6.1                         Introduction

6.1.1                      In India, Trade Statistics are obtained as a by-product of administrative activity. In the case of External Trade, there are three stages of administrative activity namely, licensing, actual shipment and arrival of goods, and the receipt and remittance of payments. The Director General of Foreign Trade (DGFT) is responsible for licensing statistics; the Director General of Commercial Intelligence and Statistics (DGCI&S) for the balance of trade statistics and the Reserve Bank of India (RBI) for the balance of payment statistics. The merchandise trade statistics disseminated by the DGCI&S captures the movement of goods across the customs frontier of the country and are based on the Daily Trade Return (DTR) generated at the various custom houses. On the other hand, the External Trade data in the standard format of balance of payments (BoP) statistics is prepared by the RBI and has been dealt with in the chapter on Financial and External Sector Statistics. The present chapter discusses issues relating to improvement in the existing system of DGCI&S External and Internal Trade, generation of data on exports by State of Origin, index numbers of foreign trade and harmonisation of codes used by various organisations dealing with product-level data. 

6.2                    Improvements in the Existing System of Trade Data

Current Status

6.2.1                      The main sources for India’s Foreign Trade Statistics are Shipping Bills and Bills of Entry – declarations made and submitted by exporters and importers, respectively to the authorities of customs at the ports. These bills are statutory documents, which contain the customs’ permission to ship or land the goods, as the case may be. These Shipping Bills and Bills of Entries for each item of export and import contain relevant details of the transactions such as Code Number of the Commodity according to Indian Trade Classification based on Harmonised Commodity Description and Coding System {ITC(HS)}, description of the commodity, license particulars of the goods in the case of imports, value of exports or imports, quantity (gross and net), amount of duty, name of exporter or importer, country of destination or consignment, Importer and Exporter Code (IEC), etc. These particulars are transcribed into a return – called Daily Trade Return (DTR) by the Statistical Division of the concerned customs authorities and are subsequently forwarded to the Directorate General of Commercial Intelligence and Statistics (DGCI&S), which is the nodal agency for collection, compilation, publication and dissemination of Foreign Trade Statistics of India. The duplicate copy of the Shipping Bill, which is adjusted for any short or shut out shipment, is used for preparing the DTRs for recording of exports. The Foreign Trade Statistics cover only commercial transactions of the merchandise trade. Items on Defence Goods are not covered in Foreign Trade Statistics as a matter of principle, set earlier. This apart, non-commercial transactions such as, personal baggage and effects, exhibition goods, samples, etc. are not covered in Foreign Trade Statistics. The direct transit trade, i.e. goods of other countries passing and transit goods warehoused not for the purpose of disposal, are excluded completely. Although the exports and imports of crude oil and petroleum products are included in the Foreign Trade Statistics, the detailed commodity-wise or country-wise break-ups are not published by the DGCI&S due to non-availability of detailed information.

6.2.2                      The DGCI&S receives trade data from about 40-50 major ports and some small ports in three different modes namely, Electronic Data Interchange (EDI), Non-EDI and manual. The data transcribed manually from Shipping Bills and Bills of Entry into DTR formats has about a 15 per cent share in the total merchandise trade, the remaining 85 per cent share being accounted for by EDI and non-EDI modes. In the EDI mode, customs clearance of Shipping Bills and Bills of Entry are given through the computer itself and the relevant information as required in the DTRs is furnished to DGCI&S. The major ports are covered by the EDI system. The non-EDI mode relates to manual clearance of Shipping Bills and Bills of Entry but the DTRs are prepared through the help of the computer and the data are transmitted to the DGCI&S in floppies.

