Data 8216;scam8217; in export,FII data

The study found that the official export growth data for the financial year 2010-11 was much higher than the figures reported by the country8217;s top-500 listed companies for the same period in their annual reports.

At the same time,the official data for FII inflows during the same year was also much higher than those reported by the large and listed foreign funds globally.

The Kotak study found that the official data showed export of engineering goods rising by 79 per cent during FY2010-11,while the engineering companies from the BSE-500 companies reported an increase of only 11 per cent in their exports for the same year.

8220;Our observation holds true for the past few years too,8221; it said.

On the FII front,the study found that the official data showed inflow of USD 22 billion in FY 2010-11,but the inflow reported by the listed FIIs and ETFs Exchange Traded Funds and estimates of EPFR Global a global fund flow database account for only USD 4.5 billion.

While these figures do not capture all the sources of FII inflow,such as those from sovereign and private equity funds,8221;nonetheless,the difference is stark,8221; the report said.

Noting that some gap could be due to data limitations,the report said that a better clarity on these figures data was critical to fully appreciate the drivers for exports and implications for forex reserves and 8220;to mitigate risks to the Indian economy from illicit foreign funds,if any8221;.

The report pointed out that the gap between the surge in exports as per official data and a more muted performance of the listed entities would suggest towards either the exports being largely driven by smaller and unlisted entities or the data quality being 8220;suspect8221;.

For FII figures,the report said,a greater level of disclosure was needed to counter potential concerns like influx of black money from foreign accounts of Indians and that of 8220;round-tripped money from Indian companies.8221;

The report went on to say that it was possible that 8220;the miracle of India8217;s engineering exports is being driven by smaller companies and unlisted entities operating outside the purview of public attention that is usually lavished on listed entities8221;.

Otherwise,the data 8220;is simply being overstated8221; and in this case 8220;India8217;s GDP growth may be questionable and more importantly,it will raise questions about the nature of exports and source of related foreign flows into India,8221; it said.

8220;The sustainability of exports and FII flows could be in question if there are no credible explanations for the aforementioned gaps between reported and bottom-up data,8221; Kotak said,while noting that any recasting of numbers could have serious implications for the country8217;s economic growth,inflation,forex reserves and exchange rate.

While exports have been a major driver of GDP growth in the recent years,8221;large illicit funds,if any,may have pushed up inflation and partly countered the RBI8217;s efforts in curbing inflation through an aggressive monetary policy.8221;

8220;We are hopeful that official data and/or some other factors will provide credible explanations to fill in the gaps in our understanding regarding the nature and composition of India8217;s exports and FII inflows,8221; Kotak said.

Raising concerns about possible 8220;over-invoicing of exports as a way to bring in funds from overseas accounts,8221; the report said that a cautious approach was required for drawing definitive conclusions due to limited available data.

8220;We are nevertheless aware of several well-documented reports of large unaccounted funds held by resident Indians in overseas accounts,8221; it said.

Kotak further said that there have been reports about funds being brought back to India through the 8220;official route by simply over-invoicing exports or even resorting to fraudulent exports8221; due to factors like increased scrutiny of bank accounts in Switzerland and elsewhere and a heightened debate in India about action against illicit overseas wealth.