Is Fat Tax the Panacea for Fast Food Consumption and Related Health Issues in Urban India?

Abstract

In an attempt to reduce the growing fast food consumption, widely believed to be the prime reason for the rising obesity in the state, the Kerala Finance Minister in his 2016 budget speech made a proposal for introducing a 14.5% Pigouvian-type fat tax on the proliferating 'branded' fast food chains in Kerala, the first of its kind in India. In this context, the present study analyzed the rationale behind this policy and its effectiveness. The study was conducted during the period of October-December 2017 using primary data collected from a sample comprising of customers from five major fast food chains as well as patients from three prominent hospitals in Bengaluru city, selected using the random sampling technique. The study found out that there has been a major shift in the food habits among the people of urban India, especially among the youth. Students and professionals have increasingly become consumers of fast foods and through appropriate statistical techniques, it was found that the fast food consumption pattern has been acting as a major determinant of food consumption-related health issues. Based on the empirical analysis, the study concluded that levying of fat tax on the 'branded' fast food chains alone will not make any significant impact in reducing the consumption rate of these food items. However, it can provide an adequate source of revenue that can be channelized towards providing better health care facilities and campaigns for better food habits. The study also outlined some policy suggestions.