A Quantitative Exploration of the Influence of Tobacco Use on Poverty in India

Tobacco use has a disproportionate impact on lower socioeconomic groups in India. The study quantifies the number of people who would fall under the national poverty line if the direct spending on tobacco and healthcare expenditures attributable to tobacco use were subtracted from their monthly expenditures. It also aims to estimate the extent to which tobacco use increases the probability of poverty status in India. We quantify the increase in poverty by multiplying the difference between headcount ratios with and without tobacco-related spending by population size. We use propensity score matching to estimate the extent to which tobacco use increases the probability of poverty. About 18.4 million (1.5% of all Indians) are pushed into poverty due to either direct tobacco-related expenditures or tobacco-related healthcare spending. Tobacco use increases households' likelihood of being poor by 3.4%-3.7%. With over 22% of the global poor, achieving poverty reduction goals is a significant challenge for India. We show that this challenge is accentuated by increased tobacco spending, which pushes millions of Indians into poverty. To address this, the Government of India must implement both fiscal and non-fiscal policies that regulate tobacco use and, in turn, contribute to poverty reduction in the country. Tobacco use has a disproportionate impact on lower socioeconomic groups in India, leading to increased and deeper poverty. This paper finds that, based on existing proven measures of poverty, tobacco use accounts for an additional 18.4 million poor individuals. It also shows that tobacco use increases the likelihood of a household being classified as poor by 3.4% to 3.7%. As India is home to a significant proportion of the global poor, addressing tobacco use becomes crucial for global and domestic poverty reduction goals. Fiscal and non-fiscal policies can be used to regulate tobacco and potentially reduce poverty levels in India.