The war against illegal goods as India’s fight
- The high inflation rate has given rise to a thriving market of cheap inferior, illegal and fake goods
- Despite the decline to a certain extent, India’s wholesale inflation rate has continued to remain in double digits since April 2021.
- The inflation rate was seen to be 12.41% in August 2022 as compared to 13.93% in July.
The Festive Season
- In the wake of a festive session, these parallel economy players who require access to such cheaper goods are looking towards China as such low cost goods are manufactured in China at a large scale.
- Example: Markets will be flooded by Chinese goods such as Diwali lights, idols, electronic items, etc.
Flourishing illegal market in India
- The demand for cheaper alternatives has given rise to a thriving smuggled and illegal goods market in the country.
- The illegal market in India is booming in five important industries namely mobile phones, fast-moving consumer goods (FMCG), FMCG-packaged foods, tobacco products, and alcoholic beverages.
- The overall size of the illegal market in these industries was recorded to be about ₹2,60,094 crores in 2019-20.
- India has been ranked low on the Global Illicit Trade Environment Index which covers 82 countries and said that India required quantifiable actions to tackle the risks posed by illegal trade on the economy.
Challenges associated with the thriving illicit market
- Tax losses: The thriving illicit and smuggling market is detrimental as it is done at the cost of taxes to the government which deprives the required capital for the country to drive social transformation.
- As per reports, the estimated tax loss to the Government on account of illicit trade in key industries is said to be around ₹58,521 crores.
- Tobacco products and alcoholic beverages, which are two highly regulated and taxed industries, constituted about 49% of the overall tax losses.
- Job losses: Further, the CASCADE report also points out that the illicit trade in the key industries has led to an estimated employment loss of over 15.96 lakh.
- Out of which, the FMCG industry alone has accounted for over 68% of job losses.
Recommendations
- Rationalisation of taxes: Rationalisation of taxes in the industries which are plagued by the illicit trade and market is seen as the only practical option available for the government to control smuggling and illicit trade.
- Incentivising domestic manufacturing: By promoting and incentivising domestic manufacturing, the reliance on international manufacturers can be reduced significantly.
- Incentivising domestic manufacturing and rationalisation of taxes will help India compete with global brands and become a global hub for these goods.
- Restrictions on profits repatriation: MNCs operating in the country must not be allowed to remit royalties and profits out of India earned from items sold to Indians.
- Adoption of advanced technology: As per CASCADE, enforcement and seizure of illicit goods and items can be enhanced by the adoption of advanced technology like AI, blockchain, and location technology.
- Awareness drives: The government must undertake awareness campaigns to inform consumers about how the illicit markets fuel crime syndicates and parallel economies.