6.2.3                      Before validating the data contained in the DTRs, the DGCI&S prepares the aggregated data of Exports and Imports within about 25 days from the close of the month in the form of a Draft Press Note. As per the existing system, the Draft Press Note is sent to the Ministry of Commerce for approval before its release. Quick Estimates of Exports and Imports by Principal Commodities are prepared at the same time with a view to make a broad assessment of the performance of India’s Foreign Trade and to study the impact of various trade policies, enabling the Government to initiate suitable corrective measures, if necessary, in attaining the desired objective in the sphere of External Trade. A monthly brochure entitled, Foreign Trade Statistics of India (Principal Commodities and Countries) is then brought out in about two months time from the reference month. At the final stage, detailed data of India’s Foreign Trade are released in two publications, namely, Monthly Statistics of Foreign Trade of India (MSFTI) containing Commodity by country details and Statistics of Foreign Trade of India by Countries (SFTIC) containing country by commodity details. The former is a monthly publication while the latter is a quarterly one though the two publications are based on the same data set with varying presentation. The data reported in these publications are according to 8-digit ITC (HS) and is available with a time lag of about 3 to 4 months from the reference month.  The status of the various publications brought out by the Office of DGCI&S on Foreign Trade is given in Annexe 6.1.


6.2.4                      In the recent past, a substantial amount of exports and imports has been taking place through satellite communications comprising software, technical know-how, etc. This mode of transaction is commonly known as e-commerce and takes place mostly in the digital mode. This poses a problem in capturing such transactions in the existing traditional system of DGCI&S.

6.2.5                      The 8-digit ITC(HS) Codes filled up in the Shipping Bills and Bills of Entry forms the basic input for generation of export and import data at the disaggregated level. It has been experienced that the exporters or importers or their agents do not report these Codes properly. To improve the situation, the Directorate General of Foreign Trade (DGFT) has issued a notification on 11 September, 2000 making it mandatory to mention 8-digit ITC(HS) Codes prepared by the DGCI&S against each export product that  figures in the Shipping Bill. It has been mentioned in the notification that no benefit under the policy will be disbursed to the exporters unless the Code appears on the Shipping Bill and this measure has been made effective from 1 October, 2000. The DGCI&S has reported that after the issue of the above notification, though the exporters are reporting valid codes in the Shipping Bills, but it has been noticed that the problem of mismatching, i.e. codes vis-à-vis the description of the items, still persists. As regards imports, no such notification has been issued.

6.2.6                      Problems like late receipt of DTRs from the customs’ ports, illegibility of manually-prepared DTRs and invalid or valid but incorrect item codes often result in delay in the processing of Foreign Trade data.

6.2.7                      The DGCI&S has reported that the possibility of some of the transactions not being reported for the purpose of compilation of Foreign Trade Statistics cannot be totally ruled out. To what extent the existing data-capture-mechanism can check this situation needs examination.

6.2.8                      Both the detailed publications namely, MSFTI and SFTIC are voluminous and hard copies are difficult to deal with particularly the issues relating to the end of the financial year. Further, at present, the DGCI&S does not have a website for dissemination of the data compiled by them. 

Conclusions and Recommendations

6.2.9                      After reviewing the existing mechanism for compilation of Foreign Trade Statistics, the Commission recommends that:

(i)                  Measures such as making available the entire code list on the website; introducing the standard query system for assigning an appropriate code for each item and feedback system from the exporters for amendment and widening the coding structure, etc. should be taken to assist the exporters in reporting the proper Codes as envisaged in the DGFT notification. A similar notification for imports should also be issued.

(ii)                The possibility of releasing commodity-wise and country-wise details of imports and exports of crude oil and petroleum products should be explored. 

(iii)               An effective mechanism between the customs houses and DGCI&S to ensure complete coverage of all transactions in the compilation of Foreign Trade Statistics should be evolved.

(iv)              All the Customs Houses and Ports including DGCI&S should be brought under the EDI system in a phased manner to eliminate the errors in data transfer and minimise the time-lag in the processing and release of data. Priority to bring the remaining customs houses under EDI scheme should be given to those ports where the volume of trade transaction is significant.

(v)                DGCI&S should take steps to bring out the publications, Monthly Statistics of Foreign Trade of India and Statistics of Foreign Trade of India by Countries within a period of about one month from the release of aggregate foreign trade data through the press note. In such a situation, the monthly Brochure entitled, Foreign Trade Statistics of India (Principal Commodities and Countries) can be dispensed with.  

