The latest IMF projections cut global growth to 3.2 per cent and 2.9 per cent for 2022 and 2023, respectively, from the pre-Covid levels of 4.9 per cent.

Despite the global headwinds, the Indian economy grew at 13.5 per cent (current prices) in the first quarter of FY23. India is likely to be the fastest growing economy in the current fiscal, even though a global downturn will negatively impact its momentum.

At the same time, macro vulnerability risks may give way to demand and profitability concerns. While India is certainly better placed than most big economies, it needs to control factors that impede growth.

Fake goods worries

Curtailing trade in counterfeits is one key measure that could boost India’s growth. FMCG goods, including personal and household items and packaged foods, tobacco products, and alcoholic beverages constitute a vast market and this is where illicit trade rule the roost.

According to a FICCI CASCADE study, the size of counterfeit market in these five key industries was ₹2,60,094 crore in 2019-20, which was more than 1 per cent of India’s GDP that year.

The FMCG industry accounts for three-fourths of the total counterfeit value of goods. The report further suggests that trade in counterfeit goods leads to an estimated legitimate employment loss of 15.96 lakh, with the FMCG industry accounting for about 68 per cent of job losses.

The estimated tax loss to the government due to illicit goods is ₹58,521 crore, with the heavily regulated and taxed tobacco products and alcoholic beverages industries accounting for 49 per cent of the overall tax loss.

The impact of the counterfeit market of these industries on the economy is significant because of their backward linkages with other sectors, which results in a multiplier effect.

This means that smuggling and counterfeiting in one industry affect growth in other sectors attached to it.

Take, for example, the case of the mobile phone industry. Fake mobile phones result in an output loss of ₹40,374 crore and a Gross Value Added (GVA) loss of ₹14,248 crore to the economy. Similarly, the illegal and smuggled household and personal goods resulted in an output loss of ₹1,56,012 crore and a GVA loss of ₹53,071 crore.

Smuggling and counterfeiting also increase the health burden on the state as people, often belonging to economically weaker sections, fall prey to substandard, expired, or hazardous goods. Further, illicit trade generates huge profits, most of which go back to the crime syndicates that control this illegal activity.

Even though trade in fakes runs parallel to the legitimate economy, experts opine that in cases where the former takes over the latter in terms of scale and volume, legitimate businesses witness massive instability which discourages foreign enterprises and investors to venture into the affected country.

By countering illegal trade, which includes smuggling and counterfeiting, India can set an example for the rest of the world.

Systemic measures

However, this will require developing systemic measures, synergy and convergence between various departments of the Centre and States under one umbrella agency, sharing of data in a seamless way across geographical regions and special courts that would deliver deterrent punishment.

In this process, the umbrella agency should adopt modern Information and Communication Technologies such as Artificial Intelligence, Blockchain, Geospatial to prevent illegal movement of goods along sea, land, and air routes.

A detailed pilot study for a gateway on imports will provide the difference between what it could do and what it wants to achieve for the agency, and the agency can continuously improve the process to curb illegal trade.

The author is a public policy expert