India needs to plan well to tackle obesity

Ritika Bansal/Surjith Karthikeyan | Updated on October 19, 2021

A tax on junk food may not work well in the Indian context   -  /iStockphoto

A ‘fat tax’ per se will not help. It must be accompanied by comprehensive health package measures

Lifestyle diseases are emerging as a health risk affecting the present generation. The fact that more than one billion adults across the world are obese and hence are at the risk of serious diseases, commands attention. These lifestyle diseases, when not controlled, may lead to chronic diseases and may impair the total health of a person.

The World Health Organization (WHO) estimates that obesity is responsible for 44 per cent of the diabetes, 23 per cent of ischemic heart disease and 7-41 per cent of certain cancer burdens. Countries like Singapore and the UK have taken cognisance of the issue while many of the industrial establishments now associate obesity with productivity and have a bias against the obese candidates for a job.

Body Mass Index (BMI) is considered as the crude population measure of obesity. Although India is better placed in the South-East Asia region with low level of obesity, the adult obesity rate has risen from 1.6 per cent in 2000 to 3.9 per cent in 2016 and is more in the case of females than males.

As per National Family Health Survey (NFHS) 2015-16, the mean BMI has increased from 20.5 in 2005-06 to 21.9 in 2015-16. The proportion of thin young women (15-49 years) declined from 36 per cent in 2005-06 to 23 per cent in 2015-16 mirroring an increase in the proportion of obese women from 13 per cent to 21 per cent.

A more significant finding from the survey is the highest proportion of obese men and women observed in the southern States. NFHS finds obesity to be a major metabolic risk factor for non-communicable diseases (NCDs).

Policies for tackling obesity

Various health economics models study the association between health and productivity (Grossman’s model) and between health and economic development (Philipson and Posner). Philipson and Cawley developed an economic framework which helps in understanding eating behaviour and economic activity.

The measures suggested by Cawley include, among other things, counterbalancing reduction in the food price to variation in cost of physical activity. The growing obesity rates may also be attributed to other factors such as lack of exercise, over intake of fats and sugar, change in work style, etc.

The policies adopted across the world for tackling obesity can be broadly classified under two approaches: (i) education and information dissemination to create awareness about the negative effects of obesity through labelling of products, advertisements, etc; and (ii) employing market instruments like taxes and subsidies.

A negative externality rises when a decision-making individual doesn’t pay the full costs. Obesity may result in significant social-economic external costs, in the form of health-related expenditures and lower productivity of the workforce. The “fat taxes”, put to the test in Europe, are imposed on unhealthy products to disincentivise their consumption factoring in their social marginal costs.

However, the extent to which a tax can internalise these external costs is difficult to quantify. The tax rate equivalent to external costs may incentivise consumers to switch to healthier substitutes and reduce the likelihood of obesity. However, a prerequisite is consumer awareness.

The crucial gain from such taxes across these countries is revealed to be the revenue generated, which can either be spent for social welfare or other productive purposes. However, there is little evidence of these revenues being used for productive activities. In African countries, obesity rates are increasing due to increased consumption of junk foods particularly by the lower income group.

A fat tax in this situation would lead to a transfer of wealth from poor to the government. Thus, fat tax may not be the best solution in this case.

‘Fat tax’ in Kerala

Kerala has also explored imposition of ‘fat tax’ on junk food to tackle obesity. The percentage of obese population in Kerala has increased from 28.1 (women) and 17.9 (men) in 2006 to 32.4 and 28.5 in 2016 respectively (NFHS, 2016).

Kerala is second only to Punjab in terms of obese population. The Kerala government may have expected a shift to healthier foods by virtue of a tax on unhealthy foods.

Kerala has witnessed a change in its structural composition of workforce from agriculture to manufacturing and service sector. It was 31.6 per cent, 28 per cent, and 40.4 per cent in 2004-05 shifting to 25.5 per cent, 31.8 per cent and 42.6 per cent in 2011-12 for agriculture, manufacturing and services, respectively. The manufacturing and service sector work (processing, information technology related activities) involves less physical activity and more mental stress compared to agricultural sector. Thus, lower physical activity and increased stress are also causes for the changed health conditions of the people.

Way forward

The WHO in its 2015 report highlighted that obesity is due to unbalanced energy/calorie intake and expenditure. Higher energy density of food, and less energy expense through day-to-day activities and exercises result in a surplus of energy. Moreover, physiological factors, individual behaviour, economic and social factors, technology and policy affect nutrition choices, intake of food and thus, health.

A fat tax alone cannot solve the larger problem of lifestyle diseases, which is a function of various factors. The obesity problem is more of a health issue than an economic issue, and the reality being healthy organic foods are far more expensive than unhealthy and easily available foods.

The cure-all formula for these lifestyle problems requires joint efforts of experienced nutritionists for carving healthy lifestyle guidelines, and policymakers in regulating marketing and advertising of junk food, food products labelling, operation of accountability mechanisms against violations of the right to health, promoting production and consumption of healthy foods through tax incentives and subsidies to farmers and consumers.

The policy of fat tax needs to be coupled with comprehensive health package measures addressing market failures arising due to information asymmetry and negative externalities, if tackling the prevalence of obesity is an ambition for the society. Targeting the twin objectives of reduction in obese population and additional revenue generation through fat tax may be a fallacy.

Ritika and Surjith are Indian Economic Service Officers, serving as Assistant Director and Deputy Secretary, respectively, in the Ministry of Finance. Views are personal

Published on October 19, 2021

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