Industry body Ficci has suggested to the government to clamp down hard on rising illicit trade in smuggled and counterfeit goods in India.
A report brought out by the chamber noted that high tax rates tend to exacerbate illicit markets by creating greater demand for cheap and counterfeit substitutes.
The report by Ficci body CASCADE pegged the loss in seven industry sectors at Rs 1,05,381 crore, increasing 44.4 per cent between 2011-12 and 2013-14.
Ficci shared the findings of the report with policymakers from the Ministry of Finance, Cabinet Secretariat and the Prime Minister's office.
The chamber also highlighted the rising menace of smuggled and counterfeit goods in India in a letter to Revenue Secretary Hasmukh Adhia earlier this month.
"India is seen to be one of the growth engines of the world. As Indian economy grows, it is facing the challenges of illicit trade in smuggled and counterfeit goods.
"You will kindly agree that to deal with a problem of this magnitude, it is necessary that adequate attention is given to bring forth the magnitude of the menace," Ficci Secretary General A Didar Singh said in the letter to Adhia.
Trade in illicit goods is highly pervasive across countries and sectors, representing a multi-billion-dollar industry globally that continues to grow. It is estimated that 8 to 15 per cent of global GDP is impacted due to illicit trade.
Smuggling and counterfeiting severely harm the economy of a country as they undermine the local industry, suppress innovation and investment, discourage legal imports, reduce the volume of revenues collected from duties and levies by the government and fuel transnational crimes.
The market for contraband and smuggled goods is thriving in India and is today one of the biggest challenges faced by Indian industry, Ficci said in a statement.
According to the report, the total loss to the government on account of illicit markets in just seven manufacturing sectors was Rs 39,239 crore in 2014.
Amongst the various sectors, the maximum revenue loss to the exchequer on account of counterfeiting and illicit trade is attributed to tobacco products, estimating a revenue loss of Rs 9,139 crore, followed by mobile phones at Rs 6,705 crore and alcoholic beverages at Rs 6,309 crore.
Besides, a recent Ficci report found that smugglers are now switching over to cigarettes and fabric/silk yarn as they are low-risk, high-reward goods.
As per the report, in the last one year, the Directorate of Revenue Intelligence seizures of smuggled cigarettes has risen 78 per cent (from Rs 90.75 crore in 2014-15 to Rs 162 crore in 2015-16) followed by fabric/silk yarn, where the increase is 73 per cent (from Rs 24.03 crore in 2014-15 to Rs 41.78 crore in 2015-16).
The seizures of gold rose 61 per cent (from Rs 692.35 crore in 2014-15 to Rs 1,119.11 crore in 2015-16).
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