Concealing Trade Figures May Land Companies in Trouble
Stringent law on anvil for services data; fudged figures may attract jail term, huge penalty
The government is considering framing legislation for a stringent penalty on companies not providing information or giving false data on trade in services.
Unlike in goods, the country does not have a strong database for trade in services. This is perceived by policymakers as hindering the negotiation of trade deals and assessment of the gains or losses incurred after the agreements are effective.
A Collection of Services Trade Statistics Act is being thought of, with a penalty of up to Rs 5 lakh and up to six months of imprisonment for non-compliance or giving false information. The Directorate General of Commercial Intelligence and Statistics (DGCI&S) is likely to be made the nodal agency in this regard. It will be a first-of-its-kind survey-based data collection for services trade.
"We want quality data; therefore, there would likely be stringent penalties. However, we are still in a discussion stage, as we have to take into account concerns raised by the sector," said a government official.
Companies have apprehensions on data confidentiality. "We are convincing them that absolute secrecy will be maintained; just as with merchandise data, these will not be shared with even Parliament," said the official. Once decided, the law's draft will go to the Cabinet for nod before it is introduced in Parliament.
After the Act comes into force, the data on services trade might be released on a quarterly basis, to begin with. In fact, an experiment in this regard was launched in January, jointly by DGCI&S and the Indian Council for Research on International Economic Relations (Icrier), a private institution.
Good-quality data, it is believed, will help identify specific areas of strength in the services sector for India to negotiate on with other countries. The government has so far relied on remittance data collected by the Reserve Bank of India to formulate trade-related policies and negotiate free trade agreements (FTAs).
India has signed trade deals in services with South Korea, Japan and the Association of Southeast Asian Nations. However, there is no reliable way to estimate the benefits. New Delhi is also holding talks on a comprehensive FTA with Canada, Australia and New Zealand, besides negotiating a Regional Comprehensive Economic Partnership.
While the services sector is considered India's strength, with export of $150 billion a year, mainly led by information technology and IT-enabled services, there is no reliable or accurate database to support that. India's services exports have a share of 3.4 per cent of global services trade, while China has 4.6 per cent.
According to the draft legislation under discussion, refusal to provide information could lead to a penalty of Rs 1 lakh, along with jail of three months. With false information, the fine could be Rs 5 lakh, besides a six-month jail term. The government has identified audio visuals, education, logistics, telecom, IT and IT-related businesses, professional services like accountancy, architecture, legal and management consultancy, and tourism, for services data collection.
At present, the country has a Collection of Statistics Act (CSA), which makes individuals and companies liable to punishments for unwillingness to furnish information. It was enacted in 2008, to improve data collection. However, the penalty for not providing information under this is thought too low to be effective - Rs 1,000 for individuals and Rs 5,000 for companies.
"CSA lacks teeth. There have been discussions if CSA could be strengthened, but it will be better to have a separate legislation dedicated to services trade data collection, to better negotiate trade deals and formulate policies," said the official.
The central bank, the only source for services-related data, divides services into six broad sectors. Data for goods are available for 12 sectors and 171 sub-sectors. "Services trade data are needed to do an impact analysis. We cannot do quantitative analysis, as we do not have detailed bilateral trade data. We only have data from RBI which are a good database but only capture a few sectors. The survey data are aimed at substantiating the data collected by RBI and understanding the services trade pattern with different economies," said Arpita Mukherjee, professor, Icrier.
Experts say such a proposed law might only help capture 30 per cent of services trade data, as it would be highly cumbersome to capture the figures related to cross-border movement of professionals.
Unlike in goods, the country does not have a strong database for trade in services. This is perceived by policymakers as hindering the negotiation of trade deals and assessment of the gains or losses incurred after the agreements are effective.
A Collection of Services Trade Statistics Act is being thought of, with a penalty of up to Rs 5 lakh and up to six months of imprisonment for non-compliance or giving false information. The Directorate General of Commercial Intelligence and Statistics (DGCI&S) is likely to be made the nodal agency in this regard. It will be a first-of-its-kind survey-based data collection for services trade.
"We want quality data; therefore, there would likely be stringent penalties. However, we are still in a discussion stage, as we have to take into account concerns raised by the sector," said a government official.
Companies have apprehensions on data confidentiality. "We are convincing them that absolute secrecy will be maintained; just as with merchandise data, these will not be shared with even Parliament," said the official. Once decided, the law's draft will go to the Cabinet for nod before it is introduced in Parliament.
After the Act comes into force, the data on services trade might be released on a quarterly basis, to begin with. In fact, an experiment in this regard was launched in January, jointly by DGCI&S and the Indian Council for Research on International Economic Relations (Icrier), a private institution.
Good-quality data, it is believed, will help identify specific areas of strength in the services sector for India to negotiate on with other countries. The government has so far relied on remittance data collected by the Reserve Bank of India to formulate trade-related policies and negotiate free trade agreements (FTAs).
India has signed trade deals in services with South Korea, Japan and the Association of Southeast Asian Nations. However, there is no reliable way to estimate the benefits. New Delhi is also holding talks on a comprehensive FTA with Canada, Australia and New Zealand, besides negotiating a Regional Comprehensive Economic Partnership.
While the services sector is considered India's strength, with export of $150 billion a year, mainly led by information technology and IT-enabled services, there is no reliable or accurate database to support that. India's services exports have a share of 3.4 per cent of global services trade, while China has 4.6 per cent.
According to the draft legislation under discussion, refusal to provide information could lead to a penalty of Rs 1 lakh, along with jail of three months. With false information, the fine could be Rs 5 lakh, besides a six-month jail term. The government has identified audio visuals, education, logistics, telecom, IT and IT-related businesses, professional services like accountancy, architecture, legal and management consultancy, and tourism, for services data collection.
At present, the country has a Collection of Statistics Act (CSA), which makes individuals and companies liable to punishments for unwillingness to furnish information. It was enacted in 2008, to improve data collection. However, the penalty for not providing information under this is thought too low to be effective - Rs 1,000 for individuals and Rs 5,000 for companies.
"CSA lacks teeth. There have been discussions if CSA could be strengthened, but it will be better to have a separate legislation dedicated to services trade data collection, to better negotiate trade deals and formulate policies," said the official.
The central bank, the only source for services-related data, divides services into six broad sectors. Data for goods are available for 12 sectors and 171 sub-sectors. "Services trade data are needed to do an impact analysis. We cannot do quantitative analysis, as we do not have detailed bilateral trade data. We only have data from RBI which are a good database but only capture a few sectors. The survey data are aimed at substantiating the data collected by RBI and understanding the services trade pattern with different economies," said Arpita Mukherjee, professor, Icrier.
Experts say such a proposed law might only help capture 30 per cent of services trade data, as it would be highly cumbersome to capture the figures related to cross-border movement of professionals.
HOW OTHERS DO IT
Collection of statistics on trade in services by other countries
Country/Laws
United States
- International Investment in Trade in Services Survey Act, 1984
- Omnibus Trade and Competitiveness Act, 1988
- Statistics of Trade Act, 1947
- Statistics Act, 1985
- Statistics Act, 1973
- Australian Bureau of Statistics Act, 1975
- Census and Statistics Act, 1905
- Statistics Act, 1975
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