Production of low-quality counterfeit goods has the potential to significantly undermine the ‘Make in India’ programme that seeks to establish the country as a global manufacturing hub, a report has said.
The counterfeit market is growing at a rate of 44 per cent per annum and has touched Rs 1.05 lakh crore in size in 2014, according to ‘Sell SMART’ report by industry body FICCI and consultancy firm KPMG.
As a consequence, since 2010, India has been on the US’ `Priority Watch List’ of countries more exposed to IPR (intellectual property rights) violations globally, it said.
Alcohol, consumer packaged goods, personal care products, tobacco, mobile and mobile components, auto parts and computer software and hardware are the sectors that are most prone to counterfeiting, the report said.
It added, of the total bogus goods sold in the country in 2014, FMCG, alcoholic beverages and tobacco accounted for a staggering 65 per cent.
Production of low-quality counterfeit goods has the potential to significantly undermine the goal of ‘Make in India’ programme. Counterfeiting is a challenge to the government and its most direct impact is felt through the loss of tax revenue, the report said.
In 2014, the government lost about Rs 39,200 crore in tax collections to the counterfeit trade, an increase of 50 per cent from Rs 26,100 crore in 2012. Of this, FMCG and alcoholic beverages sectors accounted for a loss of about Rs 27,500 crore, or about 70 per cent, it added.
“Counterfeit goods is a huge issue that needs to be addressed. Counterfeiting is more prevalent in rural and semi- urban areas compared to urban areas,” KPMG Partner Rajat Wahi said.
The report said a company’s direct distribution network has a strong link to copied products as the supply gap created by lack of direct reach acts as a driver for such items.
“In case of FMCG, a retailer who is considered to be small to be economically viable to service, is forced to rely on wholesalers for merchandise purchase. With limited capital, these retailers are easily lured by the promise of low risk, high margin counterfeit goods.”
In India, 80 per cent of consumers buying counterfeit goods purchase them with the belief they are genuine, the report maintained.