ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Illegal Transactions in External Trade and Payments in India

Using the partner-country data comparison technique to detect faked invoicing of imports and exports, the author finds that during the period 1961 to 1971 (i) There was a greater tendency to underinvoice imports than to overinvoice them. The extent of underinvoicing during the period under study varied from $ 54 to $ 332 million. High rates of import duty which exceeded the premium on foreign exchange in the illegal exchange market were the primary reason for the emergence of the phenomenon of underinvoicing of imports, (ii) The tendency to underinvoice exports was substantially more than that to overinvoice them. The magnitude of underinvoicing of exports during this period varied between $ 67 and $ 167 million. The author's estimates of the extent of smuggling of goods show an increase from Rs 51 crores in 1961 to Rs 450 crores in 1974. The ratio of goods smuggled to official imports thus rose from 5 per cent to 10 per cent during this period.

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