Why India’s growth strategy needs an economic-security lens

This article is authored by Mohit Bahl, partner and head, Risk and Integrity Advisory, KPMG in India.

India’s growth narrative is built around scale: Faster GDP expansion, rising exports, deeper manufacturing capabilities and rapid digitalisation. Yet, as the country moves towards its Viksit Bharat ambitions, one question deserves far greater policy and boardroom attention: Are the markets, supply chains and institutions supporting this growth secure enough?

GDP (Shutterstock)

The answer will shape not only India’s revenue base, but also the credibility and resilience of its growth model.

Smuggling, counterfeiting and other forms of illicit trade are still viewed largely through the prism of enforcement and tax leakage. That frame is inadequate. Illicit markets distort price signals, erode formal-sector competitiveness, expose consumers to unsafe products and finance organised criminal networks.

A recent KPMG in India and FICCI CASCADE report, Illicit Trade in India: Economic Impact, Enforcement Challenges and the Path Forward, underlines the breadth of the challenge. The costs extend well beyond foregone tax collections or headline-grabbing seizures. They show up in weaker consumer confidence, lower investment certainty, reduced productivity and greater pressure on already stretched enforcement and regulatory institutions.

Crucially, illicit trade no longer sits outside the formal economy. It is increasingly woven into the logistics networks, online marketplaces, payment channels and distribution systems used by legitimate businesses. This convergence makes detection harder and raises the risk that isolated breaches become systemic vulnerabilities.

The pattern is visible across sectors. Counterfeit consumer goods, illicit alcohol, unauthorised agrochemicals, digital piracy and fuel diversion may look unrelated, but they exploit a common set of weaknesses: complex supply chains, limited end-to-end traceability, fragmented oversight, information asymmetry and large tax and price differentials.

Take agriculture for example. Counterfeit or substandard agrochemicals can depress farm productivity, damage farmer incomes and compromise the quality of output entering food supply chains. Fuel diversion and adulteration can undermine energy security, public safety and subsidy delivery. In the digital economy, piracy and intellectual-property theft weaken incentives to innovate and create new channels for organised networks.

Individually, these may be treated as sector-specific offences. Collectively, they weaken market integrity, formalisation and the state’s ability to protect revenues and consumers.

This is why economic security must become part of India’s mainstream growth debate. Just as national security protects strategic assets and institutions, economic security safeguards the systems that sustain prosperity: Legitimate markets, critical supply chains, fair competition and public trust. Without these foundations, high growth can coexist with deep fragility.

Illicit networks adapt rapidly. Even as India has pushed formalisation through GST, e-invoicing, digital payments and stronger compliance architecture, bad actors have shifted tactics. E-commerce and social-media platforms, courier networks, fraudulent documentation, shell entities, fake invoicing and technology-enabled payments are increasingly being used to bypass conventional checks.

Enforcement must, therefore, move from reacting to consignments to identifying networks. The first requirement is visibility. If products, transactions and ownership structures cannot be traced, diversion, counterfeiting and fraud will continue to find space. Better supply-chain transparency can help agencies detect anomalies earlier, follow the money and fix accountability across the ecosystem.

Data analytics, digital authentication, track-and-trace systems and intelligence-led monitoring can materially improve oversight. But technology cannot compensate for institutional silos. A credible response requires three mutually reinforcing shifts: Interoperable traceability and analytics; timely intelligence-sharing between government and industry; and coordinated, risk-based enforcement focused on the networks and financial incentives behind illicit activity.

For corporate India, this is no longer only a compliance or brand-protection issue. Illicit trade is a strategic risk to margins, market share, reputation and consumer trust. Boards should treat supply-chain transparency, product integrity, third-party due diligence and trusted partnerships as core elements of enterprise-risk management.

For policymakers, the task is to embed economic security into the broader growth agenda. That means closer inter-agency coordination, sharper financial investigations, proportionate and predictable regulation, stronger cross-border cooperation and sustained public-private engagement. Protecting market integrity will also strengthen India’s competitiveness as a global manufacturing and investment destination. India’s ambitions are formidable, but growth alone does not guarantee resilience. The next phase must be built not just on expanding markets, but on protecting their integrity.

(The views expressed are personal)

This article is authored by Mohit Bahl, partner and head, Risk and Integrity Advisory, KPMG in India.