AIR spotlight summary on Tax on Junk Food.
Kerala has introduced a ‘fat tax’ of 14.5% on the consumption of junk food items like pizzas and burgers sold through branded restaurants. This is analyzed as a two-pronged strategy for increasing revenue and also to promote healthy food habits and hence preventing obesity and health related issues.
Effect of ‘fat tax’ on consumption pattern
Fast food are luxury products which display conspicuous consumption pattern and seen as style statement or glamorous for youth.
Short term impacts
- In the short term this is going to be a disincentive for youth and we can see a decline in consumption.
- In the branded food chain there will be an Impact on employment and also on volume of their business.
- There will be significant Increase in the revenue of the government.
- Negative impact on the fattening food products
Long term impacts
- The impact on the consumption might not be significant. The reason behind is that even these food companies may try to reduce their prices. They will work on their cost of production.
- In the long run there won’t be any Impact on employment and volume of the business of food chain.
- If there is no decline in the consumption they will add to inflation.
- The branded food chain will come up with new products with better nutritional values and there is an opportunity for local food chain. If local vendors come up with healthy food products, they can see a good establishment for themselves in the business.
- This could encourage Research and Development resulting in alternate food with the better nutritional content and less sugary saturated food. The challenge will be to maintain the taste the moment companies start playing with ingredients.
- The young generation would be more aware and sensitive towards healthy food.
- India has traditionally been nutritional food lifestyle country. The new options are going to emerge not just from existing companies but also through new start-ups coming with healthy options. This is going to help our economy in a big way.
- It is not going to have any negative impact on the food processing industry with the healthy products. India’s food processing industries are at a very nascent stage.
- FDI inflow into hospitality sector and food tourism will increase as India has a large market and their products can be catered to large population. What is required is FDI in healthy food like organic food which should be accepted across the globe. It is like Standardization of nutritional content and food across the globe.
- We must provide Healthy food to our generation. It is the objective in the broader parlance of WHO. All this is done in sync with advocacy of WHO.
Impact at four fronts
- Increase in government revenue.
- Fattening food companies are to come with improved products.
- Start-ups will be ready to grab the opportunity
- The local vendors can offer healthy food
Demark and Hungary has also tried for similar kind of taxation. Bihar too had ‘samosa tax’. Any product which is not healthy should be taxed high. The other states may follow the footsteps.
Need of the hour
- In the long run, comprehensive and holistic approach is needed. It is highly important to sensitize our young generation. Time management is a big issue in the present generation. They feel this food is quick, easily available and tasty. The businesses have to come up with new offerings which are quick, easily available and tasty.
- It is highly crucial that we start talking about a mission ‘Healthy India’. Talking to young generation, creating the environment and making them understand the importance of healthy body and healthy mind for a healthy life.
- Add-on initiatives like awareness drives in schools, railway stations and bus stands to tackle obesity and health issues. Healthy food must become part of the curriculum. Negative impacts of such fattening foods have to be understood.
- No country is allowed to play with health and education. If such is the case, the country has unsustainable future.
- There is a case to provide fillip to provide organic food or alternate food with apt nutritional value by fast food chains.
- The only challenge facing is that how to bring change in the eating habits of the young people. The present move is a win-win situation for various stakeholders in the value chain that is government, consumers and MNCs. This is going to be a positive move.