India’s illicit market has resulted in loss of 3 million jobs: FICCI

• The FMCG industry-household and personal goods and packaged foods together account for 75% of the total value of illicit goods in India.
  
• The Indian government has suffered a $7 billion loss due to the counterfeit market in 2019-2020.
  
• The illicit market drains $2.2 trillion from the global economy.
  

Sanjiv Mehta, the chairman of HUL said on Thursday that counterfeiting and smuggling of goods should be treated as serious criminal offenses in India. He batted for civil action against grey imports during the launch of a FICCI report on India’s illicit market.

“India is an official signatory to the World Trade Organization and there should be a civil action against grey imports. Even though the quality of packaging has improved and the supply chain is agile once again, the dark web is still being used for counterfeit trade. A lot of illicit products are also coming from China, “ said Mehta who is also the president of industry body FICCI.

The report titled ‘Illicit markets: A threat to National Interests’ says that India’s illicit market, spread across five key industries, has cost India 3 million jobs. The government has suffered a $7 billion loss due to the counterfeit market in 2019-2020, said the report which was released by former Vice President of India, Venkaiah Naidu.

“You can change your friends but not your neighbours,” said Naidu, referring to illicit imports from China.

Counterfeiting, smuggling and tax evasion-clubbed under the head of organized crime, together comprise grey or Illicit markets. According to the World Economic Forum, the global illicit market drains $2.2 trillion from the global economy, taking over 3% of the global GDP.

Size of illicit market in India

The report pegs the size of India’s illicit market at ₹2.6 lakh crore. The FMCG industry, household and personal goods and packaged foods together account for 75% of the total value of illicit goods in India.

The other four industries with the highest number of illicit goods were FMCG packaged Foods (25%), tobacco products (20%), alcoholic beverages (19.8%) and mobile phones (7.56%).

“The impact of the illicit market of these industries on the economy is significant because of the backward linkages of these industries with other sectors of the economy resulting in a multiplier effect,” said FICCI.

The report said that the counterfeiting in mobile phones is declining because of the Make in India campaign. India has also become the second largest mobile phone manufacturing nation globally in volume terms, it said.

“The highest counterfeit product comes from FMCG household and personal goods with products from small and medium enterprises more. Even though tobacco consumption has dipped, its illicit market remains the same and the loss to the government is highest since it is the most heavily taxed,” said Kaushik Dutta, Director Thought Arbitrage Research Institute (TARI).

The report was prepared by TARI for FICCI Committee Against Smuggling and Counterfeiting Activities (CASCADE).

Supply disruptions and illegal trade

Affected by global supply disruptions amid the Covid-19 pandemic, criminals were provided with multiple opportunities for creating illicit markets.

Even though alcohol consumption has gone down, its share in the illicit market still is 20% as there are high regulatory and tax barriers.

“Boost of Jago Grahak Jago is the need of the hour. Awareness without action is worthless. Consumer led movement is crucial in India now. Counterfeit products won't exist if consumers reject them. Each time an illicit product is purchased, the country is cheated out of revenue. Only when genuine goods are produced, does the nation become tax compliant,” said Anil Rajput, chairman of FICCI CASCADE.

Jago Grahak Jago (Wake Up Customer) was launched in 2005 by the government of India to make customers in India more aware of consumer rights.

The report was prepared using the Annual Survey of Industries, NSSO survey, Private Final Consumption Expenditure (PFCE) under the Ministry of Commerce India.


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