The private sector and government are cornerstones of an economy that cannot exist in isolation. While advocating complete control to private sector would result in inequitable social matrix, excessive regulations bear the risk of adversely impacting ease of business. We need to strike a fine balance by making smart regulations that would create a conducive business environment, and at the same time, provide adequate protection to consumers and other societal participants. A predictable regulatory environment and effective business regulations are critical for market development and businesses to thrive. This report examines the interlinkages between three different sectors i.e. alco-beverage industry, tourism and sugar business and makes a case on how ease of doing business in one would have domino effects on the others.
The alcoholic beverage industry in India is the third largest in the world by volume, valued at USD 35 billion. A global study undertaken by OECD finds that alcohol consumption in India has risen by 55 per cent over a period of 20 years, from 1992 to 2012. The alcohol industry has been able to carve out a standalone economic importance in today’s India; it generates an estimated INR 16,000 crore per annum for the States’ exchequer. However, on account of high taxes, multiple regulations, and other barriers to operations, the industry growth is stifled. India is specifically one of the world’s most restrictive and complex places for doing business in the alcohol industry. Through a sectoral study on alcoholic beverage industry through the prism of ease of doing business, we aim to understand finer nuances of the industry and recommend measures in order to address the concerns of stakeholders across the industry ecosystem.
Over the past decade, India has emerged as a preferred destination, globally. As per the Travel & Tourism Competitiveness Index 2017 of the World Economic Forum, India’s rank improved from 65 in 2013 to 40 in 2017. The tourism sector contributed 9.6 per cent in 2017. Furthermore, foreign exchange earnings from tourism during 2016-17 were USD 2.278 billion as compared to FEEs of USD 1.726 billion during 2015-16 and US$ 1.609 billion in 2014-15. However, despite the high economic importance of the sector, there are certain recurring issues in the context of conducting business in the tourism sector. Tourism and hospitality is a labour-intensive sector. This makes the sector’s role critical in terms of generating local employment. However, high tax regime and complex labour laws at the Centre and State level deter existing businesses from expanding their operations and new businesses from entering the Indian market. For example, GST on the sector’s offerings in India is levied at 18 to 25 per cent, much higher than that at some of the major tourist destinations like Portugal or Spain, where it is below 10 per cent.
Role of sugar industry in the Indian context is not limited to economic contribution. It provides livelihoods to around 50 million farmers and accounts for around 12 percent of rural employment. However, increase in input costs (sugarcane and milling) coupled with low degree of alignment between sugar prices, industry stakeholders face multiple challenges across the spectrum. We believe the sector provides a spectrum of transformational opportunities, which have the potential to treat the deficiencies and increase the attractiveness of the sector. Appropriate action-oriented approach towards optimizing processes, permissions to maximize opportunities, in consultation with the stakeholders needs to be followed, to arrive at a shared vision for the industry and steps that would eventually fructify the same.
Pahlé India Foundation
Putting India First to Make India First
