Economists bat for hike in tobacco taxation for achieving Modi’s $5 trillion economy vision

Dr. Pritam Datta, a fellow at NIPFP also talked about the reasons behind lower taxation on tobacco in the last five years since the GST regime was introduced

A substantial hike in tax on all tobacco items and stronger laws will not only bring the best out of human capital by ensuring better health of citizens, but also help in achieving Prime Minister Narendra Modi's vision of a five trillion dollar economy by 2025, experts have asserted.

Noting that the health care burden due to tobacco consumption in India is around 1.04% of GDP, pushing many into poverty, Arvind Mohan, Professor and Head, Department of Economics, University of Lucknow said a substantial increase in tax on these lethal items will close the gap. 

Speaking at a webinar, he echoed views of the World Health Organization (WHO) as well as many other international bodies like World Bank that tobacco taxation is an efficient tool, reducing tobacco consumption faster than any other single measure.

Also Read | Dip in tobacco production sparks competition among buyers; prices reach a ‘historic’ high

Mr. Mohan explained that presently, health is a big challenge for human development as at least 70% of the health expenditure is being met by the public themselves, while just 25-30% is met by the government and global institutions.

“But if we manage to cut down this expenditure by imposing tax on tobacco products, we will not only be able to capitalise our human resources, but also boost the GDP multi-fold. This will help achieve our dream of a $5 trillion economy too,” he pointed out.

Mr. Mohan along with Dr. Pritam Datta, a fellow at Delhi-based National Institute of Public Finance and Policy (NIPFP) and Rijo M. John, an economist and public health policy analyst, ahead of the Union Budget 2023-24, also underlined that while a major argument for introducing the Goods and Services Tax (GST) in 2017 was that it would contribute 2% of the GDP growth, but in actual, this has not happened.