Nepal-India Trade

Mismatch in trade figures indicates huge informal trade

Published On: April 13, 2017 02:38 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, April 12: There is a huge mismatch between Nepal's total imports from India and the southern neighbor's exports to Nepal, indicating that a large volume of cross-border trade is done through informal channel. 

A recent Nepal Rastra Bank (NRB) study found a difference of around 35 percent in total import figure of Nepal and the export figure of India over the past five years. However, the mismatch of Nepal's export to India and the southern neighbor's import from Nepal is only around 4 percent, according to the report titled 'A Trend of Import Payment'.

An official of the central bank told Republica that they tallied the data of the last five fiscal years provided by the Indian government with the data of Department of Customs to find out the discrepancy in the trade figures between the two countries until Fiscal Year 2015/16. The huge mismatch in the trade figures between the two countries has taken the central bank officials back. They say that huge volume of imported commodities or goods were being under-invoiced. 
“This tally of trade figures between the two countries indicates that there is a problem of invoicing or flaws in reporting,” Nara Bahadur Thapa, an executive director at the NRB, said. “If this study report is something to go by, we can say that there is also a huge volume of informal trade between the two countries,” Thapa, who also heads the Research Department of the NRB, told Republica. 

Informal trade generally refers to trading of goods and commodities carried out illegally. Transportation of goods and commodities without paying tax and revenues, trading of goods deemed illegal by the laws, under invoicing and evasion of taxes is included in the definition of informal trade, according to the study report. The study report has pointed out porous border between the two countries, time-consuming customs process, and price variation (in Nepali market) as some of the possible reasons perpetuating the informal trade. 

The study has also analyzed the payment trend of the import which indicates that huge volume of goods and commodities is flowing into the country through informal channel. Only 28.7 percent of the import bill was paid by opening Letter of Credit (LC), while 28.7 percent of payment was made through other channels like draft/TT, cash payment, documents against payments (DAP) and Documents against Acceptance (DAA), among others. This, however, excludes the payment made to foot import bill of petroleum products.

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