Merchandise trade data in India: Collection, presentation and issues

I thought of summarizing the merchandise trade data collection process in India at one place, in easily  comprehensible manner (ahem! Aim for parsimony), and the effort resulted into this post. I hope it helps to give a brief overview to anyone interested, about the merchandise trade data collection and presentation process in India. 

The merchandise trade data in India, related to 'physical movement' of goods, is collected and disseminated by DGCI&S. The other part, concerning 'money movement', related to merchandise trade, is handled by RBI. The two sets of data do not 'generally' match. The error varies due to various factors, which I will discuss later on. 

Let's start with the DGCI&S part. 

Physical movement of Goods data:

The physical trade part is monitored by Customs department (except SEZs which have their own monitoring systems, assisted by Customs). Transactions are recorded when the goods are 'cleared' by customs. The shipping bills filed during exports, and the bill of entries filed during imports are the reference documents. The values of goods as declared by exporters/importers are checked against the valuation guidelines, and are accepted/modified. The valuation step has undergone multiple improvements over years which qualifies for a post of its own (for some other time). Once the data on shipping bills/bills of entry is accepted,  the data is fed into the system and Customs generates a Daily Trade Report (DTR) for the day for most of the ports covered under EDI (Electronic Data Interchange). Most of our trading ports are already covered by EDI barring few land stations and remote posts. The process of covering all ports under EDI is under progress. SEZs do not come under this EDI system. Those land stations and ports 'not' covered by EDI, send their data in hard copy/ CDs through post, at intervals. The SEZs send their data in CD format to DGCI&S. 

DGCI&S thus has data in three formats. DTR data(daily), CDs(at different intervals, with lag), and hard copies(at different intervals, with lag). Compilation of data and presentation is done by DGCI&S. The data is released in phased manner, based on level of details. 

• First release: Also called press release. Generally released by Ministry of Commerce with a lag of one month. This talks of just the aggregate data on provisional basis. 
• Second release: Called Press Note. This is released shortly after press release, officially by DGCI&S. The data details are again at aggregate level. 
• Third Release: Called Foreign Trade Statistics of India (FTSI): This has a time lag of around 2 to 3 months. In this release, data is divided into principal commodities and countries. So you have some data for analysis. Data is revised at this level due to addition of Non-EDI data. 
• Fourth Release: Called Monthly Statistics of Foreign Trade of India (MSFTI): Lag of 4 to 5 month. This covers further revision of data. Data keeps coming in even after MSFTI, which is termed as 'late receipt data' and is kept on adding to the database. 

DGCI&S keeps on revising the data with minor modifications based on any further information till the end of financial year, to match the monthly figures with the cumulative figures. 

Banking Channel data:

The money part of the trade is captured by RBI through various ADs (Authorized Dealers of Foreign exchange, mainly banks and few dealers authorized by RBI to deal in forex). The mechanism of data collection is through FETERS (Foreign Exchange Transactions Electronic Reporting System). Any transaction, linked to the trade, is logged under a certain code, given for the purpose, as mandated by FETERS system. The compiled data is transmitted to RBI, which summarizes the total data coming from all ADs. 

While it is easy to record the transaction of physical goods movement,  as the physical goods are 'cleared' by customs, it is not so easy for banks/RBI to tap money movement. The payments are realized at multiple stages, depending on whether advance payment are made or not, or when was the document given for negotiation  how many shipping bills were clubbed for payment realization, was there any equity participation in imports and so on. However, FETERS captures most of the data quite accurately and the compiled data is released by RBI at monthly intervals. 

Sources of differences between physical and banking channels:

It is observed that there is a difference between data reported by DGCI&S and RBI for merchandise trade. These differences mainly arise from:

• Differences arising from exchange rate used. Customs uses a common exchange rate given by FEDAI for the month, which is an average value. ADs use the current exchange rate while actually transacting the money. 
• Timing differences of recording the transaction. Customs records the data while 'clearing' goods and ADs records the data during monetary transaction which might (and is generally) different date from the goods clearance. The difference can be up to one year, between physical movement and payment exchange as per current FEMA guidelines. 
• Freights and insurance and agent commissions which go under 'services' head, and are captured by FETERS as separate head, though Customs takes it under CIF (cost, insurance and freight value at imports) for imports. 
• Some minor differences arising from gold/silver imports by passengers, imports paid through accounts maintained abroad, credit transactions etc. 

(All such differences are clubbed under 'leads and lags in exports/imports' and are presented under 'other capital' head in the Balance of Payment account.)

RBI and DGCI&S, along with DG systems of Customs are working to iron out such differences. However, due to the lags in data collection from Non-EDI ports and SEZs (which account for almost one third of merchandise trade), the work involved is challenging. Going forward, in coming years, we might see good quality data, coming with lesser lag, if the move towards digitization goes as planned. 

On a side note, I must confess, the data presented on the DGCI&S website, needs a lot of improvement in terms of presentation. It is one of the least user friendly websites around. On the other hand, there is RBI's website, where one can find mountain of data, in a very user friendly, query-enabled format. Someone should point this out to DGCI&S. I have tried for couple of months now, to shake up someone to look into it, but nothing has changed.