The illegal market in India has led to the 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 illegal goods in India.
  
• Government of India suffered a loss of $7 billion in 2019-2020 due to the counterfeiting market.
  
• The illegal market is draining 2.2 trillion dollars from the global economy.
  

Sanjiv Mehta, the chairman of HUL, said on Thursday that counterfeiting and smuggling of goods in India should be treated as serious criminal offences. He fought for civil action against gray imports during the launch of a FICCIA report on the illegal market of India.

“India is an official signatory to the World Trade Organization and there should be a civil action against gray imports. Although packaging quality has improved and the supply chain is nimble again, the dark web is still used for counterfeiting. There are also a lot of illegal products coming from China,” said Mehta, who is also the chairman of the trade association FICCI.

The report titled
‘Illegal markets: a threat to national interests” says India’s illegal market, spanning five major industries, has cost India 3 million jobs. The government has suffered a loss of $7 billion due to the counterfeiting market in 2019-2020, according to the report released by the former vice president of India, Venkaiah Naidu.

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

Counterfeiting, smuggling and tax evasion, clubbed together under the head of organized crime, combine to form gray or illegal markets. According to the World Economic Forumthe global illegal market sucks $2.2 trillion out of the global economy, taking in more than 3% of global GDP.

Size of the illegal market in India

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

The other four sectors 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 illegal market of these industries on the economy is significant because of the backward links of these industries to other sectors of the economy, resulting in a multiplier effect,” FICCI said.

According to the report, mobile phone counterfeiting is declining due to the Make in India campaign. India has also become the second largest mobile phone manufacturing country by volume.

“The highest counterfeit product comes from FMCG household and personal goods with small and medium enterprise products more. Even though tobacco consumption has fallen, the illicit market remains the same and the loss to the government is greatest because it is the most heavily taxed,” said Kaushik Dutta, director Thought Arbitration Research Institute (TARI).

The report was prepared by TARI for the FICCI Commission against Smuggling and Counterfeiting (CASCADE).

Supply Interruptions and Illegal Trade

Hit by global supply disruptions during the Covid-19 pandemic, criminals were given multiple opportunities to create illicit markets.

Although alcohol consumption has decreased, its share of the illicit market is still 20% as there are high regulatory and tax barriers.

“Boost from
Iago Grahak Jago is the need of the hour. Awareness without action is worthless. Consumer-led movement is now crucial in India. Counterfeit products will not exist if consumers reject them. Every time an illegal product is bought, the country is cheated with revenue. Only when real goods are produced will the nation become tax compliant,” he said Anil Rajputpresident of FICCI CASCADE.

Jago Grahak Jago (Wake Up Customer) was launched in 2005 by the Indian government to raise awareness of consumer rights among customers in India.

The report was prepared on the basis of the Annual Survey of Industries, social security survey, Private Final Consumption Expenditure (PFCE) under Ministry of Commerce India.

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