Illicit trade bleeds nation by 1lakh cr
While official trade in India is sluggish, illicit trade is booming causing a huge loss to the industry and the government alike. A recent report by the Federation of Indian Chambers of Commerce and Industry (FICCI) Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) estimates that the loss to manufacturing
New Delhi: While official trade in India is sluggish, illicit trade is booming causing a huge loss to the industry and the government alike. A recent report by the Federation of Indian Chambers of Commerce and Industry (FICCI) Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) estimates that the loss to manufacturing related sectors on account of illicit trade has increased by 44.4 per cent in just two years, from Rs 72,969 crore in 2011-12 to Rs 1,05,381 crore in 2013-14.
Loss of sales to the manufacturing industry sectors has increased across all industries. The largest increase is seen in the alcoholic beverages and mobile phones industries, where losses have risen by 151 per cent and 111 per cent, respectively. The other top sectors where illicit trade is booming include tobacco, fast moving consumer goods (FMCG) products and computer hardware.
The total loss to the government for manufacturing industries estimated for 2014, on account of the illicit markets is Rs 39,239 crore, up from Rs 26,190 crore in 2012.Among all the sectors in the manufacturing industry, loss to the government is highest from the tobacco industry (23 per cent) followed by mobile phones industry (17 per cent), alcohol industry (16 per cent), FMCG packaged food (16 per cent), and FMCG personal goods (15 per cent). In the motion pictures industry, the loss to the industry for 2014 is expected to be Rs 1,300 crore approximately.
The study also establishes a relationship between high taxes and availability of illicit products. High tax rates tend to exacerbate illicit markets by creating greater demand for cheap and counterfeit substitutes. A significant reason being, that 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. This is true for the tobacco and alcohol Industry. These industries are not only highly taxed; the tax structure is highly intense and dual in nature.
