India, like any emerging great power, faces an array of strategic challenges. One that critically threatens both economic development and national security, but which so far has attracted surprisingly little attention, is illicit trade.
The Federation of Indian Chambers of Commerce and Industry (FICCI) has awoken to this challenge. Within the past year, FICCI has published estimates shedding light on the extent of illicit trade for a number of legitimate business sectors. FICCI estimates that a quarter of fast-moving consumer goods, one in five mobile phones, a quarter of computer hardware and a third of auto components are from the gray sector—that is, undeclared and largely counterfeit.
The impact of this extensive illicit activity is multifaceted. On the economic front, it deprives the Indian government of tax revenues, Indian business of sales and profits and the Indian populace of legitimate jobs. FICCI has only assessed the impact of illicit trade on seven business segments so far. The grey market in these sectors alone deprive the genuine economy of over 720 billion rupees in sales, and 260 billion in tax losses.