Date : 21/12/2023

Relevance: GS Paper 2 – Issues Related to Development – Public Health (Also Relevant for GS Paper 3 – Indian Economy – Food Processing Industries)

Keywords: HFSS, NCDs, Fiscal Measures, GST System

Context-

The consumption of High Fat Sugar Salt (HFSS) foods has emerged as a significant risk factor for various health issues, including obesity, diabetes, and high blood pressure. Contrary to the perception that these health concerns are confined to high-income countries and urban areas, a World Bank report from 2019 reveals that 70% of overweight and obese individuals reside in Low- and Middle-Income Countries, with a substantial increase in rural areas globally.

Severity in India

In India, the burden of Non-Communicable Diseases (NCDs) has surged from 38% in 1990 to 65% in 2019, and the economic impact of overweight and obesity was estimated at $23 billion in 2017, projected to reach $480 billion by 2060 if left unaddressed.

India has witnessed a concerning shift in dietary habits, marked by a 13.4% compounded annual growth rate in the ultra-processed food sector between 2011 and 2021. As the world's leading producer and consumer of sugar, the country has experienced a significant rise in the consumption of HFSS foods. Sales of snacks and soft drinks have tripled in the past decade, exceeding $30 billion, highlighting the urgent need for interventions to curb this trend and its associated health risks.

Global Trend of Fiscal Measures:

Recognizing the global trend, many countries have implemented fiscal measures to combat obesity. While taxation on sugar-sweetened beverages (SSBs) is widespread, taxation on HFSS foods is less common but rapidly increasing. Countries like Denmark, France, Hungary, Mexico, South Africa, the United Kingdom, and the United States have implemented dedicated taxes on HFSS foods. Colombia's "junk food law" serves as a recent example, introducing a gradually increasing levy on ultra-processed foods.

In India, Kerala took an early step in 2016 by introducing a 'fat tax,' later subsumed into the Goods and Services Tax (GST) in 2017. However, there is a compelling case for a nationwide HFSS tax to address market failures associated with consumption, which contribute to negative externalities and internalities.

Market Failures and the Case for HFSS Tax:

The imperative for taxing HFSS arises from significant market failures associated with their consumption, leading to negative externalities in the form of increased health-care expenditures. The rise in diseases like diabetes and obesity due to HFSS consumption imposes external costs on society, necessitating substantial health-care expenditures funded through elevated taxes. Simultaneously, internalities stemming from consumers' limited understanding, influenced by aggressive marketing, result in inadvertent harm to themselves. Taxes can serve as a targeted and effective means to curb detrimental consumption habits, reducing societal burdens.

HFSS taxation should not be viewed merely as a revenue-generating tool but as a fiscal instrument to incentivize the industry to reformulate products in favor of healthier alternatives. Unlike the taxation of other sin goods like tobacco and alcohol, the HFSS tax aims to promote industry reformulation and encourage individuals to shift towards a healthier diet. Recent studies, such as South Africa's Health Promotion Levy, indicate that such taxes can be non-regressive, with larger relative reductions in purchases observed in lower socio-economic status households.

Designing an Effective HFSS Tax:

To ensure the effectiveness of HFSS taxation, it is essential to differentiate tax rates based on the nutritional quality of the food. A GST system could be implemented with HFSS foods attracting the highest tax rate, while healthier alternatives receive either minimal or zero tax rates. This approach maintains a level playing field between HFSS and healthier alternatives, making the latter more affordable and accessible to consumers. Additionally, such a system encourages product reformulation by the industry, promoting a shift towards healthier options.

Current GST rates on ultra-processed foods in India do not align adequately with nutritional content. For instance, a uniform tax on sugar-sweetened beverages and juices overlooks variations in sugar content, while salty snacks face a flat 12% tax rate regardless of their salt content. These inconsistencies fail to consider the varying nutritional impact of products and limit their effectiveness in altering consumption patterns.

The Role of HFSS Taxation in Public Health:

HFSS taxation in India should be viewed not just as an economic or fiscal policy concern but as a public health imperative. Well-designed taxes can offer multiple benefits, acting as a deterrent to HFSS consumption, promoting healthier food choices, encouraging manufacturers to reformulate products, improving public health outcomes, reducing the burden on the healthcare system, and fostering the nation's overall well-being.

Combining HFSS taxation with other measures, such as the promotion of nutrition literacy and effective food labeling, can create a potent tool to combat the escalating epidemic of overweight and obesity. By establishing a more sustainable and equitable food system, India can address the health challenges associated with HFSS consumption and pave the way for a healthier population.

Overcoming Obstacles to Green Growth

While the potential for green technology adoption exists, obstacles such as improving the finances of power distribution companies and establishing a coordinated institutional framework to address federalism, fiscal constraints, and bureaucracy must be tackled. A strategic and concerted effort is required to navigate these challenges and fully realize the benefits of green growth.

Conclusion

The rising consumption of High Fat Sugar Salt (HFSS) foods in India poses a significant public health challenge, contributing to the increasing burden of Non-Communicable Diseases (NCDs). Recognizing the global trend, there is a compelling case for implementing HFSS taxation as a strategic measure to curb the negative health impacts associated with these products. A well-designed HFSS tax, differentiating rates based on nutritional quality, can not only act as a deterrent to unhealthy consumption but also incentivize the industry to produce healthier alternatives.
India's shift in dietary habits, marked by a substantial growth in the ultra-processed food sector, demands urgent interventions to address the health risks and economic implications. HFSS taxation should be viewed beyond its fiscal aspects, emphasizing its role as a public health imperative. By aligning tax rates with nutritional content and promoting healthier alternatives, India can create a level playing field, making it easier for consumers to make health-conscious choices.
In conjunction with HFSS taxation, efforts to promote nutrition literacy and enhance food labeling can further contribute to a comprehensive strategy in combating the overweight and obesity epidemic. By prioritizing public health and creating a more equitable food system, India can work towards a healthier future, reducing the economic and health burdens associated with HFSS consumption.

Source- The Hindu