FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) supported the latest report of the Thought Arbitrage Research Institute (TARI) titled Illicit Markets: A Threat to Our National Interests, which examines the impact of illicit trade in five key industries in India — Mobile Phones, FMCG-Household and Personal Goods, FMCG-Packaged Foods, Tobacco Products, and Alcoholic Beverages. The report methodology estimates the illicit market through the demand and supply gap and calculates the impact on the economy using multiplier effects that rely upon the widely accepted Input-Output model developed by Nobel economic laureate Wassily Leontief.
According to the report, the size of illicit markets in the above-mentioned industries was ₹2,60,094 crore for the year 2019-20 with the FMCG industry — household and personal goods, and packaged foods — together accounting for 3/4th of the total illicit value of goods in five key industries.
The report further estimates that unlawful trade in the five above-mentioned industries results in a total estimated legitimate employment loss of 15.96 lakh. The FMCG industry household and personal goods, and packaged foods, being more labor-intensive industries and due to their relatively higher illicit market size market account for legitimate job losses of 10.93 lakhs, about 68.5 percent of total job loss in five key industries. The estimated tax loss to the government due to illicit goods in these five key industries is ₹58,521 crore. According to the report, 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.
While the FMCG packaged foods industry held the highest share of the illicit market at ₹1,42,284 crore, it was followed by the FMCG household and personal goods industry at ₹55,530 crores, alcoholic beverages industry at ₹23,466 crore, tobacco products industry at ₹22,930 crores, 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 FMCG packaged foods industry at 25.09%, tobacco products industry at 20.04%, the alcoholic beverage industry at 19.87%, and mobile phone industry at 7.56%.
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.
The reports highlight that to deal with the menace of illicit markets in India, addressing the demand and supply gap of legitimate goods, strengthening the domestic manufacturing sector, increase awareness among consumers, creation of a conducive environment for innovation, and strengthen intellectual property rights (IPR) regime, regular monitoring by police and stringent punishment and law enforcement, better leverage of technology, greater coordination among enforcement agencies and better international coordination and cooperation are some of way forwards. Overall, cooperation of all stakeholders and concerted efforts of the government, industry, consumers, and international bodies are needed to achieve the challenging and mammoth task of reducing illicit markets.
The link to access the report is: https://www.ficcicascade.in/wp-content/uploads/2022/10/illicit-market-report-2022-NEW-LAYOUT-1.pd
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