Illicit market in key Indian industries pegged at ₹7.97 lakh Crore: FICCI CASCADE report

The Federation of Indian Chambers of Commerce and Industry’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (FICCI CASCADE) has released a report revealing the staggering scale of illicit trade in India’s key industries. Valued at ₹7,97,726 crore in 2022-23, the illicit market significantly impacts government revenues and legitimate businesses.

According to the report, the textiles and apparel industry leads the pack, with an illicit market size of ₹4,03,915 crore, accounting for more than half of the total market. The FMCG sector follows, with illicit activity in packaged foods valued at ₹2,23,875 crore and in personal and household care goods at ₹73,813 crore. Together, these sectors represent nearly 37% of the total illicit market in India.

Speaking at the 10th edition of FICCI-CASCADE’s MASCRADE 2024 conference, Ravneet Singh Bittu, Minister of State for Food Processing Industries, stressed the urgent need for harsher penalties and improved coordination between enforcement agencies to combat the growing menace of illicit trade. “We must create fear in the minds of those involved in these illegal activities. Harsh penalties are crucial to dissuade them,” he said.

Link between taxes and illicit trade

The report also highlights a direct correlation between high taxes and the growth of illicit trade, particularly in sectors like tobacco and alcohol, where tax rates are high. The alcohol industry had an illicit market size of ₹66,106 crore, while tobacco products were pegged at ₹30,017 crore.

Rajiv Talwar, Special Secretary to the Government of India and member of the Central Board of Indirect Taxes and Customs (CBIC), said the agency is leveraging technology to crack down on smuggling and counterfeit goods. “Our technology-driven risk management portal has enabled CBIC officers to detect an average of 60 cases of illicit trade daily,” Talwar said, adding that over 3,000 people have been arrested and foreign goods worth ₹40 crore seized in the last 15 months.

Impact on rural India and changing consumption patterns

FICCI’s report highlights that the illicit market is expanding faster in rural India, driven by growing middle- and lower-income groups who are increasingly consuming high-value, highly taxed goods. The rising demand for products like readymade garments and beauty items, taxed at 12-28%, gives illicit players the opportunity to thrive in an environment of high taxation.

Anil Rajput, Chairman of FICCI CASCADE, emphasized the importance of a comprehensive strategy to combat illicit trade. He introduced the “SECURE” framework, which involves surveillance, enforcement, capacity building, a united front against illicit trade, and rigorous punishment.

In conclusion, the FICCI CASCADE report paints a concerning picture of the rising threat posed by the illicit market across key industries. The government, in partnership with FICCI and other stakeholders, is pushing for stronger enforcement measures to address the challenges posed by this illegal trade.

Illicit Market Size (2022-23)

The figures reflect the growing economic impact of illicit trade in these industries, underscoring the need for urgent action.