There is a lack of conclusive data related to healthcare, alcohol, and tobacco expenditure patterns among households in our setting. Given a fixed household budget, spending on these temptation goods may divert household economic resources from essential items, such as food, education, and healthcare, which are indispensable components of human development. This is of much concern for the poor who spend relatively more on consumption of temptation goods. Yet, individuals exhibit imperfect self-control. To control or reduce consumption of temptation goods, public policies often use taxation as an instrument to make these costlier. In India, consumption of tobacco and alcohol is reported by at least one of the household members in more than 50% and 19% of the households, respectively. The growth of healthcare expenditures is of concern to rural populations whose incomes are significantly lower than their urban counterparts.Ĭonsumption of tobacco and alcohol, which are often termed “temptation goods,” is one of the foremost escapable causes of morbidity and mortality in the world. The majority of households who are unable to pay for using healthcare services either do not seek care or resort to short-term coping strategies such as minimizing food expenses, using past savings, and removing children from school to manage the financial shortfall. The high share of OOPE on healthcare along with inadequate provisioning of healthcare facilities further worsens the existing poverty. In case of ill health, these households must spend from their own pockets. As insurance facilities are available only to workforce in formal sector, a majority of such households are not covered under any social protection scheme. More than 90% of the workforce in India is engaged in informal economic activities. In India, only 5% of gross domestic product is spent on health and 80% of this is in form of out-of-pocket expenditure (OOPE). Increased healthcare expenditures exacerbate poverty, with about 39 million additional people falling into poverty every year globally because of such expenditures. Extensive use of technology in diagnostics and treatment of diseases coupled together with the rising therapeutic knowledge and expectations of the population has led to an increase in the cost of healthcare, especially in low- and middle-income countries.