BackDuty dodgers under lens with China trade data gap at $18bn
The gap in the figures widened to $18 billion for 2022 from $12 billion in the first nine months of the calendar year— an addition of $6 billion in the last three months of the year
PremiumNEW DELHI : The gap between Chinese and official Indian figures on the state of their bilateral trade has ballooned yet again, even as New Delhi works to stamp out the problem of Indian importers deliberately under-invoicing shipments in order to avoid paying duty.
The department of commerce told Mint on Thursday that between January and November 2022, a total of 896 cases of undervaluation were detected by the department of revenue intelligence (DRI) and customs formations and that an “investigation and recovery process is underway."
The gap in the figures widened to $18 billion for 2022 from $12 billion in the first nine months of the calendar year— an addition of $6 billion in the last three months of the year. While the gap in exports claimed by China and imports recorded by India widened from $10 billion in January-September to $16 billion in January-December, the difference in the case of exports claimed by India and imports recorded by China has remained constant at $2 billion during this period. The department of commerce attributed the gap to a slew of factors, including under-invoicing. “There could be several reasons of difference in trade data of two countries e.g. under-invoicing by Indian importers, over-invoicing by Chinese exporters, high sea sales, use of different terms of trade by two countries, fluctuation in exchange rates, difference in time period in recording transactions, etc." it said.
“DRI (department of revenue intelligence) and Custom field formations maintain constant vigil and take preventive measures like issuance of suitable alerts/modus operandi circulars etc and take appropriate action as per law when such cases are detected."
It added that the difference between the statistics published by China and India has always been there—even prior to the covid-19 pandemic when the deviation in trade data of the two countries was approximately 19%.
“Interestingly, this difference (in official trade figures reported by the two countries) has increased from $5.2 billion in 2018," Biswajit Dhar, professor, Jawaharlal Nehru University said earlier.
Beijing has claimed that the trade deficit with New Delhi exceeded a record $100 billion in 2022, whereas India’s official data show the trade gap at $87 billion during this period.
Experts said that Chinese goods also come via Nepal and South-east Asian countries and the gap could be much larger. Queries emailed to the ministry of finance, central board of indirect taxes and customs, and the embassy of China on Wednesday remained unanswered till press time.
“One issue is that there is always a difference in data reporting. Reporting of India’s exports to China and China’s imports from India will be different. In trade parlance, it’s called the mirror data issue. Second, there of course is under-invoicing. So, wherever the bilateral political economy is a little difficult and in general too, under-invoicing is a way to avoid payment of full duty," Nikita Singla, associate director, Bureau of Research on Industry and Economic Fundamentals said.
Singla explained that additional checks at ports are in place for goods coming in from Pakistan or North Korea but the same is difficult for China because the volumes are so large. The solution, she said, is digitization.
“The extent of under-invoicing is massive. DRI and customs have unearthed thousands of crores worth of under-invoicing. Goods worth ₹200 crore from China are shown as ₹4 crore by some local manufacturers. So, you can imagine the loss to the Indian exchequer and the extent of black money coming into the economy," an industry representative said on condition of anonymity.
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