India is the world's main incense producing country, and is also a major exporter to other countries. In India, incense sticks are called Agarbatti (Agar-wood: from Dravidian Tamil agil, agir, Sanskrit varti, meaning "stick". An older term "Dhūpavarti" is more commonly used in ancient and medieval texts which encompasses various types of stick incense recipes. Incense is part of the cottage industry in India and important part of many religions in the region since ancient times. The method of incense making with a bamboo stick as a core originated in India at the end of the 19th century, largely replacing the rolled, extruded or shaped method which is still used in India for dhoop.

Dhūpa (incense) and gandhā (perfumes) are two of five accessories of religious worship in Hinduism, Jainism and Buddhism; others being puṣpa (flowers), dīpa (lamp) and nivedya (food). Worshipping deities with these five accessories is generally considered as a way for achieving the four ends of human life; dharma, artha, kama and moksha.

The word agarbatti is derived from (Agar: from Dravidian Tamil அகில் (agil), அகிர்(agir)., Sanskrit varti, meaning "stick"); an older term, "dhūpavarti", is more commonly used in ancient and medieval texts which encompasses various types of stick incense recipes.

Early evidenced of incense use and incense burners have been found in Neolithic and Chalcolithic periods (3300–1300 BCE). The oldest textual source on incense is the Vedas, specifically, the Atharva-veda and the Rigveda, which encouraged a uniform method of making incense. Although Vedic texts mention the use of incense for masking odors and creating a pleasurable smell, the modern system of organized incense-making was likely created by the medicinal priests of the time. Thus, modern, organized incense-making is intrinsically linked to the Ayurvedic medical system in which it is rooted. Mahabharata classifies incense dhupa into three types known as niryasa; resins from Commiphora wightii, Shorea robusta, Boswellia serrata, second is sarin; heartwoods from aloeswood, sandalwood, roots, flowers and herbs, and third is kritrima; artificially produced or manufactured like jaggery or molasses from sugarcane for example. Blend of these three types of ingredients formed basis of incense making since ancient period. The practice of incense as a healing tool was assimilated into the religious practices of the time. Dharmaśāstra describes incense ingredients as sandalwood, aloeswood, camphor, musk, saffron, piper cubeba, resins, jaggery, ghee, honey, fragrant flowers, among others. Puranic texts similarly gives incense ingredients similar to Dharmasastra like sandalwood, aloeswood, musk, camphor, saffron, piper cubeba, resins etc. As Hinduism matured and Buddhism was founded in India, incense became an integral part of Buddhism as well. Around 200 CE, a group of wandering Buddhist monks introduced incense stick making to China.

In Arthashastra, a text on treatise of statecraft and political science, agarwood, sandalwood and other aromatics were subject to a state tax at one-tenth or one-fifteenth of the sale price of the products. The Kamasutra text describes Gandhayukti ("Perfume blending"), the technique of making perfumes as one of the 64 arts to be learned by men and women. Commonly described incense types in early texts include Dhūpavarti (incense sticks, early form without bamboo-core), Dīpavarti (powder incense rolled inside cotton lamp-wicks), Churna dhupa (incense powder mixed with camphor), Pindadhupa (fresh incense paste made into lumps), Vasana (perfumed oils for lamps).

While the earliest texts that mention aromatic preparations in any detail appear to be religious and medical texts; some of which had chapters dedicated to incense; it is only later during the first millennium CE is when evidence of texts devoted entirely to "Gandhayukti" the art of perfumery emerge for diverse use. According to James Mchugh from "approximately the late centuries of the first millennium CE onwards do we see significant materials on perfumery incorporated into texts on erotics and courtly life." These texts are not just limited to incense making, but the topic of "Gandhayukti" covers diverse products related to perfumery and cosmetics of various kinds; Curna (perfume powders), Vilepana and Anulepana (fragrant sandal unguent, applied to the body and left on to render its fragrance), Udvartana and Sananiya (fragrant bathing exfoliants), Dhupavarti (incense sticks, early form which lacks bamboo-core), Dipavarti (perfumed powder rolled inside cotton lamp-wicks), Vasana (perfumed oils), among others.

A chapter in ancient Bṛhat Saṃhitā is dedicated to Gandhayukti ("Perfume blending"), here Varahamihira provides several perfume formulas, one of them known as Gandharnaava ("Ocean of perfumes") is a unique perfume formula, in which from a given number of ingredients placed in a grid, numerous combinations can be made, leading in some cases to a vast number of potential perfumes. He provides a complex algorithm for calculating how many perfumes one can make from a given number of ingredients, in one case up to 43,680 perfumes can be made.

The Gandharnaava (Ocean of perfumes) is prepared from the following sixteen substances, if every four of them are permuted variously at will and that in one, two or four parts. The substances are Uŝira, Aguru, Vālaka, Madanfal, Karpûra, Dhānya, Nāgapuşpa, Tagara, Saibya, Spŗkkā, Ghana, Karcûra, Vyāghranakha, Nakha, Coraka, Chandana. The total number of perfumes resulting from the sixteen ingredients being mixed in all possible combinations is 43,680.