Gunjan Krishna, Industrial Development Commissioner and Secretary, Commerce and Industry, Government of Karnataka, on Tuesday said smuggling and counterfeiting not only fund terrorist organisations but also undermine global security and pose a serious threat to security and economic growth.
“The prevalence of counterfeit goods, including medicines and consumer goods, is putting public health and safety at risk. WHO reports that one in 10 medicines in low- and middle-income countries is substandard,” she said at the ‘Combating Illicit Trade: Insights, Challenges and Solutions’ seminar organised by FICCI. To combat the situation, Karnataka has taken various steps, including supporting 43 GI tagged products and working closely with law enforcement agencies to combat illegal trade, she said.
“Our efforts to preserve traditional crafts and ensure access to authentic, quality products are critical to protecting our economy, health and safety,” Krishna said.
Illegal trade volume
According to a FICCI CASCADE report, “Illicit Markets: A Threat to National Interest”, which examined the impact of illicit trade in five major industries in India – mobile phones, FMCG (household & personal goods), FMCG processed foods, tobacco products and alcoholic beverages – the size of the illicit market in these sectors was Rs 2,600,940 crore in 2019-20, with the FMCG industry (household & personal goods, processed foods) accounting for three-quarters of the total value of illicit goods in these five categories.
“Counterfeiting and smuggling undermine legitimate businesses, government revenues, cultural heritage and artisans’ livelihoods. To combat these illegal activities, it is critical to engage grassroots communities and local leaders and raise awareness about the severe economic, health and social impacts,” said Prabha Rao, executive director of the South Asia Institute for Strategic Studies and research fellow at the Institute for Defense Studies and Analyses.
She said coloured areca nut is being smuggled into India from Sri Lanka, Indonesia, Cambodia and Malaysia and sold at a much cheaper price, adversely affecting areca nut growers in the country.
Bengaluru North CGST Commissioner Kotraswamy M suggested that to effectively tackle the illegal trade and resolve this global menace, the government should form a united front involving solidarity and a human chain of whistleblowers.
Karnataka faces a wide range of smuggling-related problems, but authorities have made great strides in cracking down on various criminal gangs. Authorities have successfully dismantled a number of interstate drug rings, international wildlife trafficking rings, and large-scale smuggling operations through airports, trains, roads, waterways and ports.
Deputy Commissioner of Customs Kayanam Rajesh Rama Rao said his department has been working to crack down on smuggling and illegal trade, resulting in a decline in the number of Chinese-made toys, milk bottles and other items made with carcinogenic materials coming into the country. But manpower shortages remain one of the biggest challenges, he said.
Enforcement itself can be tough in certain areas, so even actionable intelligence can be useless, said Gunjan Arya, IPS, deputy director general for security at the National Intelligence Agency in Bangalore.
“Teak smugglers from Chikkamagaluru are well aware of the interior roads and have proved clever enough to evade police,” he said.
A trader would buy PDS rice from BPL cardholders and resell it to rice mills, who would mill and pack it and resell it at a higher price in the retail market, Aarya further said. “It is difficult to solve such cases and get sufficient evidence as all the parties involved work as a team. Manufacturing of illegal country-made liquor is another example. It is easy to set up this business and hide it in villages and no one talks about it,” he said.
According to Prem Mahadevan, senior researcher at the Global Initiative against Transnational Organized Crime, geography plays a key role in the expansion of illicit trade, especially if a country’s trade routes connect it to China. Weak democracies, autocracies (in Central Asia), internal conflicts and lack of social mobility also fuel the illicit trade.
The top 25 countries for counterfeiting include seven from Latin America, 12 from Asia and six from Africa. Afghanistan, India and Nepal had high cases of illegal trade, while Pakistan had a significant amount of counterfeit medicines. Central Asian countries had high government involvement in illegal trade. Nearshoring is also shortening global supply chains, facilitating counterfeiting. Mahedevan said the recently released 2023 notorious markets list listed New Delhi, Mumbai and Bangalore as notorious markets for the distribution of counterfeit, fake and smuggled goods.
PC Jha, Advisor, FICCI CASCADE and former Chairman, Central Board of Indirect Taxes and Customs (CBIC), was of the view that in recent years, the country has made great strides in developing its formal economy and is steadily moving towards the goal of becoming a developed nation. “However, amidst all this progress, one significant challenge remains largely overlooked – illicit trade. Illegal activities such as counterfeiting and smuggling pose a major threat to the stability and development of our economy.”
It must be emphasised that elimination and abatement of counterfeiting and smuggling are crucial to realising India’s $5 trillion economy, he added.
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