Drug Alcohol Rev. 2026 Sep;45(6):e70243. doi: 10.1111/dar.70243.
ABSTRACT
INTRODUCTION: Taxation of alcohol is an important policy instrument to combat the ill-effects of excessive alcohol consumption and raise revenues for governments. However, there is a need for studies exploring the demand price elasticity of different alcohols in Indian contexts amid changes in consumption habits, taxes and structure of the alcohol market. This paper examines the price and cross-price elasticity of demand for beer and foreign liquor in India using the latest surveys.
METHODS: Household Consumption Expenditure Surveys of 2022-2023 to 2023-2024 is used to estimate the elasticity. Unit values based on Deaton’s approach that leverages the geographic variation in unit values are utilised. Beer and foreign liquor were analysed jointly, with country liquor treated as a potential substitute.
RESULTS: The price elasticity of beer and foreign liquor is found to be statistically significant and inelastic. Own-price elasticity is recorded to be around -0.27 and -0.25 in 2022-2023 and around -0.18 and -0.17 in 2023-2024. Income elasticity is positive and increased from 0.42 to 0.63 in 2022-2023 to 0.55-0.80 in 2023-2024. Significant cross-price effects between foreign liquor and country liquor exist in 2022-2023; however, they became weaker and largely insignificant in 2023-2024.
DISCUSSION AND CONCLUSIONS: The above results show that the demand for alcoholic beverages in India is inelastic. Thus, the excise duties can be used by governments as instruments for increasing revenues and decreasing demand. The weakening of cross-price effects over time suggests reduced substitution between country liquor and higher-taxed alcoholic beverages.
PMID:42644770 | DOI:10.1111/dar.70243
