Boosting Health & Economy: Why India Must Raise Tobacco Taxes Now

Health is an essential pillar of economic growth and societal stability. As India advances towards becoming a global economic powerhouse, prioritizing fiscal policies that promote health is crucial. The COVID-19 pandemic has highlighted the need for strong public health measures, emphasizing health promotion and disease prevention as fundamental to sustainable development. One of the most pressing concerns in this regard is the economic and health burden posed by tobacco consumption.

The Burden of Tobacco Use in India

Tobacco is the leading cause of preventable deaths globally and poses a severe threat to India’s public health. More than one million people die annually in India due to tobacco-related diseases, contributing significantly to healthcare costs and productivity losses. According to estimates, the economic burden of tobacco use exceeds ₹1.04 lakh crore (approximately $15 billion) annually. This represents about 1% of India’s GDP and results in significant economic losses.

Tobacco consumption is not only a health hazard but also an economic burden that disproportionately affects low-income households. A staggering 18.4 million people fall into poverty annually due to tobacco-related expenses. The Household Consumption Expenditure Survey (2022-23) highlights that rural households spend more on tobacco than on education, exacerbating poverty and impeding social mobility.

Tobacco Taxation: An Economic and Public Health Imperative

Tobacco taxation is the most effective tool to curb consumption and generate revenue for healthcare investments. Despite India’s strong commitment to tobacco control, taxation on tobacco products has remained stagnant since the introduction of the Goods and Services Tax (GST) in 2017. The lack of regular tax hikes has made tobacco products more affordable over time, reversing past public health gains.

A well-structured taxation policy can significantly reduce tobacco use while providing the government with much-needed revenue. The WHO Framework Convention on Tobacco Control (FCTC) recommends that taxes should constitute at least 75% of the retail price of tobacco products. However, India’s current taxation system falls short of this standard. Additionally, the GST exemption for small-scale tobacco industries producing bidis and chewing tobacco should be reassessed.

The Rising Consumption of Tobacco

Recent data indicates that cigarette production and consumption reached a decade-high level by 2023, posing a serious threat to public health. The Global Adult Tobacco Survey (2016-17) reported that India has 267 million tobacco users, making it the second-largest consumer of tobacco products in the world. Alarmingly, the Global Youth Tobacco Survey (2019) found that 8.5% of children aged 13-15 were active tobacco users. The average age of initiation for cigarettes, bidis, and smokeless tobacco is 11.5 years, 10.5 years, and 9.9 years, respectively.

India’s Efforts in Tobacco Control

India has implemented several measures to control tobacco consumption. These include:

• Large health warnings on tobacco packaging (85% of both sides of the panel)
• Ban on electronic cigarettes
• Regulation of tobacco depiction in media and entertainment
• Mandatory anti-tobacco health messages in cinema halls
• Incorporating tobacco harm education in schools and universities

Despite these efforts, the affordability of tobacco products remains a major challenge. If tobacco remains within easy reach, public health gains achieved over the years could be undone.

Strengthening Fiscal Policies for Tobacco Control

For effective tobacco control, India must adopt a comprehensive fiscal strategy that includes:

1. Annual Tax Increases: Raising taxes on all tobacco products annually through GST and Central Excise without exemptions.
2. Reforming the Tiered Taxation System: A uniform taxation structure aligned with WHO standards to ensure that the final price discourages consumption.
3. Removing the GST Threshold for Small Tobacco Producers: Ensuring that all manufacturers contribute fairly to tax revenue without exemptions.
4. Countering Illicit Trade Through Digital Tracking: The tobacco industry often argues that higher taxes increase illicit trade. However, implementing a robust digital monitoring and tracking system can address this concern effectively.

Fiscal Benefits of Higher Tobacco Taxes

Increasing tobacco taxes has a dual advantage:

1. Public Health Gains: Higher prices reduce consumption, leading to lower rates of tobacco-related diseases and deaths.
2. Revenue Generation: Additional revenue can be used to strengthen healthcare infrastructure, fund disease prevention programs, and support other public health initiatives.

Investing in Health for Economic Growth

A healthier population contributes to a more productive workforce, directly impacting economic growth. Noncommunicable diseases (NCDs) account for 74% of all deaths globally, and India must take decisive action to protect its citizens. Tobacco control is not just a health issue but an economic necessity.

India’s fiscal policies must prioritize health by strengthening tobacco control measures. Raising tobacco taxes is an evidence-based approach that will save lives, reduce economic burdens, and enhance national productivity. The government must act decisively to ensure a healthier and more prosperous future for all Indians. The time to act is now!