(vi)              DGCI&S should make available on website the key results of Foreign Trade Statistics released through its various publications.

6.3                         Inter-State movement/flows of goods

6.3.1                      The inter-state trade between the various States of India is commonly known as Inland Trade, which involves movement of goods by five modes namely, (a) sea, (b) air, (c) rail, (d) river, and (e) road. Information on entry of goods, which add to the stock of material resources, and exit thereof, which depletes the stock of the State, forms the basis of Inland Trade Statistics. The entry and exit of goods from a State are commonly known as inward and outward movements. But the movements of goods within the boundaries of any State do not come under the purview of inland trade. Inter-State Trade Statistics provides an idea about the demand of commodities produced in a State along with flow thereof to other States. There has been a substantial growth in the Inter-State Trade but the system of data collection in this field has not developed to get the comprehensive coverage.

Sea-borne Trade

6.3.2                      Sea-borne Inland Trade data is published by the DGCI&S in the publication entitled, Statistics of Inland & Coasting Trade Consignment of India (see Annexe 6.2). This is an annual publication and the issue for 1998-99 has been released in August 2000. The basic documents for compilation of these statistics are received from customs authorities in the form of Coastal Daily Trade Returns. Compilation of Sea-Borne Inland Trade, which is also commonly known as Coasting Trade, is done by recording the inward and outward movements of all goods classified into around 500 items between 12 maritime blocks. These maritime blocks correspond to an equal number of maritime States or Union Territories of India, which are as follows:

6.3.3                      In the publication both inward and outward movements of goods are shown separately for each maritime block besides a separate presentation for internal movements among the ports within a block. In the case of maritime blocks, a further sub-division into two or more trade blocks have also been made to identify the importance of the chief ports, the minor ports and the remaining ports of the State or Union Territory.

Air-borne Trade

6.3.4                      Air-borne Trade data is published by the DGCI&S in its annual publication, Inter-State Movements/Flows of Goods by Rail, River and Air which shows gross weight of cargo moved by air from airport to airport within the country (see Annexe 6.2). Besides this, the State-wise total movements of air cargo are also indicated. Only the quantities expressed in gross weight (kgs.) as figuring in the invoices submitted to the Indian Airlines are compiled in respect of the cargo moved. No information is furnished on the values of air cargo moved since the value figures do not find place in the invoice. Compilation of Air-borne Trade is done on an outward consignment basis, i.e. the consignment from a block airport as reported by the reporting agency along with the destination. The source of air cargo data is the Indian Airlines who collects the airway bills from the consignor or consignee and compiles airport-wise cargo movements and supplies data to the DGCI&S in the standard format on financial-year basis for publication. Commodity-wise details of the cargo moved are not furnished by the Indian Airlines to the DGCI&S. Further, the information on cargo moved by private airlines are also not made available to the DGCI&S. Amongst all the modes of transport, air transport has the advantage of taking the least time for carriage and handling high valued and perishable goods. The disadvantages are comparatively high transportation cost and unsuitability for transportation of bulk commodities. The carriage of goods in Inter-state Trade by air vis-à-vis other modes of transport is primarily governed by factors such as unit value of commodities, need or adherence to delivery schedule, perishability of the commodity, location of destination with respect to the point of origin, etc.

River-borne Trade

6.3.5                      River-borne Trade data is published annually by the DGCI&S in its publication, Inter-State Movements/Flows of Goods by Rail, River and Air (see Annexe 6.2). But since the share of River-borne Trade in the total trade is very insignificant the same is not shown separately but clubbed with Rail-borne Trade data.

6.3.6                      The statistics of River-borne Trade cover the river-borne consignments between the trade blocks of Eastern India consisting of Assam, Bihar and West Bengal carried by Central Inland Water Transport Corporation of India (CIWTCI) Ltd., Kolkata. The basic documents for the statistics are the invoices relating to consignments of the selected commodities dispatched from each steamer station to trade block other than the one in which it is situated. Each steamer company consolidates the figures in respect of the steamer stations with which it is concerned and submits returns to the CIWTCI Ltd. and, in turn, the CIWTC Ltd. sends the consolidated statements to the DGCI&S at the end of each month.

