Socio-Economic Significance of Tobacco in India

Tobacco generates enormous economic benefits in terms of agricultural employment, farm incomes, revenue generation and foreign exchange earnings. India is the world’s 2nd largest producer of tobacco with an estimated annual production of 800 million kgs. Although tobacco is grown on a meagre 0.24% of the country’s arable land, tobacco & tobacco products contribute more than Rs.34,000 crores in  tax revenues. In addition, foreign exchange earnings through the export of tobacco & tobacco products garners around Rs. 6,000 crores annually.

Tobacco is an extremely important commercial crop, providing livelihood to 45.7 million farmers, farm labourers, tribals, women workers and their families. Tobacco is also a highly labour intensive and remunerative crop providing much higher returns than other crops grown in the region.

The Indian Government has officially acknowledged the economic importance of tobacco in the Report on Tobacco Control in India, published by the Union Ministry of Health & Family Welfare in 2004, “Tobacco occupies a prime place in the Indian economy on account of its considerable contribution to the agricultural, industrial and export sectors.

What makes tobacco stand out from the rest of the crops grown in the region is the fact that it thrives in poorer and marginal soils that are largely unsuitable for cultivation of other crops. It is a hardy and disease resistant crop that grows in semi-arid and rain-fed conditions. Even in extremely adverse weather conditions, the crop suffers low fluctuations in yield. An additional advantage of tobacco cultivation lies in its flexibility in planting time as compared to other crops.

The 2004 Report on Tobacco Control in India maintains, “Given the existing level of technology, the possibility of an alternative crop to tobacco, purely on economic grounds does not exist”. Studies conducted by the Central Tobacco Research Institute (CTRI) have also outlined that no single crop is more remunerative than Flue Cured Virginia (FCV) tobacco.

An ASSOCHAM-TARI study Tobacco Economics in India: The Voice of the Farmer and other Stakeholders found that the tobacco growing areas of the three major tobacco producing States in India, viz., Andhra Pradesh, Karnataka and Gujarat are better off in several socio-economic parameters as compared to the non-tobacco growing areas of these States. “…tobacco does create higher returns and other social capabilities for its farmers than those who are engaged in growing other cash crops,’’ the study report observed.

Despite being a leading tobacco producer and a major exporter, India has remained at the forefront of tobacco control, implementing measures equally or more stringent than in many developed countries. While leading tobacco producing and exporting countries have resisted signing or ratifying the WHO’s tobacco control treaty called the Framework Convention on Tobacco Control (FCTC), India was one of the earliest signatories to the treaty and also the 8th country to have ratified it in 2005 disregarding tobacco’s socio-economic importance in the country.

Foreseeing devastating impact of stringent tobacco policies advocated by WHO’s FCTC, the countries depending on tobacco have adopted a balanced and cautious approach to tobacco control. This approach not only helps them safeguard their interests but also helps them optimally exploit the potential of tobacco in the form of enhanced revenue and foreign currency earnings. On the other hand, India due to its excessive regulatory policies, is surrendering its advantageous and pre-eminent position in tobacco production and exports.

In view of the important role that tobacco plays in the country’s economy, particularly in terms of employment and livelihood of millions dependent on tobacco, there is a need to strike a balance between tobacco control policies and socio-economic imperatives of tobacco in India.