Counterfeit trade undermines India’s push for global competitiveness

Fakes goods market in India is vast and the economic cost is substantial. The government is working on an intellectual property policy to support its present and prospective international trade.

An Indian street vendor waits for customers as he sells counterfeit watches on a pavement. Manan Vatsyayana / AFP

MUMBAI // On Colaba Causeway, a bustling shopping street in the south of Mumbai, stallkeepers call out to passers-by to try to sell their wares – clothes, watches, books and electronics.

Many of these are counterfeit products that have been made locally or imported from other Asian countries.

On the pavement directly outside an official Puma store, one stall is selling baseball caps branded with Puma’s logo for 300 rupees (Dh16).

“It’s a copy made in China,” the trader selling the caps admits.

The counterfeit goods market in India is vast and the economic cost for the country and businesses is substantial.

Illicit trade in a number of Indian sectors including fast-moving consumer goods, tobacco and mobile phones resulted in a loss of more than 1 trillion rupees in the financial year to March 2014, up 44 per cent from two years earlier, when the loss was about 729 billion rupees, according to the Federation of Indian Chambers of Commerce and Industry (Ficci).

“Counterfeit sales is an emerging market phenomenon,” says Ankur Bisen, senior vice president of the retail and consumer products division at Technopak, an Indian consultancy. “Counterfeit is also an outcome of how stringently the laws are defined and how the state enforces these laws, and in India there is a lack of law enforcement when it comes to counterfeit goods, so this allows the industry to flourish.”

Another aspect that allows the counterfeit market to thrive is the fact that the country is a large sourcing market for global companies, with clothes for many major brands manufactured in India.

“Some of the factories use their spare capacity to make counterfeit products as well,” says Mr Bisen.

He explains that clothes are some of the main counterfeit items that are actually produced in India, while electronics and watches largely come into the country from China.

“It’s a huge tax loss for the government,” says Mr Bisen.

Alwyn Didar Singh, the secretary general of Ficci, says that the problem with fakes is a symptom of the country’s economic growth.

“One of the challenges currently faced is the growing illicit trade in counterfeits, pass-offs and smuggled goods,” says Mr Singh. “These activities are threatening brands not only within the country but across the globe. Contraband and counterfeit products hurt the integrity of the brand, further diluting the brand owner’s reputation. This results in a decline of sales of the legitimate products. The practice might also impact consumers’ health, creating safety hazards.”

But Mr Bisen says that global companies are doing little to intervene in the counterfeit trade in India because “the market size itself is so small at the moment that it’s not worth it for brands to take the issue head on … whereas for some brands counterfeiting may be a big issue in China, which is a big market for certain luxury brands, so that’s where the crackdown is more severe”.

Ajay Gupta, who has been selling counterfeit products in Mumbai for 10 years, including replicas of football shirts of major teams imported from Thailand, says that business is good.

“It depends on people’s budget,” he says. “Not everyone can afford to pay for a real one, so they buy the copies. These are cheap, only 500 rupees.”

One shop on Colaba Causeway is filled with hundreds of fake designer bags, literally stacked up to the ceiling. These brand names include Armani, Michael Kors, Gucci, Salvatore Ferragamo, Calvin Klein and Mulberry. A leather bag embossed with the logo of the designer label Coach is selling for 2,000 rupees in the store, while another bag patterned with Prada’s logo is priced at a negotiable 2,500 rupees. The genuine products that these goods are based upon would cost well over 10 times these prices.

The sales assistant, who spoke on condition of anonymity, explains that most of the bags are imported from South Korea, while many of the leather products are manufactured in Mumbai.

He says that his boss regularly travels to South Korea, and fills two to three shipping containers and brings them into India.

“The bags sell really well,” he says. “Indians, foreigners, they all come to buy.” He points to a pile of 50 bags that have been set aside. “An Indian came today and bought all of these – a trader – and he’s going to take them to South Africa to sell.”

He says that traders often come to buy bags which then make their way into countries including the UAE.

Some counterfeit products on sale have the spelling of their names changed slightly, for example sports clothes are branded with the word Adibas, using the Adidas typeface.

“India’s role as a global economic powerhouse is increasingly linked to its ability to ensure that intellectual property rights (IPR) are protected with strong IPR rules, and strong enforcement of the laws and regulations,” said Ram Vilas Paswan, the union minister of food and public distribution.

He said that a national IPR policy is being worked on. “As India continues to take its place as a major economic power globally, its views on IPR and enforcement domestically will become increasingly important to its international trading partners and to prospective business investors. We have, over the years, initiated several mechanisms to ensure consumer safety and check unfair trade practices.”

A report published this month by Ficci and the Grant Thornton consultancy says that there is a need for a specific e-commerce law to help control a growing problem of counterfeit goods being sold online in India.

“In terms of the tactics, e-commerce is the newest channel adopted by counterfeiters to effectively reach a wider audience,” says Vidya Rajarao, a partner and the national leader at Grant Thornton India. “With online marketplaces witnessing a phenomenal growth in India, the space has also become an easy prey to fake goods.”

As India strives to become a global manufacturing hub under its Make in India campaign, it will need to ensure authentic products for its success.

“With respect to India, building global competitiveness through the Make in India campaign is imperative, and so combating the issue of counterfeit in this regard is critical,” says Ms Rajarao.

Askmebazaar.com, one of India’s major online marketplaces, is actively trying to crack down on the problem and last year launched a campaign that involved a series of short films on YouTube to raise awareness about counterfeit products and deliver a message that the company was committed to selling genuine items.

“The volume is such that it creates a viable parallel economy across counterfeit brands and goods because of the weaker intellectual property regime,” says Manav Sethi, the group chief marketing officer and head of digital strategy at Askme.

He explains that about 90 per cent of India’s retail market is still unorganised, and branded stores still make up a very small portion of the market. This means that many Indians, including in rural areas, cannot get access to stores selling Nike trainers, or they do not have the spending power to buy them, so they turn to counterfeit products that are available.

“I think the government is very aware of our weak IP regime, and we understand that the government is working on a framework, which is very encouraging,” says Mr Sethi.

Some traders, however, see nothing wrong with their activities.

“Some people can’t afford to buy the real ones, so I’m solving a problem,” says Mr Gupta.

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