Rail-borne Trade

6.3.7                      Rail-borne Trade is published by the DGCI&S in its annual publication, Inter-State Movements/Flows of Goods by Rail, River and Air (see Annexe 6.2).

6.3.8                      In case of Rail-borne Trade also, only quantity figures are available from railway authorities, as railway invoices do not contain the provision for showing the value figures of the goods to be transported. This is primarily because the freight of the goods to be transported by rail is directly related to the quantum of goods to be carried and not on the value of the goods.

6.3.9                      For convenience of presentation of Inland Trade Statistics by rail, India has been divided into 38-trade blocks. Each block or a select group thereof normally corresponds to a State of the Union of India. Thus, all railway stations in a particular State are included in the same trade block even if some of them may belong to different administrative zones according to the railway authorities. In the presentation of Inland Trade data in respect of commodities only important ones are given a separate identity and the rest are classified into several homogeneous groups. The DGCI&S is receiving data on inter-State movement for about 1000 commodities, which are for convenience of presentation, classified into 78 commodity groups.  Besides State-wise total movements, inter block movement for each commodity or commodity group in a matrix form is also published. This matrix gives an idea about the inter-State movement of each commodity or commodity group within India. As per the existing arrangement, the basic information is entered by the zonal railways and a hard copy of the information is provided to DGCI&S on a quarterly basis. For this purpose an amount of about Rs.57 lakhs is paid at present by the DGCI&S to the Railway Board as the annual service charges. The DGCI&S, however, compiles manually the required format for presentation of these data from the computer printouts furnished by the railway authorities. 

Road-borne Trade

6.3.10                  Railways and road transport dominate the multi-mode transportation system in the country. These two modes together account for a significant portion of the passenger and freight movement. The share of the remaining modes, namely, inland water transport, shipping, air transport, pipelines, ropeways, etc. is insignificant. Several studies conducted so far show that the share of passenger and freight between road transport and rail transport has changed, in fact reversed, in favour of the former over the period since India attained independence. Thus indicating the emergence of road transport as the prime mode of transport and the trend in favour of the road is rising unabatedly. While the railways, air transport, shipping, etc. due to their centralised ownership and administrative set-up have a statistical system for data generation, the goods carried by road transport are characterised by a poor database.  This is, because the goods road transport is mainly in the private sector, dominated by lakhs of micro-truck operators. These operators mostly do not maintain road transport operational statistics partly due to limited resources, a poor understanding of the provisions of the Motor Vehicles Act, income-tax phobia, etc. and also do not like to part with whatever information they have.

Road Transport Statistics

6.3.11                  Data on road transport can be classified into three main categories namely:

(a)                General Motor Statistics;

(b)                Passenger Transport Statistics; and

(c)                Goods Transport Statistics.

6.3.12                  The General Road Transport Statistics published by the Ministry of Surface Transport, Government of India, flow from the administration of the Motor Vehicles Act, 1994 (MVA) and the State Motor Tax on Passengers and Goods Acts. These statistics are compiled from the returns submitted by the Transport Commissioners to Directors of Transport in the States/Union Territories who, in turn, send these data to the Ministry of Transport. These statistics include:

(a)                Total number of registered motor vehicles (taxed and tax-exempted), number of buses owned by private and public-sector, Government revenue from road transport (taxes and fees), newly-registered motor vehicles – year-wise;

(b)                State-wise motor vehicle taxation rates for personalised vehicles, taxis, auto rickshaws, motor vehicle taxes on goods transport and passenger transport, accident statistics based on reports of police authorities;

(c)                State Governments publish in their Statistical Abstracts – Road transport-related statistics of the number of motor vehicles of different classes and categories, motor driving licenses issued district-wise, working of the State road transport corporation, motor vehicle accidents, etc.

