issue of high consumption of HFSS foods in India
The consumption of High Fat Sugar Salt (HFSS) foods is one of the major risk factors to a host of health issues that include obesity, diabetes and high blood pressure.
World Bank report of 2019, worldwide, 70% of all overweight and obese people live in Low- and Middle-Income Countries.
A 55% rise in rural areas across the globe, dispelling the perception that overweight/obesity is only a problem in high-income countries and urban and affluent communities.
The Non-Communicable Diseases (NCDs) burden in India has skyrocketed from 38% in 1990 to 65% in 2019.
The global burden of diseases study shows that annually, 1.2 million deaths in India can be attributed to dietary risks alone.
The economic impact of overweight and obesity in India was estimated at $23 billion in 2017.
If unattended, this is likely to rise to $480 billion by 2060.
The ultra-processed food sector in India witnessed a compounded annual growth rate of 13.4% between 2011 and 2021.
As the world’s largest producer and consumer of sugar in 2022, the country has seen an alarming surge in consumption of HFSS foods.
About 50%-60% of edible sugar, salt and fat produced in India is consumed by the processed food industry.
Sales of snacks and soft drinks have tripled over the past decade.
This not only poses severe health risks but also impacts productivity and economic growth, necessitating urgent interventions to curtail the rising consumption of these products.
There is a global trend of utilising fiscal measures to combat obesity.
Taxation is considered to be an effective means to reduce the consumption of these products as most consumers are price responsive towards them.
While taxation on sugar-sweetened beverages (SSBs) is far more wide and used in more than 60 countries.
Implementation of a dedicated tax on HFSS foods
The imperative for taxing HFSS arises from significant market failures associated with their consumption, contributing to negative externalities and internalities.
Negative externalities manifest as societal costs in the form of increased health-care expenditures.
The escalation of diabetes and obesity due to increased HFSS consumption leads to external costs imposed on society.
Substantial health-care expenditures, borne through elevated taxes to finance public health insurance such as the Ayushman Bharat Yojana.
Taxes can offer a targeted and effective means to curb detrimental consumption habits, thereby reducing societal burdens.
Implementing such taxes has shown promise in various countries, demonstrating a reduction in the purchase of unhealthy items.
Unlike the taxation of other sin goods such as tobacco and alcohol.
The HFSS taxation need not be viewed as a means for raising revenue.
It should be seen as a fiscal tool to incentivise the industry to reformulate the products more in favour of healthier alternatives and for people to reorganise their food consumption basket in favour of a healthier diet.
Global trend
A recent study on South Africa’s Health Promotion Levy showed that there were larger relative reductions in purchases of taxable beverages among lower socio-economic status (SES) households compared with reductions observed in higher SES households, making such taxes non-regressive.
Tax rates need to be differentiated based on the nutritional quality of the food so as to incentivise product reformulations.
It is possible to have a GST system with HFSS foods in the highest rate structure while their healthier alternatives.
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