Even as the Indian government does everything it can to help the economy recover from the impact of COVID-19, it is also battling another issue resulting in loss of revenue to help support public and social welfare programmes: contraband and counterfeit goods.
India has seen a significant rise in illicit trade in recent years and it only seems to rise with time. Furthermore, pandemic-incited lockdowns also became an opportunity for counterfeit activities to surge to new highs.
As India Inc. is rooting for economic recovery, yet counterfeit remains a big impediment that’s clearly slowing the much-needed economic revival. India (being no exception), had to endure major losses and economic setbacks lately. Not to forget, how consumers are at greater risk when it comes to their health, wealth, and safety vis-a-vis counterfeit goods.
As per a study by FICCI Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), researchers identified seven key sectors that are most vulnerable to smuggling and counterfeit. These comprise automotive parts, alcohol, computer hardware, personal goods, packaged foods, mobile phones, and tobacco products.
As per a report by ASPA (Authentication Solution Providers’ Association), counterfeiting costs the economy INR 1 trillion every year. The report also notes that one in three adults have been victims of fake products from one or another e-commerce website, making online counterfeiting the fastest growing crime.
Now when you look at these kinds of statistics, and in the same measure talk about economic recovery, it’s clearly an oxymoron.
As the country, is gradually coming out of the pandemic, it is pivotal to understand that the economy needs an immediate boost, and concerted effort is required to enable India to embark on its economic revival journey.
This can only be attained if we ensure that our economic systems are equipped to fight, and eventually eliminate illicit trade. It’s easier to gauge that an economy dented with counterfeit and contraband may not in fact be able to come back to its pre-pandemic shape. Let me contextualise this with some relevant data.
A bird’s eye view of hard statistics
ASPA highlighted tobacco faced the highest jump in illicit trade in 2020 over 2019 and 2018. According to a query response raised in the Lok Sabha, Indian authorities seized illegally imported cigarettes worth Rs 1,772 crore between April 2020 and February 2021, as compared to seizures worth INR 187.6 crore in the previous financial year.
Additionally, according to the Tobacco Institute of India (TII), the illegal cigarette trade comprising internationally smuggled and locally manufactured tax-evaded cigarettes account for as much as one-fourth of the cigarette industry in India.
Another key example of commodities impacted by counterfeit products is Gold. According to the World Gold Council, in FY 2019-20, 120 tonnes of gold was smuggled into India, which was about 15 percent to 17 percent of the nation’s annual demand, which is indeed alarming.
However, there are companies working towards overcoming this challenge. Recently, Amazon partnered with the US government's counterfeit watchdog to launch a joint operation to prevent fake goods from entering the country.
The company revealed that it invested more than $500 million in 2019 alone to protect its store and customers from counterfeit and other forms of fraud and abuse. Overall, they have done a commendable job in this area.
It is critical for organisations to take preventive measures to stop counterfeit in the country, especially in a post-pandemic world. Such initiatives will go a long way to address this burning issue and making it easier for the Indian economy to thrive without any leakages.
It’s also heartening to see the Indian government implement several anti-illicit trade measures to curb this issue and protect consumer interest and rights.
Nonetheless, we believe anti-counterfeiting technologies are the need of the hour. In absence of requisite tech support, it is difficult for the Police and other enforcement agencies to conduct concrete inspections and differentiate between genuine vs. fake products, allowing many such contraband activities to thrive.
No other option but to smell the coffee
As evident, there is little doubt of the kind of catastrophic negative impact counterfeit and illicit trade can bring on the economy. It’s time that we rapidly take more actions to resolve this issue.
Business communities, industry, and government must collaborate to make this one of their key priorities. Counterfeit as a subject must dominate their mind space. Only then can something translate into tangible action.
Next would be to come up with an integrated approach of like-minded industry partnerships that can enhance consumer awareness. The first step of fulfilling our self-reliance vision is really to build a self-reliant ecosystem that can help fix this problem on ground, strengthen enforcement and regulations, to eventually prevent illicit trade from getting out of control.
– Alexander Reisch is the Managing Director, IPM India Wholesale Trading Private Limited, (country affiliate of Philip Morris International Inc. The views expressed are personal.