INDIA – The current market size of counterfeit products in India is US$7.63 billion (Rs 45,000 crore), and is estimated to rise to more than US$9.32 billion (Rs 55,000 crore) by the end of 2013, according to a recent industry report by Assocham.
Assocham (The Associated Chambers of Commerce and Industry of India) says that New Delhi alone contributes nearly 75% to the production of fake foods. Not only is the Indian capital city a huge market for counterfeit products, it also acts as the main transit point for the sale of such goods.
While the lower costs of such counterfeit goods make for an attractive business proposition, the association noted that many fake goods are actually sold as genuine products at the MRP (maximum retail price) of a regular item.
Some markets where these goods are easily available and sold openly with every appearance of being legitimate businesses are Gaffar Market (popular for counterfeit and smuggled mobile phones and accessories, cosmetic items and commonly used electronic appliances), Sadar Bazar (known for its availability of fake packaged FMCG goods and cosmetics), as well as Khari Baoli, Bhagirath Place, Nehru Place and Kashmere Gate.
The cost of counterfeit products to government and industries
A recent study titled ‘Socio-economic Impact of Counterfeiting, Smuggling and Tax Evasion in Seven Key Industry Sectors’ by Ficci-CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) indicates that the annual tax loss to the Indian government in 2012 is estimated at US$4.44 billion (Rs 26,190 crore).
A further US$16.95 billion (Rs 100,000 crore) is estimated to be lost in annual sales to seven key industries: auto Components, alcohol, computer hardware, FMCG (personal goods), FMCG (packaged goods), mobile phones and tobacco.
The highest loss in terms of revenue is from FMCG (packaged goods) at Rs US$3.45 billion / Rs 20,378 crore (23.4%), FMCG (personal goods) at US$2.55 billion / Rs 15,035 crore (25.9%), auto Components at US$1.56 billion / Rs 9,198 crore (29.6%), mobile phones at US$1.53 billion / Rs 9,042 crore (20.8%) and tobacco at US$1.52 billion / Rs 8,965 crore (15.7%).
The maximum tax loss on account of smuggled and counterfeit products to the government is from the tobacco sector at US$1.06 billion / Rs 6, 240 crore followed by FMCG (packaged food) at US$959.32 million / Rs 5,660 crore and FMCG (personal goods) at US$787.46 million / Rs 4,646 crore.
The maximum loss for FMCG companies works out to 45%, though on an average, it is around 25% of the market share of well-known products.
Ficci-CASCADE chairman Anil Rajput said, "This (counterfeiting) is causing losses to the government due to tax evasion. The sales of industries are badly affected. It is also causing losses to the consumers as they are being cheated into purchasing substandard items."
One of the main reasons why the Indian counterfeit market is booming, suggested Rajput, is due to excessive taxation: "Heavy taxes on products have led to flourishing of the fake goods markets. To avoid paying high taxes, people get trapped into buying cheaper products."
It is difficult to distinguish real from fake products as most counterfeit goods are marketed in packaging that is extremely similar to the real packaging. This has raised awareness of the need for secure packaging and labelling for cosmetics and pharmaceutical products in India.
Last year, New Delhi Police discovered a fake packaging factory in Central Delhi. "Nowadays, the manufactures situated in Outer Delhi and northeast Delhi areas have started using advanced machines,” said a police officer.
"To make it appear original, they also use computerised and digital machines to write prices, manufacturing dates and batch numbers on the packets. You can't make out the differences," he explained.