One Govt., two estimates of trade deficit

By Our Special Correspondent

CHENNAI, JUNE 29. The balance of payments statistics for 2000-01 released by the Reserve Bank of India show that an old problem got worse last year: the RBI's picture of the trade account is far worse than that presented by the Union Commerce Ministry.

As the accompanying Table shows, the trade deficit in 2000-01, according to the RBI, was 2.5 times the estimate of the Commerce Ministry. This difference from the government organisations is not new, though what had narrowed in the early 1990s has widened again in the second half of the 1990s. The gap last year was the largest since 1997-98.

The difference is entirely in imports, for the figures on exports are largely the same from both sources. There was a huge $ 9.4 billion variation between the RBI and the Commerce Ministry in the valuation of imports last year. And while the Commerce Ministry information showed a near stagnancy in imports, the RBI says imports increased by $3.9 billion.

The RBI records information about exports and imports on actual payments basis and is, therefore, a more accurate source of estimates. There are many reasons why such differences surface. One is that while the Commerce Ministry's figures are built up from customs data collected in ports and airports, there are some goods that do not pass through such points of entry/exit. An example is import of offshore oil rigs, payment for which will show only in the RBI statistics.

The second reason is that while the RBI values imports based on that day's exchange rate, the Commerce Ministry's estimates are based on the average exchange rates over a certain period. The third reason and the one most likely for the 2000-01 difference is armament imports. Defence imports never pass through Customs but they have to be paid for.

So the fact that the RBI shows imports were $9.4 billion more than what the Commerce Ministry recorded may well represent the additional defence imports last year - a possible replenishment of arms and armaments post-Kargil and post-explosions in ammunition dumps.

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Section  : Business
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