Illicit trade compromising attainment of Sustainable Development Goals worldwide

The multifaceted impact of illicit trade extends far beyond the loss of revenue; as it undermines the law of the land, erodes public trust, threatens public health, and degrades the environment. The shadow economy siphons off vital resources from legitimate businesses and fuels anti-social elements which threatens to derail the entire growth trajectory of countries.

To gain a comprehensive understanding of the far-reaching impact of illicit trade, it is important to view it through the lens of UN Sustainable Development Goals (SDGs). An alarming fact is that every SDG is severely impacted by illicit trade. Let’s delve further into the impact of illicit trade on societal, economic, and environmental goals.

As per the FICCI report, titled 'Illicit Markets: A Threat to Our National Interests' by FICCI's Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), the Central government is estimated to have lost as much as Rs 58,521 crore in taxes in 2019-20 due to illicit trade in goods in key industries- FMCG, mobile phone, tobacco products, and alcohol - with the size of illicit markets in these industries at a little over Rs 2.60 lakh crore for the year 2019-20. Tobacco products and alcoholic beverages- two highly regulated industries - account for nearly 49% of the overall tax loss in these industries.

The illicit cigarette trade is a huge challenge in India. According to Euromonitor’s 2023 report, illicit cigarette volumes in India reached 30.2 billion sticks in 2022, trailing only behind China and Brazil. Unfortunately, this is not just an India problem, but more of a cross-border problem. The loss of taxes to the exchequer results in starving the nation of resources as the money could have been otherwise spent on infrastructure and funding other vital public initiatives.

Zooming in on the alcohol sector, about 40% of the Indian market, almost close to half of the consumption of alcohol in India is illicit. Recently, there was news pertaining to deaths in Tamil Nadu due to consumption of illicit alcohol. What has been noticed is that many individuals are caught unaware as they cannot differentiate between legitimate and illicit products, however, there are others who choose illicit products as they are available at a cheaper price. It is therefore important to raise awareness of the harmful effects of using sub-standard products.

Increasingly, we are witnessing the huge impact of illicit trade on the environment - be it air, water, or soil. There are unsustainable practices right from manufacturing to transportation, to the way the products and waste created are being disposed of. Let’s look at the example of illicit pesticides used within India. A few years ago, there were incidences of counterfeit pesticides being used in Punjab which led to farmers losing their crops and irreversible damage to the soil, resulting in huge economic loss.

Counterfeiting also expands to other crimes such as wildlife. Chennai airport frequently witnesses large quantities of wildlife, especially exotic animals such as snakes, tortoises, or pangolins for their medical value. The authorities are connecting this to organized crime, money laundering, and other such criminal activities.

Illicit trade is a challenge that needs to be addressed on a war footing as it is crucial for maintaining economic stability, public health, and achieving sustainable goals. Necessary to suppressing this threat is the adoption of regulation that supports enforcement of non-compliant products at the origin and fostering transnational co-operation throughout the illicit supply chain.

The article is authored by Suriya Padmanaabhan, Director of Programs, Transnational Alliance to Combat Illicit Trade (TRACIT).