Illicit Markets in India Surge: Impact on Legitimate Businesses and Tax Revenues

A recent report highlights the rapid growth of illicit markets in India, particularly in textiles, apparel, and FMCG sectors. The report, from FICCI's CASCADE and TARI, estimates the illicit market's size at Rs 797,726 crore for 2022-23, significantly affecting legitimate businesses and government tax revenues.

Illicit markets in textiles, apparel, packaged goods, personal and household care, alcohol, and tobacco have expanded rapidly in India, posing significant challenges for legitimate businesses, according to a recent report.

The report from FICCI's Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), in collaboration with the Thought Arbitrage Research Institute (TARI), estimates the size of the illicit market in India at Rs 797,726 crore for 2022-23. Textiles and apparel alone accounted for over 50% of this market, while FMCG products, including packaged foods and personal and household care goods, comprised nearly 37%.

High consumption of luxury and high-value branded goods, especially among India's growing aspirational middle class, is driving the expansion of the illicit market. Products with higher tax rates, such as beauty and cosmetics (28%) and readymade garments (12-18%), are particularly targeted by illicit traders. Additionally, sectors like tobacco and alcohol, not covered by GST, are severely impacted due to high tax regimes.

(With inputs from agencies.)