Recently, the Union Budget (India), for 2014-15 raised taxes on tobacco products. Many do not understand why or how this move makes economic sense. I hope to shed some light on the issue by providing some evidence in this regard.The following are links to two documents related to the Economic Burden of Tobacco Related Diseases in India. While one links to the Executive summary, the other links to the highlights of the study.

Some of the Major findings of the study are :

1. The total economic cost attributable to tobacco use (all diseases) in India was Rs.1,04,500 crores (US$ 22.4 billion). 16% was direct cost, while 84% was indirect cost.

2. The cost from premature death was Rs.73,000 crores (US$ 15.6 billion).

3. The estimated Rs.1,04,500 crores economic costs of tobacco was 1.16% of the GDP (2011). Also, it was 12% more than the combined State and Central Government expenditure on health in 2011-12. The total central excise revenue from all tobacco products combined (in 2011-12) was only 17% of the estimated economic cost of tobacco.

For those who wish to read more, please follow the links below:

Click to access economic_burden_of_tobacco_related_diseases_in_india_executive_summary.pdf

Click to access Economic-Burden-of-Tobacco-Related-Diseases-in-India-Highlights.pdf

A related article published in BMJ (2009) by one of the authors (explains methodology):
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2655042/pdf/CLU-18-02-0138.pdf