Fake Goods Result In 26,190 Crore Loss To Exchequer

New Delhi: Sale of fake and counterfeit products in seven sectors, especially tobacco, auto components and fast moving consumer goods, have resulted in a 26,190 crore ($4.85 billion) loss to the exchequer, a Federation of Indian Chambers of Commerce and Industry (FICCI) study has revealed.

The study covered seven sectors - auto components, alcohol, computer hardware, fast moving consumer goods (personal goods), fast moving consumer goods (packaged foods), mobile phones and tobacco - which are worst hit by counterfeiting and smuggling.

Widespread counterfeiting in these sectors have resulted in sale loss of genuine products to the tune of 72,969 crore in 2012, says the study released.

Almost 30 percent of the total auto components sold in the country are fake while a quarter of the FMCG products are not genuine.

The study was conducted by a New Delhi-based think tank, Thought Arbitrage Research Institute, on behalf of FICCI Committee Against Smuggling and Counterfeiting Activities Destroying Economy (FICCI-CASCADE).

"The loss to government has been quantified to the extent of revenue loss to the exchequer which comprises of direct and indirect taxes and has been calculated on the basis of total sales loss estimate to the industry," the report said.

The study concludes that "grey market" poses serious challenges to the government, industries and customers. Grey market or illicit market comprises transactions which are done outside the authorised channels of trade and mainly includes counterfeiting, smuggling and tax evaded goods.

On the one hand, customers face health and safety hazards and, on the other, genuine manufacturers' incentive and motivation to invest in business growth, research and development tends to decline on account of vulnerability to counterfeits and fakes.

"The counterfeiter-criminal nexus results in growth of antisocial activities, violent and organised crime. The consequential price paid by society for such incidences cannot be measured only in economic terms but have far-reaching impact on national security and the country's progress," the report said.

This is the first comprehensive study related to the impact of fake products on the Indian economy. It was released by Consumer Affairs Minister K.V. Thomas at a function here.

In 2008, Paris-based International Chamber of Commerce, in a report, had said the impact of counterfeit products on G20 countries was estimated at $455 billion to $650 billion. This impact is estimated to rise to the tune of $1,220 billion to $1,770 billion by 2015.

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