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BW Businessworld

Multiplier Effect

Rs 34,000 crore The tax revenue generated by tobacco & tobacco products

Photo Credit : Shutterstock


A new study has attempted to measure the economic value of tobacco and the multiplier effect it has on other sectors in the hope of focusing some attention on it.

And why not? India is the second-largest tobacco growing country in the world with an annual production of around 800 million kgs. Also, tobacco and tobacco products contribute more than Rs 34,000 crore in tax revenues. More importantly, it is a sustained source of livelihood for farmers, especially women and tribals, as it is a relatively hardy crop that can withstand variations in weather and thrive in soils of average fertility.

“With a remarkable contribution of Rs 229,825 crore in one year—2016-17— and a colossal Rs 11,79,498 crore overall to the economy, the tobacco sector merits immediate attention of the government and policymakers,” says the study which has been prepared by Thought Arbitrage Research Institute (TARI), a not-for-profit organisation, for leading industry body ASSOCHAM.

The report, which uses econometric and statistical methodologies while using government data points, argues that the steadily growing tobacco sector in India has large implications for its stakeholders, directly and indirectly.

“The immediate impact, amounting to Rs 142,731 crore for 2016-17 under category 1 can be seen through the livelihood opportunities it provides to a large number of people, be it in the form of wages to farm labourers, bidi workers, tribals and women engaged in tendu leaf collection, or as a major source of revenue for farmers, profits for registered and unregistered enterprises and taxes for the government,” it says.

Simply put, the study implies that increase in the output of the tobacco sector has a much larger impact on the other sectors and households of the economy.

“ASSOCHAM is pleased to present this attempt at estimating the total economic value generated by an entire sector -- the tobacco sector in India in 2016-17 and the total cumulative intrinsic economic value generated over the years. The findings of this report provide a 360-degree view encompassing the value generated by the various stakeholders comprising the sector,” says Balkrishan Goenka, President, ASSOCHAM.

Last year, BW Businessworld in its 12 May 2018 issue had highlighted the need for the Modi government to impose a ban on foreign direct investment in the tobacco industry due to the declining income of tobacco farmers, increase in illegal trade as well as shrinking export of tobacco produce.

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