Beverage sector to grow at 16.5-19%

New Delhi, Dec 20 : The Indian Beverage Association (IBA) unveiled a first-of-its-kind primary research based report by the Indian Council for Research on International Economic Relations (ICRIER) that highlights opportunity, barriers and policy recommendations to enhance the global competitiveness of the Indian Non-Alcoholic Beverage Sector.

According to the ICRIER report titled 'Unleashing the Potential of the Non-alcoholic Beverage Sector', corporate manufacturers in the sector expect to grow at an annual rate of 16.5% while non-corporate players expect 19% annual growth (based on an assumption of 7% GDP growth).

With top corporates such as Coca-Cola and PepsiCo announcing multi-billion dollar investments in the market, the ICRIER report contextualizes the growth opportunity for the sector and pegs the direct to indirect employment opportunity at 1:4, at par with the Software industry.

The report also analyses structural barriers to growth faced by the sector and makes recommendations for better water usage policies at State levels, stringent measures to curb spurious drinks, and suggests speedy implementation of the Goods and Services Tax (GST) for this sector.

The report also recommends uniform low taxes for all non-alcoholic beverages across different states, and classification of the sector in the 'Orange' category to expedite clearances for setting up of manufacturing facilities.

Unveiling the report, Union Minister of Agriculture and Food Processing Industries Sharad Pawar said, "I am happy that the industry and academic institutions are coming together to examine the core issues facing the food processing industry with focus on the Non-Alcoholic Beverage sector. Development of this sector is crucial for India's growth targets and it is an ideal sector to study with the objective of bringing India to the global manufacturing network.

"I am happy to see recommendations in the ICRIER report to help India become a manufacturing hub. There is a need for reforms at the State level, for example, the Non-alcoholic Beverage sector should be classified in the Orange category at all state levels and this will streamline the clearance process for setting up manufacturing facilities. I urge IBA and ICRIER to disseminate this report at State Government level."

Speaking about the report, S R Goenka, President, Indian Beverage Association, said, "The Indian non-alcohlic beverage sector, while still in a nascent stage, holds several advantages in terms of its large consumer base, abundant supply of raw material and a pool of low cost, skilled labour. The sector has seen double digit growth post-liberalisation, and is currently contributing over 1 per cent to India's GDP.

"With industry leaders such as Coca-Cola and PepsiCo announcing significant investment plans for India, there is a clear indication that the sector offers significant potential for growth in the coming years. This report takes an industry-wide perspective to provide a way forward to help India play out its strengths and emerge as a non-alcoholic beverage manufacturing hub and an agro-product sourcing destination."

Highlights of the study

Key Barriers to Growth:

· High and discriminatory taxes across different product categories

· Stringent environment regulations related to water that varies across states

· Spurious products and lack of implementation of regulations against spurious products. Industry estimates show that counterfeit/spurious products account for 23.4 per cent of the total size of the FMCG industry (packaged goods), which results in a loss of approximately INR 5,660 crore to the exchequer, besides impacting the brand image of the companies and the health of consumers

· Poor infrastructure including power shortages, limited availability of land near, high cost of land acquisition and cumbersome procedures, inadequate and poor quality of surface water, poor road conditions, capacity constraints of Indian Railways, amongst others

· Inconsistent supply and poor quality of agriculture raw materials, rising raw material prices due to inflation and restrictions on imports

· Complex regulations affecting the entire supply chain

· The implementation of GST is getting delayed, which is a major concern for both the corporate and non-corporate sectors

--IBNS (Posted on 20-12-2013)

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