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

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.