Thought Arbitrage Research Institute (TARI) prepared a comprehensive report titled Challenging Landscape of Illicit Trade: How Changing Factors of Consumption Affect Illicit Markets in 5 Key Industries in India. TARI’s latest report estimates that the size of illicit markets in five key industries—FMCG (Personal Care, Household Goods, Packaged Foods), Tobacco Products, Textiles, Apparel, and Alcoholic Beverages reached ₹7,97,726 crores in 2022-23. Textiles and Apparel accounted for over 50% of the total illicit market, with an estimated size of ₹4,03,915 crores.

The report delves into how income growth across different fractiles (income segments) reshapes India’s consumption landscape. Middle-income groups have become the primary drivers of consumption, accounting for a substantial portion of market demand across a broader range of goods and services. As this group’s purchasing power rises, their consumption extends beyond necessities to include more premium goods and services. However, this growth has a shadow side—the expansion of illicit markets. The expanding middle class also becomes a key consumer base for illicit goods due to the availability of counterfeit products at lower prices, as industries like FMCG, alcohol, tobacco, and textiles are particularly vulnerable to counterfeiters and smugglers capitalizing on rising demand.

The report also highlights a clear relationship between higher taxes and the growth of the illicit market. Illicit trade is especially prevalent in high-tax industries like tobacco and alcohol, where consumers are drawn to cheaper, illegal alternatives. Price remains the key motivator, particularly among lower- and middle-income consumers, who are most vulnerable to counterfeit products.

The report was launched at the 10th edition of FICCI CASCADE – MASCRADE (Movement Against Smuggling and Counterfeit Trade) on 25th September 2024 at The Lalit, New Delhi. The launch event featured Mr. Ravneet Singh Bittu, Minister of State for Food Processing Industries, Mr. Anil Rajput,Chairman of FICCI CASCADE, and Mr. Rajiv Talwar, Special Secretary to the Government of India.