more rational when drunken to speak with honesty. Home delivery of liquor can take care of the needs of the time of lockdown and social distancing. One ration card for the entire nation with Aadhar Card is used for issuing the quota of liquor to the people as in military canteens.

Hike in prices of liquor enhances revenue

Morally, one has no right to encroach upon the lifestyle of the people who consume liquor and contribute to the economies of the respective states more than other consumers. It is interesting to observe that there is no agitation on the hike of the prices of liquor which is most suitable for the government for enhancing the revenues i.e. cash cow for financing.

Also Read: Lockdown in Indian Economy

My first visit to the USA in 1983 as a GSE team member of Rotary International provided me the opportunity to stay in American families who maintain a bar in their homes but this does not mean that they drink too much. They simply ask the guest to drink anything once and enjoy their drinks before dinner only. I have seen many cocktail parties of the students in HUFS, Seoul (South Korea) during my stay on its campus which used to start at 5 PM in the evening and finish at 5 AM. That too conveys that they do drink in limit and maintain discipline. Another experience, I wish to share is that I received an invitation to a birthday party from my neighbour in HUFS with the note that ‘bring your own booze’ which is practically based on American culture. Meaning thereby that it is their lifestyle and it is immoral on our part to interfere as teetotallers.

Estimates say that taxes on liquor and beer fetch the state governments nearly Rs 90,000 crore annually

Alcohol is currently outside the purview of Goods and Services Tax ( GST) and deserves to be brought under its domain with a well-defined mechanism for a refund of taxes to the industry. In spite of GST not being levied on liquor, the prices of liquor continue to rise after its rollout. This is because the inputs used to manufacture liquor were taxed at 12-15% under the VAT regime before GST and post-GST, they are taxed at 18%. Alcohol was not brought under the purview of the GST regime primarily to ensure that the State Governments continue to have a strong inflow of revenue (other than what they get from GST). It is estimated that taxes on liquor and beer fetch the state governments nearly Rs 90,000 crore annually.

Clarification on MHA order allowing Opening of Shops

According to a report by the WHO, the per capita alcohol consumption in India has increased from 2.4 litres in 2005 to 5.7 litres in 2016 with 4.2 litres being consumed by men and 1.5 litres by women.  It is to be noted that per capita alcohol consumption in India has more than doubled from 2005 to 2016. According to a recent government survey ( February 2019), around 16 crore Indians in the age group of 10-75 are consumers of alcohol with Chhattisgarh, Tripura, Punjab, Arunachal Pradesh and Goa having the highest prevalence of the liquor use. Alcohol prohibition in India is in force in the states of Bihar, Gujarat, Mizoram, and Nagaland as well as in the union territory of Lakshadweep. All other Indian states and union territories permit the sale of alcohol. It needs to be noted that the Dietary Guidelines recommend that if alcohol is consumed, it should be in moderate—up to 1 drink per day for women and up to 2 drinks per day for men—and only by adults of legal drinking age which is different as per region.  

Central Government can think of imposing GST and nationalizing the sale of liquor, and bring it under Central List

 To implement the social distancing and lockdown in letter and spirit, the state governments have to seriously introspect the issues including home delivery with morality. It has to be understood that to be moral, we should not interfere in the lifestyle of the people who may go to hell or heaven by using liquor.  The eagle eyes of the Central Government can think of imposing GST and nationalizing the sale of liquor for bringing it under Central List as it is a cash cow for financing.

 A consumer (of liquor) as a hero of economics is always interested in liquor with the statutory warning and all those who pollute the relationship are called villains in the real drama in the market. We have to understand, analyze, and interpret consumer psychology which is the study of why and how people buy things in the market including liquor (online and offline). 

Disclaimer: The views expressed in this article are of the author solely. TheRise.co.in neither endorses nor is responsible for them.

About the author

Prof. M. M. Goel is former Vice-Chancellor of JNU Jaipur. He is also known as ‘Needonomist’ (economist for needs) among the fraternity of economists in India.


M. M. Goel

Prof. M. M. Goel is former Vice-Chancellor of JNU Jaipur. He is also known as ‘Needonomist’ (economist for needs) among the fraternity of economists in India.

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