6.3.13                  The operational statistics like the output of services, material consumption, employment, cost of operations, earnings, etc. are at present collected from public sector transport undertakings for passenger services only.  In the case of goods transport by road, no statistics are available except for data from the few public sector undertakings in respect of their negligible small fleet. No data on goods transport by road is published, either by the Central Ministry of Surface Transport or State Transport Directorates.  In order to fill up the data gaps for the non-agricultural sector including transport activities, the Central Statistical Organisation launched a scheme known as ‘Economic Census and Surveys’ in the year 1977. So far, four Economic Censuses have been carried out, the last one conducted during 1998. As regards, the Follow-up Enterprise Survey on transport sector, six surveys have been carried out, the last conducted during July 1999- June 2000 (55th Round of NSSO). All these Follow-up Enterprise Surveys provide only basic information on the location, employment, fixed assets, working capital and receipts and expenditure details of the enterprises. These surveys do not normally provide information on total number of vehicles, quantity and value of goods carried.


6.3.14                  One of the principal shortcomings in respect of availability of inter-State goods transport data is on account of incomplete coverage of modes of transport.  Apart from deficiency in coverage, another area, which needs attention, is that available data from the different modes is not comparable. Uniformity in the system of classification of commodities for presentation of Inland Trade Statistics is not followed at present. As a matter of fact, the classification followed for recording Rail and River-borne Trade is different from that followed for recording Sea-borne and Air-borne Trade. Further, the classification followed for compiling Foreign Trade data is different from Rail, River, Sea or Air-borne Trade. As such comparison of these data with External Trade is practically not possible.

6.3.15                  A complete picture on the Inter-State Trade will not be available unless data on movements of all the commodities and commodity groups by all modes of transport are available. It is not possible, at present, to get such comprehensive information because of the inherent difficulties in the data collection mechanism. Presently, some important characteristics like value figures of goods carried by rail, river or air are not reported in the source documents. Further, the basic units of area like trade block, maritime block, etc. for which data are captured or presented and also the unit of quantity of goods moved by the various modes of transport are not the same.

6.3.16                  At present, the available information on rail-borne trade statistics, covers only 78 major commodities and commodity groups involving around 1000 items. Thus there is a need to enlarge the coverage of commodities.  The data from the railways are received quarterly and there is a time lag of about two months in furnishing such data to the DGCI&S. The basic information is entered into the computer media by the railway offices and the data are made available to DGCI&S in the form of computer printouts by nine zonal railway offices. These data are consolidated and tabulated manually for publishing in DGCI&S’s annual publication Inter-State Movements/Flows of Goods by Rail, River and Air.  As River-borne Trade Statistics are available only in respect of three States namely, Assam, Bihar and West Bengal, this necessitates the enhancement of the geographical coverage.  Further, both for Rail and River-borne Statistics, only quantity figures are available. No separate data for river-borne cargo is available. The information on cargo in gross weight moving by air from airport to airport and also from State to State within the country is available. However, the available information relates to the total movement of air cargo and does not give commodity-wise detail. Further, the goods moved by the private airlines are not being considered at present. The available information on movement of goods by road is also grossly inadequate.

Conclusions and Recommendations

6.3.17                  In order to maintain comparability among the different modes of transport, there is a need for a common classification of commodities for presenting data on Inter-state Trade, which may also entail its comparison with that of Foreign Trade.

6.3.18                  In case of Road-borne Trade no statistics are compiled on a regular basis either by DGCI&S or by any other organisation. Since the bulk of the Internal Trade is presently carried out by road, it is necessary to develop some innovative system for estimation of the volume of Road-borne Trade by utilising the existing provisions of the Motor Vehicles Act. Maintenance of the logbook by the truck operators and submission of the same by them to their respective RTOs could be one of the methods. Since complete enumeration would be very expensive and time consuming, the feasibility of conducting properly-designed sample surveys to get reliable estimates on Inter State Trade by road at the State level should be explored. The system of collection of copies of invoices at check-posts of the State borders by the revenue or transport authorities may also be considered as a means to gauge the volume of Inter-State Trade by road.

6.3.19                  Taking note of the inadequacies in the system, the Commission recommends that:

(i)                  DGCI&S should devise a standard format for collection and presentation of data on Inter-State Trade for all modes of transport. This method of presentation should also enable its comparison with Foreign Trade data. The possibility of using National Product Commodity Codes developed by CBEC and others should be explored.

