The illicit market in five key Indian industries - FMCG (packaged goods), FMGC (personal and household care), alcohol, tobacco, and textiles and apparel - was valued at Rs 7,97,726 crore in the financial year 2022-23, as per FICCI CASCADE'S latest study released on Wednesday.
Textiles and apparel with an illicit market size of Rs 4,03,915 crore in 2022-23 accounts for over 50% of the total illicit market
The illicit market for FMCG (Packaged foods) has grown from Rs 1,12,474 crores in 2011-12 to Rs 2,23,875 crores in 2022-23, marking an increase of 99%, said the report. The estimates for the illicit market of FMCG (Personal and Household Care Goods) grew from Rs 43,010 crores in 2017-18 to Rs 73,813 crores in 2022-23 (71.6%).
The illicit market of alcoholic beverages witnessed a rise of 153.5% between 2017-18 and 2022-23. In current price value terms, the illicit market reached Rs 66,106 crore for 2022-23, after 48,134 crores in 2021-22. For tobacco products, between 2018-19 and 2022-23, the illicit market grew by 17.7%, from Rs 25,495 crore to Rs 30,012 crore.
The report highlighted that the illicit market in these five categories expanded faster in rural India, especially among the growing classes of middle- and lower-income groups. In essence, the menace of counterfeiting and illicit trade seems to have broken new ground since earlier it was more of an upper-income phenomenon, more pronounced in urban reaches of the country.
"Therefore, the changing spending pattern - with rising disposable incomes- highlights consumers opting for products which are taxed more, such as products carrying tax rates of 28% in case of beauty and cosmetic products and readymade garments which are taxed at 12-18%, which give illicit players the opportunity to use arbitrage for economic gains," highlighted the report.
It added, "The impact is far more profound in the case of industries which have historically been exposed to higher tax regime, i.e. tobacco and alcohol. In case of tobacco products, above 50% of the illicit markets can be attributed to the effect of punitive tax on the industry and similarly for alcohol such effect is 46%."
Rajiv Talwar, Special Secretary to the Government of India and Member (Compliance Management), Central Board of Indirect Taxes and Customs (CBIC), said that over 3,000 people have been arrested in the last 15 months and foreign products worth Rs 40 crore were seized.
