'Nation-wide menace' of counterfeiting crippling India

The Indian government is losing around $6bn a year in revenue from the illicit counterfeit market in the country, according to the Indian industry trade body.

The figure (Rs 39,239 crores) comes from a Federation of Indian Chambers of Commerce and Industry (FICCI) report and covers just seven manufacturing sectors in 2014.

The trade body also estimated that seven industry sectors lost $16.4bn as a result of illicit trade, which represents a 44.4 per cent increase between 2011-12 and 2013-14.

FICCI said "the market for contraband and smuggled goods is thriving in India and is today one of the biggest challenges faced by Indian industry," adding that "it is vital to highlight the enormity of the problem and take firm steps to eradicate the nation-wide menace".

According to the report – published by FICCI's dedicated body to addressing the illicit trade the Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) – the maximum revenue loss to the exchequer from counterfeiting was attributed to tobacco products, with an estimated revenue loss of $1.4bn, followed by mobile phones at $1.05bn and alcoholic beverages at $984m.

FICCI said there was a noticeable trend that saw conmen shifting to smuggled cigarettes and fabric/silk yarn because they were "low-risk, high-reward goods".

Last year, the seizures of smuggled cigarettes by the Directorate of Revenue Intelligence increased by 78 per cent from $14m in 2014-15 to $25m in 2015-16. Seizures of fabric/silk yarn increased by 73 per cent from $3.7m in 2014-15 to $6.5m in 2015-16. Seizures of gold also increased by 61 per cent from $108m in 2014-15 to $174.6m in 2015-16.

Meanwhile seizures of machinery parts and electronic items have declined.

FICCI said it was "alarmed" by the counterfeit trade's pace of growth. It wanted to draw attention to the "magnitude of the problem" in the country and has urged the Indian Government to take "swift action to clamp down the rising illicit trade".

"India is one of the growth engines of the global economy and as the India economy grows it is faced with the challenges posed by the growth of smuggled and counterfeit goods," FICCI said.

"Smuggling and counterfeiting severely harms the economy of a country in multidimensional ways. It undermines the local industry, suppresses innovation and investment, discourages legal imports, reduces the volume of revenues collected from duties and levies by the government, fuels transnational crimes and hampers the health of citizens. The ill effects are felt widely across industries."

The trade body believes much of the increase is a result of high taxes and a demand for cheaper products. "High tariffs and taxes create opportunities for those involved in illicit markets to step in and supply 'reduced' versions of the original product at lower prices. A perspective of having the right balance between tax revenue targets and consumer interests is therefore imperative," FICCI said.

FICCI also called for strengthening domestic manufacturing to reduce the gap in supply and demand, as well as introducing stronger punishments and improved surveillance.