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According to a report released by Federation of Indian Chambers of Commerce & Industry (FICCI) on Thursday, illicit trade of commodities in five important sectors, including the FMCG, mobile phone, cigarette, and alcohol industries has costed the exchequer an estimated 58,521 crore in taxes in 2019–20.

The size of the illicit markets in these sectors is little over 2.60 lakh crore for the 2019–20 fiscal year. The FMCG sector accounts for 75% of illicit trade in the overall value of products in the five core industries, according to the report.

The report titled 'Illicit Markets: A Threat to Our National Interests' by FICCI's Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) stateted, "The estimated tax loss to the government due to illicit goods in these five key industries is 58,521 crore."

The two heavily taxed and regulated sectors of alcoholic drinks and tobacco products account for roughly 49% of the total tax revenue lost to the government as a result of illicit trade in these five crucial sectors.

The FMCG packaged food business lost the most employment (7.94 lakh) as a result of illicit trade, followed by the tobacco industry (3.7 lakh), the FMCG household and personal products industry (2.989 lakh), the alcoholic beverage industry (97,000), and the mobile phone industry (35,000).

The tax loss to the government due to illicit trade in these five sectors stood at 17,074 crore (FMCG packaged foods), 15,262 crore (alcoholic beverages), 13,331 crore (tobacco products), 9,995 crore (FMCG household and personal goods), and 2,859 crore (mobile phones).

The report also noted, "The impact of the illicit market of these key industries on the economy is pervasive and significant because of the backward linkages of these industries with other sectors of the economy resulting in a multiplier effect. Higher the multiplier, higher is its overall effect on the economy."

FMCG (household and personal products, packaged foods) business revenue accounts for about 1.97 lakh crore of the overall illicit trade revenue of 2.60 lakh crore. Alcoholic beverages ($23,466 billion), cigarette goods ($22,930 billion), and mobile phones ($23,466 billion) follow ( 15,884 crore).

The report emphasises that some of the ways forward to combat the threat of illegal markets in India include addressing the demand and supply gap for legal goods, bolstering the domestic manufacturing industry, raising consumer awareness, rationalising tariffs to reduce tax arbitrage, creating a supportive environment for innovation, and improving international coordination and cooperation.

"Overall, cooperation of all stakeholders and concerted efforts of the government, industry, consumers, and international bodies are needed to achieve the challenging and mammoth task of reducing illicit markets," the report stated.

(With inputs from PTI)

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