Illicit Markets in India: Textiles, Alcohol, and Tobacco on the Rise
A recent report by FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) and the Thought Arbitrage Research Institute (TARI) has highlighted the rapid growth of the illicit market in India. The report, titled ‘Consuming The Illicit: How Changing Factors of Consumption Affect Illegal Markets in 5 Key Industries,’ estimates the size of the illicit market at Rs 797,726 crore for the year 2022-23.
Key Findings
The report reveals that the textiles and apparel sector accounted for over 50% of the total illicit market in 2022-23. Fast-Moving Consumer Goods (FMCG), including packaged foods and personal and household care goods, made up nearly 37% of the illicit market.
Impact on Legitimate Businesses
The growing illicit market is not only undermining legitimate businesses but also distorting competition and significantly reducing government tax revenues. The report attributes this growth to the increased consumption of high-value, branded, luxury, and high-end taxed goods and services, especially among the expanding middle class in both rural and urban areas.
Taxation and Illicit Trade
The report highlights that high tax rates on products like beauty and cosmetic items (28%) and readymade garments (12-18%) provide opportunities for illicit players to exploit economic gains. Industries with historically higher tax regimes, such as tobacco and alcohol, are particularly affected. For instance, over 50% of the illicit tobacco market and 46% of the illicit alcohol market can be attributed to punitive taxes.
Growth Statistics
| Industry | 2017-18 (Rs Crore) | 2022-23 (Rs Crore) | Growth (%) |
|---|---|---|---|
| Alcoholic Beverages | 48,134 | 66,106 | 153.5% |
| Tobacco Products | 25,495 | 30,012 | 17.7% |
| Textiles and Apparel | 311,494 | 403,915 | 29.67% |
| Personal and Household Care Goods | 43,010 | 73,813 | 71.6% |
The report concludes that the mismatch between purchasing power and aspirations has fueled the growth of the illicit market, impacting both businesses and government revenues.
Doubts Revealed
Illicit Markets -: Illicit markets are places where illegal goods are bought and sold. These goods are not allowed by the government.
Textiles -: Textiles are types of cloth or fabric used to make clothes, curtains, and other items.
Alcohol -: Alcohol is a drink that can make people feel relaxed or sleepy. It is only for adults and can be harmful if not used properly.
Tobacco -: Tobacco is a plant that is used to make products like cigarettes. It is harmful to health and can cause diseases.
FICCI CASCADE -: FICCI CASCADE is a group in India that works to stop illegal trade and protect businesses.
TARI -: TARI is a research group that studies different markets and helps understand economic issues.
Rs 797,726 crore -: Rs 797,726 crore is a very large amount of money in Indian currency, showing how big the illegal market is.
FMCG goods -: FMCG stands for Fast-Moving Consumer Goods, which are products like food, drinks, and toiletries that people buy often.
Disposable incomes -: Disposable incomes are the money people have left after paying taxes and other necessary expenses, which they can spend on anything they like.
