Trade of illicit consumer goods stood at  ₹2,60,094 crore in 2019-20

Trade of illicit consumer goods stood at ₹2,60,094 crore in 2019-20

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NEW DELHI: The sale of illicit consumer goods such as mobile phones, fast-moving consumer products, packaged foods as well as tobacco products, and alcoholic beverages stood at 2,60,094 crore in 2019-20, according to a report by industry body FICCI.

The FMCG industry including household and personal care goods, and packaged foods together accounted for three-fourth of the total value of illicit goods sold in the five key industries, FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) said in its report released Thursday.

The committee relied on the latest available government data to assess the impact of illicit trade on the five sectors.

In fact, according to the report, the estimated tax loss to the government due to the trade of illicit goods in these five key industries was estimated at 58,521 crore in the same period. Two highly regulated and taxed industries, tobacco products and alcoholic beverages account for nearly 49 % of the overall tax loss to the government due to illicit markets in these five key industries.

The report describes illicit products as those that are legitimately or illegitimately smuggled across state or international borders without paying taxes; counterfeit or fake goods produced at low cost, designed to resemble a legitimate brand as well as goods sold by domestic manufacturers who manufacture products but evade taxes on the sale of such items.

Simply put, the supply side of the illicit trade is determined by the price disparity between genuine and illicit products. This is generally true for high-value products that are generally protected by IPR. The demand side is fuelled by factors such as the inclination to use foreign brands at relatively lower prices, according to the report.

While the FMCG industry—packaged foods industry held the highest share of illicit trade at 1,42,284 crore, this was followed by the household and personal goods industry at 55,530 crore, alcoholic beverage at 23,466 crore, tobacco products at 22,930 crore, and mobile phone industry at 15,884 crore.

In terms of the percentage of the illicit market, the FMCG household and personal goods industry was at the top at 34.25%, followed by packaged foods industry at 25.09%, tobacco products industry at 20.04%, alcoholic beverage industry at 19.87%, and mobile phone industry at 7.56%.

Citing industry data, the report said that the ongoing pandemic further caused an increase in illicit trade activities across industries such as pharmaceuticals, tobacco, alcoholic drinks, PPE products, home, and personal sanitizing products, luxury goods, beauty, and personal care products.

Illicit marketers leveraged disruptions reported in global supply chains to plug the demand for such goods.

“Amid the Covid-19 crisis, many businesses particularly micro and small enterprises suffered financial liquidity crises to keep their business running. Euromonitor International highlights that limited or lack of capital from formal channels to these players makes them vulnerable to organized criminal networks and mafias. This in turn allows illicit players to take advantage and reach an understanding for carrying out fraudulent activities and selling illicit goods,” it added.

The report’s findings are based on data sourced from the Government of India, Ministry of Statistics and Programme Implementation (MoSPI) such as the Annual Survey of Industries, NSSO survey, Private Final Consumption Expenditure (PFCE), Directorate General of Commercial Intelligence (DGCIS).

The report further estimates that unlawful trade in industries covered led to a legitimate employment loss of 15.96 lakh. “The impact of the illicit market of these key industries on the economy is pervasive and significant because of the backward linkages of these industries with other sectors of the economy resulting in a multiplier effect,” it said.

The report said that methods such as driving greater consumer as well as rationalisation in tariffs apart from increasing the country’s domestic production could help curb the incidence of illicit trade in the country. Stronger punishment and rule of law too act as a deterrent to illicit trade, the report said.

 

 

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