(ii)                DGCI&S should be given the responsibility for coordinating and monitoring of data collection from the various agencies associated with different modes of transport.

(iii)               Forms used by the different agencies in recording the basic information for the various modes of transport should be standardised.

(iv)              The DGCI&S should take data from the zonal railways through electronic media instead of computer printouts in a standard format for the purposes of computer processing and inclusion in their publications.

(v)                A specially-designed Enterprise Survey should be conducted for collection of data on movement of goods by road transport. The feasibility of conducting sample surveys by the revenue or transport authorities to assess the volume of Inter-State Trade by road through copies of invoices collected at check-posts of the State borders should also be examined.   

(vi)              Feasibility of collecting relevant data by introducing logbook system should be explored.

(vii)             The River-borne Trade data should be shown separately and should not be clubbed with Rail-borne Trade as is presently being done. 

(viii)           The commodity-wise details of air-cargo movement should be collected and presented as in case of other modes of transport. The movement of cargo by private airlines should also be covered.

6.4                         Generation of Data on Exports by State of Origin

6.4.1                      The issue of exports by State of Origin has received attention from time to time and at present greater significance has been attached to it especially in the light of WTO data requirements. Till today, no official statistics of the country’s exports according to the State of Origin are available and this is a major gap in the DGCI&S data on Foreign Trade. The transition to a liberalised World Trade and in order to derive benefits from the expanding overseas market, the Centre and States need greater mutual cooperation with each other in the national endeavour for improving the export performance of the country. The need for greater encouragement to the States based on their shares in the total export performance has been long felt. In order to develop a suitable mechanism for assisting the States in proportion to their contribution to the national exports, the generation of data on exports by State of Origin is of great significance.

6.4.2                      For capturing the data on exports by State of Origin, one additional field of information indicating the State of Origin is needed in the DTRs. So far, this information is available only in case of EDI-based computerised DTRs. The basis of this information is the declarations of the exporters. Though this information on the State of Origin can be made available by the exporter, such information needs to be checked as it could be mixed up with the place where the goods were procured but not produced. This information is to be particularly checked for non-manufacturer exporter. The manufacturer exporter will, however, be in a position to furnish this information with a fair degree of accuracy. Thus if the information is collected from both manufacturer and non-manufacturer exporter without making a proper distinction between these two, the information so collected might mix up the place of procurement with the production of goods. There is a need to, (a) analyse the information filled by the exporters in the computerised DTRs, and (b) conduct pilot surveys to assess whether the exporters are aware of the State of Origin of the goods or can give information only on the State of Procurement.


6.4.3                      The Commission recommends that:

(i)                  Pilot surveys based on the addresses of exporters as available in EDI and non-EDI data should be conducted to know whether exporters are aware of the actual origin of the goods or can give information only on the place or State of Procurement.

(ii)                If found feasible, appropriate modification in the Shipping Bills should be made to collect the information relating to place of procurement and State of Origin.  

6.5                         Index Numbers of Foreign Trade of India

6.5.1                      The indices of Unit Value and Quantum of Foreign Trade of India as well as the ‘terms of trade’ are compiled on a regular basis by DGCI&S.  The three indices namely, gross, net and income terms of trade are derived from the Unit Value and Quantum of Foreign Trade indices[1]. At present, DGCI&S is releasing the indices with base 1978-79. On account of the changes effected in the Indian Trade Classification since April, 1987, the old commodity baskets have been recast to suit the new Classification System for compilation of the index number series besides maintaining a temporal comparability.

