Tobacco’s Quiet Surge: Why India’s Welfare State Faces a Growing Health and Fiscal Risk

The Household Consumption Expenditure Survey (HCES) 2023–24 reveals a trend that sits uneasily with India’s expanding welfare and healthcare ambitions: tobacco consumption is rising rapidly, spreading across regions and income groups, and is increasingly concentrated among poorer households. This shift has profound implications — not only for public health outcomes, but also for the long-term fiscal sustainability of publicly funded healthcare and for India’s broader social policy priorities.

What the HCES data shows — rising spend and widening reach

Adjusted for inflation, per capita spending on tobacco has risen sharply over the past decade. Between 2011–12 and 2023–24, tobacco expenditure increased by 58% in rural India and by an even steeper 77% in urban areas. Tobacco now accounts for about 1.5% of monthly per capita consumption expenditure (MPCE) in rural areas and around 1% in urban India.

These percentages may look modest in isolation. But the real concern lies in the explosion in the number of households consuming tobacco. In rural India, tobacco-consuming households rose from 9.9 crore (59.3%) to 13.3 crore (68.6%) — a 33% increase in just over a decade. Urban India saw an even sharper 59% rise, with consuming households jumping from 2.8 crore to 4.7 crore. Tobacco use is no longer marginal; it is becoming socially mainstream.

Gutkha’s rapid spread and the rural–urban convergence

The composition of tobacco use has shifted in troubling ways. In rural India, the surge is driven overwhelmingly by gutkha and leaf tobacco. The share of rural households consuming gutkha has risen nearly sixfold — from 5.3% to 30.4%. Today, gutkha alone accounts for 41% of total rural tobacco expenditure, making it the single largest tobacco product by value.

Urban India, often assumed to be more health-aware, tells a similar story. Cigarettes remain the most widely consumed product, used by 18.1% of urban households. But gutkha has followed close behind, now consumed by 16.8% of urban households — evidence of its aggressive penetration into city markets.

Regional hotspots and the normalisation of use

Geography sharpens the picture. Gutkha consumption is concentrated in India’s central belt — Madhya Pradesh, Uttar Pradesh, Bihar, Chhattisgarh and Rajasthan — where prevalence far exceeds the national rural average of around 30%. In rural Madhya Pradesh, more than six in ten households consume gutkha; Uttar Pradesh has crossed the 50% mark.

What is especially worrying is that urban patterns are beginning to mirror rural ones. Nearly half of urban households in Madhya Pradesh consume gutkha, while Uttar Pradesh, Bihar and Rajasthan all record rates well above one-third. Several states in Northeast India also report gutkha use above the national average in both rural and urban areas.

The class divide: tobacco and poverty reinforcing each other

Tobacco consumption is increasingly concentrated among poorer households. In rural India, over 70% of households in the bottom 40% of the income distribution consume tobacco; in Uttar Pradesh, Madhya Pradesh and Bihar, this figure exceeds 85%. Poorer rural households spend a larger share of their MPCE on tobacco (1.7%) than the richest 20% (1.2%).

Urban India shows an even sharper gradient. More than half of bottom-40% households consume tobacco, compared to under 37% among the top 20%. The poor spend nearly twice the share of their MPCE on tobacco as the rich. In rural areas, gutkha use cuts across classes — a sign of deep social normalisation — while in cities, inequality is stark, with the poorest far more likely to consume it.

The health burden behind the numbers

The health consequences are well established and severe. The Ministry of Health and Family Welfare estimates that nearly 13 lakh deaths annually in India are attributable to tobacco use. Tobacco is a major risk factor for non-communicable diseases (NCDs) — cardiovascular disease, cancer, chronic respiratory illness and hypertension.

According to the World Health Organization, NCDs account for about 63% of all deaths in India. Rising tobacco consumption today thus translates directly into higher chronic disease burdens tomorrow.

Tobacco and the fiscal stress on public healthcare

What makes this trend particularly fraught is its interaction with India’s expanding publicly funded healthcare system. Schemes such as Ayushman Bharat were designed to protect vulnerable families from catastrophic health expenditure. As of October 2025, over 42 crore Ayushman cards have been issued, covering nearly 12 crore families, with estimated savings of ₹1.52 lakh crore in out-of-pocket spending.

Government health expenditure rose from 29% of total health spending in FY2015 to 48% in FY2022, while private out-of-pocket expenditure declined sharply — a genuine policy achievement. But paired with rising tobacco use, this creates a classic moral hazard problem: as tobacco-driven chronic disease increases, the fiscal burden shifts increasingly to the state.

This risk is magnified by weak fiscal offsets. Tobacco products contributed just 2.4% of gross tax revenue in FY23. While the Central Excise (Amendment) Bill, 2025 proposes higher duties, tax increases alone — especially if limited to chewing tobacco — will not be sufficient.

Regulation failures and distorted household priorities

Regulatory enforcement remains patchy. Surrogate advertising continues unabated, with high-profile celebrities promoting gutkha and pan masala under euphemisms such as “silver-coated cardamom”. Such practices undermine public health messaging and dilute deterrence.

Perhaps the starkest indictment lies in household budgets. In rural India, bottom-40% households spend just 2.5% of MPCE on education, but 4% on pan, tobacco and intoxicants. A welfare state committed to human capital formation cannot afford to ignore how addictive consumption crowds out spending on education, nutrition and health.

A policy alarm bell, not just a dataset

The HCES 2023–24 does more than document consumption trends; it exposes a structural contradiction in India’s development model. Expanding social protection and universal healthcare cannot coexist indefinitely with an unchecked rise in tobacco use, especially among the poor.

Without stronger taxation, tighter regulation, aggressive public health campaigns and enforcement against surrogate advertising, tobacco will continue to erode both population health and public finances. The survey’s findings are not merely uncomfortable — they are a warning that demands urgent policy response.