Recently came across this interesting article in “The Hindu” newspaper’s business section about Indian states’ addiction to alcohol sales for running their economies. The Alcohol Economy Sad but true. States’ dependence on alcohol sales taxes/duties has been growing at a fast pace over years and decades. Reason I was looking around for alcohol related topics recently, was because of several memes & jokes going around social media in India nowadays, about how critical alcoholics are to the Indian economy and that by lining up at recently opened alcohol stores in the middle of the pandemic lockdown (as essential service), they are being patriotic citizens of the country and taking up the burden of keeping India alive, economically!

Now let’s analyze a bit. A few things in the above business article jumped out at me, viz., “…Liquor sales taxes constitute the 2nd/3rd highest revenue source in states after GST and its share of states’ revenues is increasing rapidly”, “…Mizoram, Gujarat, Bihar, Nagaland & Lakshadweep are the only states/UT’s that have complete prohibition in India”, “…At least a 3rd of the drinkers in India fall in the ‘hazardous’ drinkers category” and “National Institute of Mental Health & Neurological Sciences study in one state found that for every Rs 1 that state gets in revenue from alcohol sales, the state loses Rs 2 in healthcare expenses and lost productivity”.

1st off, the idea that states will come to a grinding halt in the absence of alcohol related revenues is pure BS. The five states that have prohibition are doing just fine without those revenues, not spectacularly good nor woefully bad. As the author of the article points out correctly, states’ dependence on alcohol as source of revenue is not out of dire necessity but because they are too lethargic to work on other sources of income and increase the shares of those other sources. Alcohol taxes/duties is easy money, so they go for it. What those states don’t realize is the tremendous strain they are putting on their health care infrastructure and losing worker productivity. They are losing way more than they are gaining. So the comedic assertion by drunkards that the country’s roads and bridges and airports et al, are all being sponsored by them drinking alcohol, is really, as stupid as it sounds. You are not sponsoring anything in the country except sponsoring avoidable diseases like liver damage, chronic heart diseases, major cancers and ensuring weak immune systems that make you more vulnerable to viruses like Covid-19. And of course not to speak about the millions of hours of lost productivity (try operating a heavy construction equipment or a nuclear power plant, fully drunk, to know what I’m talking about!), the massive negative impact on middle & low income families, of alcohol addiction (especially during a pandemic when the economy is in shambles) and the sharp rise in domestic violence (women, children & elderly parents being the primary victims) due to increased alcohol drinking.

Indian states get approx USD 23 billion from alcohol sales and the total health care costs in the country, depending on which source you rely on, varies between USD 30-40 billion (a little over 1% of GDP of India). Assuming (and I don’t personally agree with this assumption, but still…) that the 1/3rd of the hazardous drinkers are the ones who end up sucking up healthcare facilities and lost productivity, we are still looking at about USD 16-18 billion being spent on these drunkards to keep them alive and well (but in many cases they die) + additional un-calculated cost, probably running into several billions of $, of productivity loss to industries that employ or should be employing these drunkards. So in summary, economically, states are not doing themselves good by going on increasing their dependence on alcohol sales.

The supposedly positive health effects of alcohol, even when drunk in moderation, have now begun to be debunked. As Olga Khazan writes in this “Atlantic” newspaper article, America’s Favorite Poison  most of the scientific articles extolling the virtues of wine or other such beneficial effects, over the years, have been found to be dubious at best and fake at worst with almost all those studies being sponsored by alcohol companies. So no matter what angle you look at from, alcohol sales, and especially during and after this horrific pandemic, doesn’t make any sense at all! At the very best what states should be doing in this lockdown times (trying to at least), is to gradually wean their economies’ dependence away from alcohol sales and instead finding newer and more productive sources of incomes. Right now, it looks difficult with GST, corporate tax and petrol sales etc down so much, but as those five states show, it is not impossible.

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