Negative impact of contraband goods on the Indian economy and businesses

 

FICCI CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) today organized a seminar – ‘Combating Counterfeiting and Smuggling – An Imperative to Accelerate Economic Development’. The seminar discussed the importance of increased awareness on the hazards of counterfeiting and smuggling, and the need for effective enforcement to enhance India’s economic development.

Shri Sadhan Pande, Minister in Charge, Consumer Affairs Department, Government of West Bengal, and chief guest at the meeting stated counterfeiting is a big issue in India which is affecting our revenues particularly the indirect taxes. In the State of West Bengal, Minister cited examples of counterfeit products such as Tea, Cream etc which were finding its way to the retail market owing to their low prices. Further, he added that illicit trade in cigarettes is also a big menace in the state as they are being smuggled from neighboring countries and are readily available across the markets in West Bengal. Hon’ble Minister thanked FICCI CASCADE for taking the lead in fighting this problem. He extended his support to FICCI and welcomed suggestions from industry in addressing this challenge.

Mr. Mayank Jalan, Chairman, FICCI – West Bengal State Council & CMD, Keventer Agro Ltd. in his welcome address highlighted that counterfeiting and smuggling adversely impacts industries, consumers, government and economies as a whole. It is imperative to understand the need for safeguarding the rights of legitimate industry in developing competitiveness in various sectors of the economy.

As per FICCI CASCADE report, the total loss to the government on account of illicit markets in just seven manufacturing sectors is Rs 39,239 crores in 2014. Amongst the various sectors, the maximum revenue loss to the exchequer is attributed to tobacco products, estimating a revenue loss of Rs. 9139 crores, followed by mobile phones at Rs 6705 crores and alcoholic beverages at Rs 6309 crores.

According to FICCI’s report – ‘Invisible Enemy – A Threat to Our National Interests’ – focusing on the negative impact of contraband goods on the Indian economy and businesses, the perpetrators are now switching over to cigarettes and fabric/silk yarn as they are low-risk, high-reward goods. As per the report, the Department of Revenue Intelligence (DRI) seizures of smuggled cigarettes has increased by 78% followed by fabric/silk yarn where the increase is by 73%, seizures of gold have also witnessed an increase of 61%.

According to recent FICCI report, ‘Illicit trade: Fueling Terror Financing and Organized Crime’, counterfeiting is the second largest source of income for criminal activities such as terrorism, globally. The report also highlights that the total employment losses globally due to counterfeit and piracy stood at 2 to 2.6 million jobs in 2013 and is expected to rise to 4.2 to 5.4 million jobs in 2022, suggesting an approximate increase of 110 per cent.

Factors like porous international borders, gateway to Nepal imports etc pose a challenge while containing inflow of illicit goods.  The customs, police department and the state enforcement agencies, in the last couple of months, have taken several actions in West Bengal against those dealing in counterfeit and other illegal products.

While there is an increase in vigilance by the enforcement agencies, it must be noted that this only the tip of the iceberg of a much larger and threatening operation in illegal trade in the country.  Illicit trade is internationally known to result in increased criminal activities with its trade falling in the hands of criminal organizations including terrorist groups.

Mr. P. C. Jha, Advisor, FICCI CASCADE and Former Chairman, Central Board of Excise and Customs, stated “During the last twenty years, the volume of the counterfeiting activity has increased 100 times and the size of trade in counterfeited goods is 10% of the legal international trade (around 2% of the world’s overall economic output). The problem of illicit trade is much more serious than it is commonly perceived.”

Mr. Deep Chand, Advisor, FICCI CASCADE and Former Special Commissioner of Police, New Delhi, emphasized on the need for consumers being continuously made aware of the detrimental impact of illicit products. Consumer awareness campaigns that explain how to differentiate a spurious product from a genuine product, to demanding a copy of the bill from the seller, along with the harmful consequences of buying illegal products vis a vis a genuine one, needs to be explicitly conveyed.

Other key speakers, included, Ms. Mala Banerjee, President, Federation of Consumer Associations, West Bengal, Mr. Deepankar Aron, IRS, Additional Director General, DRI, Zonal Unit Kolkata, Mr. Shrihari Pandey IPS, Special Superintendent of Police (Special), West Bengal, Mr. Gautam Banerjee, Principal Associate Patent & Trademark Attorney, Khaitan & Co. Capt Shakil Ahmed, Sr. GM – Corporate Affairs, Diageo India and Mr. Bibhav Pradhan, Regional Legal Manager East, Hindustan Unilever Ltd.

Mr. Harish Agarwal, Co-Chairman, FICCI – West Bengal State Council & Partner, Ernst & Young LLP in his concluding remarks proposed thanks to the Hon’ble Minister for his continuous support to FICCI. In his remarks he said that the problem of counterfeiting is estimated at $600 billion a year. Product counterfeiting has grown over 10,000% in the past two decades and continues to grow.

Several steps are being taken by FICCI CASCADE and the government to create large-scale awareness among the most impacted segment of this menace: the consumer. The seminar has been organised in a series of such events to be organised across the country as part of a nation-wide awareness campaign to highlight the issue and focus on the growing menace of illegal trade. The event was attended by more than 100 industry captains, representative from consumer forums, government officials and stakeholders in this segment.

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