India must raise taxes on tobacco and sugary drinks to curb health risks and recover economic costs, argue Nagarajan and John in a new World Bank blog, urging a Health Cess and stronger excise policies.
In a World Bank blog post, Mohan Nagarajan and Rijo M. John argue that India must urgently revise its tax policies on tobacco and sugar-sweetened beverages (SSBs) to tackle the rising burden of non-communicable diseases (NCDs). With India leading the world in sugar consumption and tobacco-related illness costing $36.2 billion in 2017–18, the authors emphasise the toll these products take on public health and the economy.
Despite their harmful impact, India’s current tax rates on these products fall well below WHO recommendations. For instance, bidis—India’s most smoked tobacco product—face a tax of only 22%, while SSBs are taxed at just 28.6%. The upcoming expiration of the GST Compensation Cess in March 2026 offers a chance to introduce a “Health Cess” aimed at reducing consumption and maintaining government revenue.
Nagarajan and John recommend replacing ad valorem taxes with specific excise duties, which are proven to more effectively deter harmful consumption. They also call for the inclusion of bidis in the new Health Cess, ensuring all harmful products are taxed proportionately. With the right reforms, India can move toward better health outcomes and economic resilience.
