Plan ready to compile inter-state trade data

NEW DELHI: The government is ready with a roadmap to capture interstate trade data, considered as essential for the proposed Goods and Service Tax regime.

Tracking of trade flows between states has never been attempted before in the country. Economists say such data could improve the credibility of statelevel GDP numbers and help in better planning for infrastructure projects on the basis of goods movement trends.

The commerce ministry will soon submit a report on creating such a interstate database to the Fourteenth Finance Commission, stating that domestic trade figures could be released on an annual basis to start with.

The Thirteenth Finance Commission had stressed on the need to compile inter-state trade data, especially in the context of the proposed goods and services tax regime which requires such transactions to be 'zero rated.'

The Directorate General of Commercial Intelligence and Statistics (DGCIS), which compiles India’s foreign trade data, and the Central Statistics Office have submitted recommendations for creating an inter-state trade database, after conducting a pilot project to track trade flows between four states—Tamil Nadu, Kerala, West Bengal and Sikkim.

“We presently compile data on interstate trade through railways, river, air and sea,” said Dipankar Sinha, director general at DGCIS. “Statistics of interstate movement of goods by road is not collected by any agency and has never been done before.”

Such data can lead to significantly better policy planning and recommendations have been shared with the commerce ministry, he added. About 60% of the total freight movement in the country takes place by road and this share is likely to increase as India’s road networks are developed further.

“Today, we can’t ascertain states’ gross domestic product at market prices, for which inter-state trade data is the missing component. This often renders state-level fiscal policies ineffective as they are based on wrong numbers,” said NR Bhanumurthy, professor at the National Institute of Public Finance and Policy.

Although commercial tax departments have production data, they don’t know the destination of the goods. Moreover, checkpoints at state borders don’t rigorously inspect the transported goods’ quantity or value.

The DGCIS has noted that states’ descriptions of goods varied widely and were vague or incomplete.

The pilot study, conducted after extensive consultations with states, has thrown up the need to bring states onto common reporting codes for commodities and get state commissionerates of commercial taxes to share primary trade data with the DGCIS.

“We expect the total number of records across the states combined to run into crores during a year,” Sinha said. “But 90% of the time taken for compiling the pilot data, was spent on codification of the commodities.” Processing such goods trade would be “extremely difficult” till states agree on using common descriptions and codes, he added.

According to a CSO official, while most states do not follow any codification system, a few utilise some arbitrary coding system based on local requirements.