NEW DELHI: Counterfeit and smuggled products account for over one fifth of India's FMCG market according to a study which says sales of fake goods are growing at a faster rate than the overall market.

A report from industry body FICCI and consultancy firm KPMG said that the counterfeit market was increasing at 44% a year, around four times the speed of the FMCG market; it was estimated to be worth some Rs 1.05 lakh crore in 2014.

"Counterfeit goods is a huge issue that needs to be addressed,” said Rajat Wahi, partner at KPMG. He added that the practice was "more prevalent in rural and semi- urban areas compared to urban areas".

A former director-general of Maharashtra police who now runs a consultancy advising firms on this issue concurred. "In a megapolis such as Mumbai, cases of counterfeiting reported are negligible," said D Sivanandan.

"I cannot imagine what the situation is like in small towns and cities, where monitoring levels are lower," he told the Business Standard.

Weak law enforcement and gaps in the supply chain have created opportunities that counterfeiters have been quick to exploit.

And while some consumers are well aware they are buying fakes, doing so in order to cut costs, the great majority – 80% according to the report – believe they are purchasing genuine goods.

FMCG, alcohol and tobacco brands are most at risk, with these three sectors accounting for almost two thirds of the value of fake goods sold.

FMCG companies say they work closely with police and some have also recruited ex-policemen and hired private detectives to help them tackle the problem.

"Counterfeiting is something we take very seriously, since any pass-off or fake of our product is a loss of business for us," said Sunil Duggal, chief executive officer, Dabur India.

Previous studies have highlighted the effect of counterfeiting on the luxury goods sector, as products from China are moved through web shopping portals.

Data sourced from Business Standard, Economic Times, ASSOCHAM; additional content by Warc staff