India’s tobacco industry is one of the country’s oldest and most organised agro-based industries. It covers a comprehensive value chain ranging from farming to processing, manufacturing, and exports. India is among the world’s leading tobacco-producing and exporting countries, and its contribution has been significant not only to agricultural income but also to employment generation and government revenue.
In this article, we attempt to understand the structure, production, export performance, global position, and the role of major companies in India’s tobacco industry.
Current Status of India’s Tobacco Industry
India is the second-largest tobacco-producing country in the world and accounts for approximately 9% of global production. Every year, about 800 million kg of tobacco is produced in the country, cultivated across an area of nearly 0.45 million hectares. Several varieties such as Flue-Cured Virginia, Burley, Bidi, Oriental, Rustica, Hookah, Cigar, and Chewing tobacco are produced in India, highlighting the vast scale and diversity of the industry.
In terms of employment, the tobacco industry plays a critical role. Around 36–46 million people are employed in activities related to farming, processing, manufacturing, and exports. Due to relatively low production and export costs, India remains competitive compared to other tobacco-producing nations.
Economically, tobacco contributes nearly 12% to India’s excise revenue and about 4% to agricultural exports. A significant portion of domestic demand comes from smokeless tobacco, while exports generate foreign exchange earnings of over US$ 840 million annually through raw tobacco and cigarettes. Despite strict regulations and health-related laws, the tobacco industry continues to remain a crucial component of India’s agricultural and economic landscape.
Global Tobacco Industry
The global tobacco industry is one of the world’s oldest and most tightly regulated industries, with an estimated market size of approximately $850 billion. This sector spans the entire value chain, from tobacco farming to processing, manufacturing, and marketing, covering cigarettes, cigars, smokeless tobacco, as well as newer products such as e-cigarettes and heated tobacco. Each year, nearly 6 million tonnes of tobacco are produced worldwide, and around 5.5 trillion cigarette sticks are consumed, reflecting the massive scale of the industry.
In terms of consumption, the Asia-Pacific region dominates the global market, accounting for nearly 65% of the world’s smokers. This is followed by Europe with approximately 15%, America with 10%, Africa with 7%, and the Middle East with around 3%. Overall, close to 1.3 billion people consume tobacco globally. While consumption of traditional cigarettes is declining in developed regions such as North America and Europe due to stricter health regulations and changing consumer preferences, demand remains resilient in emerging markets across Asia-Pacific, Africa, and Latin America.
Economically, the tobacco industry remains a major source of government revenue worldwide, generating close to $200 billion annually in tax collections. Additionally, the market value of Reduced-Risk Products (RRP) has reached around $30 billion, indicating a gradual shift towards alternative nicotine products. However, due to increasing health advocacy, ESG pressures, and rapid innovation, the industry is undergoing a transition phase, attempting to balance traditional tobacco products with new-generation alternatives.
India’s Tobacco Exports
India is the world’s second-largest tobacco exporter after Brazil and exports a wide range of products including FCV, sun-cured, flue-cured, unmanufactured non-FCV tobacco, cigars and cheroots, smoking tobacco, homogenised tobacco, extracts, and essences. India is also the only country in the world where tobacco is produced across two seasons, ensuring consistent supply for exports.
In FY25, India exported 1,46,954 tonnes of FCV tobacco, valued at Rs 7,571 crore (US$ 895.9 million). During April–May 2025 of FY26, exports of 31,908.16 tonnes of FCV tobacco stood at Rs 1,688.6 crore (US$ 197.71 million). In the same period, unmanufactured non-FCV tobacco exports were 1,40,046.51 tonnes valued at Rs 4,645.71 crore (US$ 550.08 million) in FY25, and 19,768.09 tonnes valued at Rs 642.73 crore (US$ 75.30 million) in FY26 (April–May 2025).
Overall, exports of unmanufactured tobacco and tobacco products stood at 3,64,575.84 tonnes valued at Rs 16,728 crore (US$ 1.97 billion) in FY25. In April–May 2025 of FY26, these exports were 66,984.61 tonnes and Rs 3,201 crore (US$ 374.9 million). India exports tobacco to nearly 200 countries, with the UAE emerging as the largest importer. In FY25, the UAE imported US$ 427 million worth of tobacco from India, and about US$ 134 million during April–July 2025 of FY26, underscoring India’s strong position in the global tobacco market.
New Excise Duty from February 1
Under the new excise duty effective from February 1, the government has redefined the length-based tax structure for cigarettes. The duty is now determined based on the length and category of cigarettes, making the tax slabs more transparent. Different rates have been applied across categories, ranging from small-sized to long-sized cigarettes. Additionally, an ‘Other’ category has been introduced, on which a higher excise duty of Rs 8,500 per 1,000 sticks has been imposed. This applies specifically to non-standard or unusually designed cigarettes.
To know more about the new excise duty of cigarettes, click here.
Stocks to Add to your Watchlist
Companies in the tobacco sector are often viewed as defensive plays over the long term due to strong cash flows, stable demand, and significant tax contributions.
Wrapping Up
Looking ahead, viewing the tobacco industry as an export-driven sector rather than one dependent solely on domestic consumption has become increasingly relevant. The first major opportunity lies in exports. Demand for Indian tobacco remains steady in international markets, and companies have expanded their presence to over 100 countries. This not only generates foreign currency earnings but also provides partial protection against currency fluctuations, along with improved margins.
In addition, the China Plus One strategy has emerged as a key growth driver. The need for diversification in global supply chains has positioned India as a strong alternative. The direct impact of this shift is visible through longer contracts and more stable income streams for Indian companies, improving overall revenue visibility.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
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