India is the third largest global spirits market by volume in the world, just behind China and Russia. It is also one of the fastest growing markets in the world. The domestic alcohol industry has recognized that the young people and women are the key target populations for them and they are assertively focusing on these vulnerable groups through their marketing campaigns.

India is one of the world‘s most restrictive places for trade and doing business. In 2014, it is ranked 110 out of 152 countries, in terms of economic freedom, by the Economic Freedom of the World Report. Its Freedom to Trade Index was 6.2 (highest score 10.0), 124 Doing business in India remains difficult for both foreign and domestic companies. The country was ranked 133 out of 152 countries by the World Bank this year in its Doing Business Score. Many studies have indicated trade barriers continue to be a major hindrance to India‘s development and prosperity, making trade liberalization and further deregulation critical to its economy.

The industry is consistently launching new products, such as flavoured alcoholic drinks, to attract the nondrinkers in this group.The availability of alcohol is increasing in India; there are more outlets in shopping malls and popular market places, which make it easily accessible. In some states, certain alcoholic beverages like wine and beer can be sold in supermarkets that further increase the availability. Increase in physical availability of alcohol leads to rise in alcohol consumption and alcohol related harm. Intensive engagement of the alcohol industry is observed in social initiatives and policy related activities under the broad framework of corporate social responsibility (CSR), which now-a-days are part of a more general strategy that is designed to further the industry’s political and economic interests.

The Indian alcohol industry is a high-risk industry, on account of the high taxes and innumerable regulations governing it. The international liquor industry, the Indian one too has seen players with strong brands; diversified portfolios and large operations achieve market leadership positions. The Indian liquor industry comprises the IMFL, country liquor, foreign liquor bottled in origin (BIO), illicit alcohol, beer and wine segments.

Indian made foreign liquor:

The maximum permissible limit for alcohol content in spirits is 42.8 per cent v/v (volume to volume). The overall IMFL market is increasing at the rate of 9 to 10 per cent annually. There is a tremendous growth in the vodka market. It is the fastest growing among all types of liquors. Vodka consumption has been growing at the rate of about 44 per cent over the past few years.

Country liquor:

The average alcohol content in country liquor is 33 per cent volume to volume. It is produced in local licensed distilleries and is made of cheap raw material, primarily rectified spirits of grains or molasses. In the southern states coconut and other palms are used as raw materials in the production of local liquor. It is called as arrack, desi sharaab, daru, tharra, toddy, fenny and tari. The production cost for country liquor is low; the excise duties are also lower than they are for other liquor. The idea behind country liquor was to provide cheap alcohol and thus check the illicit trade of alcohol.

Beer:

Beer has become a popular beverage in the country only over the last two decades. It’s growing at a rate of about 17 per cent per year. In India, beer is manufactured in licensed breweries and there are more than 60 beer brands available in the market. The growth in the beer market appears to be driven by young consumers and professionals who consider beer a trendy drink, as compared with traditional spirits. There is also a small demand for foreign beer in the up market urban areas. The highest levels of beer consumption in India are observed in the southern states.

Foreign liquor bottled in origin (BIO):

Imported liquor forms a very small part of alcohol consumption in India. It is usually consumed by the rich and upper middle class in metropolitan cities. It is also subjected to customs duty, making it much more expensive. The imported spirits market in India is growing at the rate of 25 per cent annually.

Wine:

Wine is an alcoholic beverage made from fermented fruit juice, usually that of grapes. Wines made from other fruits are usually named after the fruit from which they are produced (for example, apple wine or elderberry wine) and are generically called fruit wine. The term “wine” can also refer to the higher alcohol content of starch-fermented or fortified beverages such as barley wine, sake, and ginger wine.

The alcohol industry is very important for the government. It generates an estimated Rs. 18,000 crore per annum in spite of the fact that the per capita consumption of liquor in India is the lowest in the world. The total liquor industry is worth Rs. 2,000 crore. IMFL accounts for only a third of the total liquor consumption in India. Most IMFLs are cheap and are priced below Rs. 300 per bottle.

Alcohol sales proceeds account for 45% of the total revenue collection in the country. Whiskey accounts for 60% of the liquor sales while rum; brandy any vodka account for 17% 18% and 6% respectively. MNC’s share is only 10%and they have been successful only in the premium and super premium ranges. Post WTO the government may have opened India to foreign distilleries, but the duty has been increased from 222% to 464-706%.This is due to the fact that there is a 100% customs duty, 150%contravening duty, local taxes, distributor’s margin, retailer’s margin and publicity charges. The cost is finally borne by the consumer. Though the government claims that this is being done to protect the domestic liquor industry, the domestic industry accounts for 99% of the market share.

This protectionist policy could prove to be counterproductive and lead to smuggling. As of now, only 45% of the sales are through legal channels and only 25% of this is duty paid for. Within India itself, the policy of alcohol retail differs from state to state. While some states like Maharashtra. Uttar Pradesh, and Tamil- Nadu have a liberal policy, come states like Haryana and Andhra.

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