Health impacts of taxing foods high in fat, sugar, and sodium in India

What is it about?

Our study looks at what might happen if India increased taxes on foods that are high in fat, sugar, and sodium (HFSS). These foods include many packaged, highly processed, and ready to eat products that are widely consumed but can harm health when eaten regularly. We wanted to answer two questions. 1) How would higher taxes on HFSS foods affect what people consume? 2) What would this mean in the long run for people’s health, food expenditure, healthcare costs, and government revenue in India? To answer these questions, we combined detailed national data on household food consumption and expenditure with information on nutrition, disease risks, healthcare costs, and future population growth. We estimated nutrient intakes and consumer responses to food price changes. We modelled the potential impact of tax changes on diets, disease rates, health spending, and tax revenue over a 30 year period. We looked at two possible tax scenarios using India’s existing Goods and Services Tax (GST) system: Scenario 1: Increasing the GST on HFSS foods to 28%, which was the highest standard GST rate applied to most goods until late 2025. Scenario 2: Increasing the GST further to 40%—similar to how tobacco products and sugar sweetened beverages are currently taxed. Our results suggest that a 40% GST on HFSS foods would improve the health of India’s population. Over 30 years, this policy would be expected to reduce new cases of major diet related diseases, such as heart disease, stroke, diabetes, chronic kidney disease, and asthma, by around 1.7% per year on average. This would prevent about 9.2 million cases of disease a year. We also found that spending on healthcare would fall. Lower rates of disease mean fewer hospital visits, medicines, and long term treatments. Overall, the tax would reduce total health spending by up to 0.6% per year, adding up to savings of roughly US$18 billion over 30 years. At the same time, despite people buying less HFSS food, the higher tax rate would increase GST revenues from food and beverages by up to 92%. However, the overall impact on household finances would be relatively small, including for lower income households. Our model predicts average food spending to increase by only about 1%, which could be offset in the long-term by lower out-of-pocket healthcare costs.

Featured Image

Photo by Zoshua Colah on Unsplash

Photo by Zoshua Colah on Unsplash

Why is it important?

India is facing a rapidly growing health challenge. Rates of overweight, obesity, high blood pressure, and diabetes are rising across the country, affecting adults, young people, and even children. Diets that are high in fat, sugar, and salt are major contributors to this trend and are often driven by increased consumption of packaged and highly processed foods. Diet-related diseases place a heavy burden on individuals, families, and the healthcare system. Many people in India pay directly for healthcare from their own pockets, and long term treatment for conditions such as heart disease or diabetes can be financially devastating. Preventing disease is a growing priority for policymakers. Governments around the world are increasingly using taxes to discourage unhealthy consumption and promote better public health. This includes taxes on tobacco, alcohol, sugar sweetened beverages, and unhealthy food. However, most of the existing evidence on taxes to promote healthier diets comes from high income countries or focuses on a narrow range of products, such as sugary drinks. Our study fills an important gap in evidence. Although several countries are considering or have introduced taxes on foods high in fat, sugar, and salt, the long term health and economic effects of such policies in a middle income country like India, with its wide income differences and diverse diets, were not known. Our study was also motivated by current policy discussions in India. Government reports and economic surveys raised concerns about the rapid growth in consumption of ultra processed foods and suggested that fiscal measures, such as taxation, could help make people’s diets healthier. Our findings show that even modest changes in consumption can lead to substantial health gains over time. Higher taxes on unhealthy foods could deliver multiple benefits at once: improving population health, reducing healthcare spending, and generating significant government revenue. Importantly, even our largest tax increase scenario (40% GST) would be expected to have only a modest impact on how much households spend on food overall, which could be offset by long-run savings on out-of-pocket healthcare expenditure. Finally, our results are likely to be conservative. We do not account for all possible dietary improvements, such as increased consumption of fruits, whole grains, or fibre. The true benefits of healthier food policies could be even greater than those reported here.

Perspectives