Indian consumer brands: The counterfeit advantage

Despite the suspension of formal trade between Pakistan and India, Indian consumer brands have not exactly disappeared from local markets. Some continue to enter through informal channels, while counterfeit versions are being produced locally and sold openly in major wholesale centres.

That is the visible problem. The bigger one is the advantage that comes with staying outside the system.

A counterfeit producer does not pay for a trademark, product development, or quality control. A smuggled product can avoid import duties and taxes. Both can sidestep many of the safety, labour and regulatory costs faced by a documented business. That makes it much easier to sell at a lower price while chasing the same customer.

In other words, compliance itself starts becoming a disadvantage.

Wholesale markets such as Karachi’s Jodia Bazaar and Lahore’s Shah Alam Market reportedly carry products with packaging closely resembling established Indian brands across personal care, hair colour, tea, and confectionery. In products applied directly to the skin or hair, the concern goes beyond trademark abuse. Once production moves outside the regulated economy, there is little visibility on what actually goes into the product or how it is made.

And this is not a small corner of the economy. Estimates cited in a recent assessment put forgone tax revenues from five illicit sectors at around Rs751 billion annually. Tobacco and petroleum products account for the largest share, followed by tyres and lubricants, pharmaceuticals, and tea. Pakistan also ranked 101st out of 158 countries on the 2025 Illicit Trade Index (compiled by PRIME Institute and Transnational Alliance to Combat Illicit Trade (TRACIT)), pointing to persistent weaknesses in enforcement, customs controls, and intellectual-property protection.

The economics are not complicated. When taxes and compliance costs keep rising for formal businesses, but enforcement does not improve at the same pace, the price gap between legal and illegal goods widens. For a consumer already squeezed by weak purchasing power, the cheaper option becomes harder to ignore, regardless of whether that discount comes from efficiency or evasion.

This is where illicit trade becomes an industrial policy issue rather than just a policing problem.

Pakistan often discusses high taxation, weak investment, and poor manufacturing competitiveness as separate problems. They are not. A legitimate manufacturer pays corporate taxes, sales tax, duties, and employee-related costs, while also spending on branding, distribution, and product standards. An illegal competitor can skip a good part of that bill.

The state is, in effect, asking one part of the economy to operate under a full cost structure while allowing another to compete without it.

That matters for investment too. For multinational consumer companies, the brand itself is a major asset. If trademarks can be copied easily and illegal sellers can undercut authorised products, the expected return on investing in that market falls. A tax incentive here or there does little to compensate for a market where intellectual property cannot be protected properly.

There has been more enforcement activity in recent years. Customs authorities have stepped up action against intellectual-property violations and intercepted Indian-origin goods routed through third countries. But border action only solves part of the problem. If counterfeit goods can be produced locally and then distributed through well-established wholesale networks, tighter customs checks simply move the problem further down the supply chain.

That is also why occasional raids rarely change much.

The real objective should be to make illegal trade meaningfully more expensive and riskier across the entire chain. That means tracing manufacturers and distributors instead of only seizing stock from retailers, improving coordination between Customs, provincial authorities, and the Intellectual Property Organisation, speeding up prosecution of trademark violations, and placing greater responsibility on online marketplaces that repeatedly host counterfeit sellers.

Technology can help through product serialisation, digital verification, and stronger customs databases. But technology on its own will not fix a problem that is already visible. The missing part is consistent enforcement.

The broader policy point is harder to ignore. Pakistan’s formal sector is repeatedly asked to pay more taxes, invest more and become more competitive. But these firms are not only competing with each other. They are also competing with businesses that avoid many of the costs imposed by the state itself.

That creates a perverse outcome. Every additional tax or compliance cost imposed on the formal product can make the smuggled or counterfeit alternative even more attractive if enforcement remains weak.

Counterfeiting, then, is not just an IP or consumer-protection issue. It is another expression of Pakistan’s much larger formalisation problem. The laws mostly exist. The real gap is that breaking them still does not appear costly enough.