Illicit trade at ₹7.97-lakh cr in FMCG, textile, alcohol, tobacco sectors: FICCI

The size of illicit trade in India’s FMCG, alcohol, tobacco, textiles and apparel sectors could have been as high as ₹7,97,726 crore in 2022-23, a report published by industry chamber FICCI suggests. The problem is severe in the textiles and apparel business where the illicit market size could be ₹4,03,915 crore, over 50% of India's illicit trade in these sectors, it says.

The report, prepared by FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), in association with the Thought Arbitrage Research Institute (TARI), estimates the illicit trade in FMCG (packaged foods) and FMCG (personal and household care goods) to be worth ₹2,23,875 crore and ₹73,813 crore, respectively.

In the case of alcoholic beverages, the report notes a rise of 153.5% in the size of the illicit market between 2017-18 and 2022-23. It reached ₹66,106 crore in 2022-23, up from ₹48,134 crore in 2021-22, the report says.

According to the report, higher taxation is a key factor that drives the illicit economy, as there is an incentive for illicit players to provide low-value alternatives. “This tendency is validated in the growth of the illicit markets of packaged foods, where we find that between 2017-18 and 2022-23, the illicit market grew by 99%. Both in cases of urban and rural, lower-and-middle income households are vulnerable to illicit packaged foods, are attracted to aspiration-driven consumption, but also sensitive to price shocks,” the report says.

Tobacco and alcohol, the two industries that have historically been exposed to higher tax regimes, were also cited as examples to illustrate this point. “Our study shows that at constant prices, the illicit market for tobacco grew from ₹7,699 crore in 2011-12 to ₹13,198 crore in 2022-23, indicating a significant growth in the actual volume of illicit markets,” it says.

“As consumer demand for diverse goods and services rises, so does the opportunity for counterfeiters, smugglers, and other illegal operators to exploit market vulnerabilities. The landscape of illicit trade is becoming increasingly complex with sophisticated networks operating across borders, making enforcement and regulation more challenging. Smuggling and counterfeiting not only distort market competition but also siphon off significant revenue from legitimate businesses and the government,” Jyoti Vij, Director General, FICCI says.