6.5.2                      A Technical Committee was set up in January 1992 for the purpose of formulation and construction of Global and Bilateral Foreign Trade indices with commodity break downs for India. The final report of the committee was submitted to the Government in January 1993. In the Report a new methodology for compilation of the unified Bilateral Foreign Trade indices was evolved and recommended for implementation. Later on, an Expert Group was constituted in the Ministry of Commerce under the Chairmanship of the then Economic Adviser, Ministry of Commerce to review the recommendations of the Technical Committee. In September 1995, the Group decided that for computing Bilateral Index Numbers, 1992-93 might be considered as the base year and the country- specific Commodity Basket may be compiled. Accordingly, the global and bilateral indices for the year 1996-97 were calculated, but could not be released as the unit of quantity in the ITC (HS)-1996 had been changed from that of ITC(HS)-1992 for many items.  On account of changes in the units of commodities included in the Commodity Basket and 1992-93 being too distant to be considered as a base year, DGCI&S has decided to compile Index Numbers with 1998-99 as the base year.

6.5.3                      The Commission has observed that the Technical Committee submitted its Report in 1993 and during its tenure of a year, it not only developed the methodology but also actually compiled the Bilateral Trade indices for four years. But even after a gap of more than 8 years, the revised series of indices could not be compiled and released by DGCI&S. Further, the base year of indices of Unit Value and Quantum of Foreign Trade of India being compiled at present by DGCI&S is very old (1978-79) and has a different classification, thus limiting the utility of the indices. 


6.5.4                      The Commission, therefore, recommends that:

(i)                  DGCI&S should immediately revise the current base year (1978-79) of indices of Unit Value and Quantum of Foreign Trade and the corresponding indices of terms of trade.

(ii)                 DGCI&S should compile and release the series of indices on Bilateral Foreign Trade following the methodology suggested by the Technical Committee constituted within a period of one year.

6.6                         Product Classification: Harmonisation of Codes

6.6.1                      The need for harmonisation of activity, product and trade data has often been desired as this will enable cross-classification of activity and product data. The primary organisations, which deal with product-level data are: Central Board of Excise & Customs (CBE&C), Directorate General of Foreign Trade (DGFT) and Directorate General of Commercial Intelligence and Statistics (DGCI&S).  At present, the codes used by these organisations are not uniform compelling the user to refer to different documents in order to know the excise tariff duty, custom duty, quantum of exports and imports, and the Trade Statistics of a product.

6.6.2                      In this context, a Task Force was constituted with the objective of developing a National Classification Code for Customs, Central Excise Statistics and Trade purposes. The Task Force is represented by officials from CBE&C, DGFT and DGCI&S.  The objective of the Task Force is to undertake harmonisation of the product codes being adopted by the above-mentioned agencies. At present, the Harmonised Commodity Description and Coding System (HS) is being used in India for the purpose of classifying goods under the Customs and Central Excise Tariff, for collecting Trade Statistics by DGCI&S and for determination of the importability of a product by DGFT.  In the coding system being used by these organisations, HS has been used as the basis for the purpose of classification, irrespective of the objectives and purposes of the concerned organisation.

6.6.3                      The present Task Force is attempting to develop an 8-digit coding system to fulfill the requirements of the various users.  ITC(HS) codes developed by the DGIC&S fully conform to 6-digit (sub-headings) of the HS system, and these would form the basis for development of the ensuing 8-digit classification code. The extension of the seventh and eighth digits would be done as per the HS principles.  The proposed 8-digit classification code would also encompass the goods, which do not come within the preview of the Excise Act. The task force would also prepare concordance tables between the existing Customs, Excise, DGCI&S and DGFT Codes and the proposed new codes and vice-versa, to enable smooth transference of the new coding system and to make use of the past data.


6.6.4                      The Commission recommends that:

(i)                  The 8-digit coding system being developed by the Task Force constituted by CBEC should be finalised urgently and also stress upon the need to adopt this national classification code based on HS System by all the producer and user organisations engaged in product-level data.  The use of national classification would eliminate the multiplicity of the product-level coding system and would also enable a study of the flow of output through various economic systems apart from cross-classification of activity and product data.

[1]  ‘Gross terms of trade’ is defined as the ratio of Quantum Index of Import and that of Export,  ‘Net terms of trade’ is defined as the ratio of Unit-value Index of Export and that of Import while ‘Income terms of trade’ is defined as the product of ‘Net terms of trade’ and ‘Quantum Index of Export’.