Alcohol may become costlier in Indian states considering farm loan waivers: Report

  • The Indian states granting farm loan waivers amid an ongoing rural distress in the country may reportedly hike liquor taxes.
  • Liquor taxes are one of the top three revenue sources of the state governments in India who will be looking to make up for the shortfall in revenue.
  • Any rise in tax will eventually be passed onto consumers.
India’s ongoing farmer distress has led many state governments to waive off farm loans. Now, it appears the move may lead to higher prices on alcohol as those states will likely increase taxes, according to a Bloomberg report.

Loan waivers to farmers have recently dominated agendas for political parties as they gear up for the upcoming general elections this year. Agrarian distress may play a huge factor in deciding rural votes.

Liquor taxes are among the top revenue sources of state governments who will be looking to make up for the shortfall in revenue.

However, the move will mean that the burden of the extra tax levy will likely be passed onto consumers, said the report. Alcohol is already among the highest taxed in the country as it does not fall under the national Goods and Services Tax

However, that could change as Indian Prime Minister Narendra Modi indicated last month the government was considering imposing the highest taxes on luxury and sin goods including alcohol and tobacco.

Recently, India’s main opposition party, the Indian National Congress announced loan waivers in three Indian states immediately after coming to power in three states including Madhya Pradesh, Rajasthan, and Chattisgarh.

The Maharashtra government has already announced a hike in the tax on home-made liquor by 20%, reported the Times of India.

See more:
Politically driven, financially unsound: The loan waivers offered by India’s political parties will only serve to worsen the country’s bad loan crisis
India's bad loan problem continues to break records
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