The report highlights that the illicit market for textiles and apparel alone stands at Rs 4,03,915 crore, accounting for over 50% of the total illicit trade.
New Delhi: A new report launched by FICCI CASCADE, in collaboration with the Thought Arbitrage Research Institute (TARI), reveals that the illicit market in India is valued at a staggering Rs 7,97,726 crore across five key industries, including textiles and apparel, FMCG packaged goods, personal and household care, alcohol, and tobacco.
The report, titled “Consuming The Illicit: How Changing Factors of Consumption Affect Illegal Markets in 5 Key Industries,” highlights that the illicit market for textiles and apparel alone stands at Rs 4,03,915 crore, accounting for over 50% of the total illicit trade. Additionally, illicit markets for FMCG packaged foods and personal care products are estimated at Rs 2,23,875 crore and Rs 73,813 crore, respectively.
Industry Impact and Rising Illicit Trade
The impact of illicit trade is particularly pronounced in industries historically subjected to higher tax regimes, such as tobacco and alcohol. In the tobacco sector, over 50% of the illicit market can be attributed to punitive taxes, while this figure stands at 46% for alcohol.
As consumer patterns evolve, expenditures in various sectors are increasing alongside the growth of illicit markets:
- FMCG (Packaged Foods): The illicit market expanded from ₹1,12,474 crores in 2011-12 to ₹2,23,875 crores in 2022-23, marking a 99% increase. Middle-class consumers are driving demand for higher-quality packaged foods, making them more susceptible to smuggled and counterfeit products.
- FMCG (Personal and Household Care Goods): The illicit market grew from ₹43,010 crores in 2017-18 to ₹73,813 crores in 2022-23, representing a 71.6% increase. The rural segment, particularly lower-income groups, is highly vulnerable to low-quality and illicit products due to price sensitivity.
- Textiles and Apparels: The illicit market rose by 29.67% from ₹3,11,494 crores in 2017-18 to ₹4,03,915 crores in 2022-23. Lower-income groups are particularly exposed to low-quality products in both urban and rural areas.
- Alcoholic Beverages: The illicit market surged by 153.5%, reaching ₹66,106 crores in 2022-23, primarily driven by a trend of premiumization among younger consumers. High tax rates have contributed significantly to this illicit trade, with tax components accounting for 46% of total illicit alcohol consumption over the past six years.
- Tobacco Products: Between 2018-19 and 2022-23, the illicit tobacco market grew by 17.7%, from ₹25,495 crores to ₹30,012 crores. Over 50% of this growth is attributed to tax increases, which have driven consumers toward illicit tobacco products, particularly among lower-income groups.
New Consumption Patterns in India
India’s economy has experienced exponential growth, with rural and urban consumption increasing by 7.6 times from 1999-2000 to 2022-23, driven by rising incomes, urbanization, and changing demographics.
Key trends influencing this shift include:
- Rise of the Middle Class: In rural India, spending by upper-income groups has fallen, while middle-income groups have seen increased spending, reflecting an aspiration for higher-value goods.
- Income Growth: Increased household incomes have expanded purchasing power, particularly for non-essential goods.
- Urbanization: The migration of individuals from rural to urban areas is reshaping consumption habits, aligning them with higher standards of living.
- Age Demographics: Millennials aged 25-44 are key drivers of consumption trends, focusing on lifestyle services and aspirational purchases.
- Rising Education Levels: A 50% increase in education attainment from 2011 to 2022 has enhanced earning potential, leading to greater spending on non-essential items.
As the government and industry leaders unite to confront the burgeoning threat of illicit trade, the emphasis on strict penalties and coordinated responses becomes increasingly vital for safeguarding the integrity of India’s economy, the report said.
