Abstract: The emerging demand of natural indigo dye due to the environmental and sociological concerns imparted by the synthetic dye helps in leveraging the conventional natural indigo dye production process in many developing countries, including India. Despite having remarkable global market potential, the high price of natural indigo dye impedes its extensive commercialization. Therefore, in the present study, the economics of natural indigo dye is evaluated through life cycle cost (LCC) analysis by considering the traditional indigo dye production process in India using the plant biomass Indigofera tinctoria L. The life cycle model includes cultivation of Indigofera biomass, as well as the production and processing of indigo dye and the cost involved in each step. Along with the detailed cost analysis, the present study also includes socio-economic analysis and possibilities of cost reduction based on the outcome of sensitivity analysis. From the LCC analysis, the life cycle cost of Indigofera biomass cultivation is $420.74 ha−1 year−1, whereas the indigo dye production cost is $113 ton−1 of Indigofera biomass. For an annual dye production of 1000 tons, the present study estimated the economic stabilization of rural farmers and labours by an annual employment generation of 196,250 man-days year−1 and 12,50,000 man-days year−1, respectively. By sensitivity analysis, the raw material price was identified as the major contributor in the total indigo dye production cost. As a cost reduction measure, the combination of biomass yield (70 tons) and reduction in the biomass production cost (50\%) was found to be suitable. Utilization of by-product generated from the dye industry into value-added products could contribute towards a cost reduction of 22\% in the Indigofera biomass cultivation and a cost saving of $37.4 ton−1 of biomass in the indigo dye production cost. Graphic Abstract: [Figure not available: see fulltext.]. © 2020, Springer-Verlag GmbH Germany, part of Springer Nature.