The escalating illicit trade in counterfeits and smuggled goods in India should be deemed a national threat, the Indian industry trade body has told the government.
In a letter – sent to the Ministry of Finance, Cabinet Secretariat and Prime Minister – the Federation of Indian Chambers of Commerce and Industry (FICCI) claimed that "counterfeiting and smuggling has been an enduring problem that has escalated in scope and magnitude, impacting industries, government, economies and, the health and safety of the consumers".
"Illicit trade should be treated as a national threat and tax evasion needs to be seen as a grave offence," FICCI's secretary general A. Didar Singh wrote.
FICCI, which has spent years focusing on curbing illicit trade, also called on the government to take adequate steps to tackle the issue.
The letter was in response to a session that FICCI held "to understand the gravity of the menace caused by illicit trade activities". The letter shared the outcomes of the session, which focused on consumer awareness, enforcement and regulation, taxation policy and stakeholder collaboration. Delegates felt that stringent actions needed to be taken to counter and bring down the illicit trade in the country's top smuggled sectors including gold, cigarettes, machinery parts, fabric/silk yarn and electronic items.
According to Singh, India has the potential to become a global manufacturing hub but the widespread smuggling and counterfeiting, in the absence of an adequate enforcement mechanism to stop it, is acting as a "dampener" to achieving that goal.
"It is time that we call for stern and resolute counterstrike force against such ill-intentioned activities," Singh said in a separate statement.
The letter also follows a recent report published by FICCI's dedicated body to addressing the illicit trade the Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE).
The report claims that the Indian government is losing around $6bn a year in revenue from the black market, while seven industry sectors are estimated to have lost $16.4bn, which represents a 44.4 per cent increase between 2011-12 and 2013-14.
According to the report, the maximum revenue loss to the exchequer from counterfeiting was attributed to tobacco products, with an estimated revenue loss of $1.4bn, followed by mobile phone at $1.05bn and alcoholic beverages at $984m.
Last year, seizures of smuggled cigarettes in India increased by 78 per cent from $14m in 2014-15 to $25m in 2015-16.
FICCI said it was "alarmed" by the illicit trade's pace of growth. "The market for contraband and smuggled goods is thriving in India and is today one of the biggest challenges faced by Indian industry… It is vital to highlight the enormity of the problem and take firm steps to eradicate the nation-wide menace".
The report establishes a relationship between high taxes and the availability of illicit products.
"High tax rates tend to exacerbate illicit markets by creating greater demand for cheap and counterfeit substitutes," Singh said in a statement. "A significant reason being that high tariffs and taxes create opportunities for those involved in illicit markets to step in and supply 'reduced' versions of the original product at lower prices. A perspective of having the right balance between tax revenue targets and consumer interests is therefore imperative."
FICCI has also called for strengthening domestic manufacturing to reduce the gap in supply and demand, as well as introducing stronger punishments and improved surveillance.