Capturing Data on Trade in Services : Lessons India can learn

Capturing Data on Trade in Services : Lessons India can learn
Global trade in services has registered a phenomenal growth in the recent years and in countries such as India, trade in services contributes substantially to their international trade. India, being one of the largest exporter and importer of services is a proponent of liberalisation of trade in services in the WTO and in its bilateral free trade agreements (FTAs). It is, therefore, crucial for India to have a robust data collection mechanism for trade in services, which includes global and bilateral trade and investment flows across different services sub-sectors. A technical group has been set up by the Department of Commerce under the Chairmanship of the Directorate General of Commercial Intelligence and Statistics (DGCI&S) for this purpose.

Globally, different organisations have attempted to capture data on trade in services. The General Agreement on Trade in Services (GATS) of the WTO[i] was the first agreement that tried to define trade in services through four modes.[ii] The GATS established legally enforceable discipline at the multilateral level to capture the international trade in services, which applies to all WTO member countries and all services subsectors. The International Monetary Fund (IMF) collects data for balance of payments and international investment in accordance with the Balance of Payments (BoP) Manual. As of date, the IMF collects data for its member countries in accordance with the Sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).[iii] The Organization for Economic Co-operation and Development (OECD) and the United Nations also collects data on trade in services.  A number of countries such as the United States (US), the United Kingdom (UK), China and Australia have domestic regulations mandating data collection on trade in services. Some countries such as the US have a separate Act namely the International Investment and Trade in Services Survey Act, 1984, mandating collection of trade in services data while there are others such as Canada and Australia that continue to collect trade in services data under their general Statistics Act.

In India, at present to some extent the services trade data is captured by the Reserve Bank of India (RBI) under the purview of the Foreign Exchange Management Act (FEMA), 1999. Services trade statistics are generated from the Foreign Exchange Transaction Electronic Reporting System (FETERS), which only covers specific sectors and does not give mode-wise data for services delivery. Also, at present the data is captured at the level of authorized dealer in foreign currency (banks) and not the service supplier. Since 2008, the Indian government has promulgated the Collection of Statistics Act, 2008, which also mandates collection of trade in services data. However, it is difficult to measure trade in services compared to trade in goods due to its intangible nature and the lack of a proper framework for data collection and reporting.

There are several issues faced in capturing data on trade in services.

1. How to classify services sectors?

2.How to identify service providers especially when there is large number of non-corporate entities?

3. How to isolate the different modes of service delivery and quantify them?

Country experiences and global benchmarks can be used to resolve some of these issues. For instance, as regards classification of services sectors, the GATS classifies different services. During the Uruguay Round of negotiations, WTO members adopted a classification of service sectors entitled �Services Sectoral Classification List�, (W/120) based on the United Nations Provisional Central Product Classification (UNCPC). The IMF�s Balance of Payments Manual also classifies services under different heads. These classifications are recognized globally and some countries are already following them. Internationally, most countries have adopted or are shifting to the IMF�s BPM6 classification of services sectors. India has also adopted the BPM6 classification and there is now a need to create a concordance between the national industrial classification (NIC) and BPM6 to facilitate data collection by sub-sectors and cross-country comparisons.

Data collection requires identification of service provider. A number of countries undertake primary survey for collecting data. In the US for instance, the Bureau of Economic Analysis (BEA) mails the survey questionnaires to the entities and persons who are believed to be eligible from the reports of their international transactions. The BEA uses benchmark or census surveys to reach the entire population every 5 years. The questionnaires are sent to potential respondents and the mailing lists include US persons who have previously filled a report and all US persons who although have not filled the report before but are believed to have transactions in the services. The lists are collated based on information from government sources, industry associations and publications, business directories and various periodicals.

[iv] In the UK, any trading businesses registered for Value Added Tax (VAT) and/or Pay as You Earn (PAYE) tax are surveyed.

The services sector in India is not similar to the comparator countries, which make it difficult to collect information. In India around 80 percent of services are in the non-corporate sector. As a result, it is often difficult to identify the service suppliers, particularly in categories such as logistics services, construction services or retail services. Thus, it is difficult to create a database of all service suppliers. Thus, it is important for India to design a data collection framework which is able to identify the services exporters and importers. One way to achieve this is to create a population of companies supplying services using the directories and member list of associations and professional bodies. Post which, there is a need for a primary survey of service suppliers to filter those who trade in service. Once, the service suppliers are identified a population has to be created, which can be surveyed on a regular basis. An online mechanism should be devised so that filing of information is easy and everything is linked to the unique identification number of the service supplier.

Most countries do not have a mechanism for reporting mode-wise services trade data due to the complexity of trade in services and inter-mode linkages. Moreover, sometimes the boundaries between goods and services trade are blurred, especially in case of services like �travel�, �construction� and �government goods and services�. With technological development new modes of services delivery have surfaced and more often than not it becomes difficult for even the service supplier to isolate the different modes of service delivery. It is therefore important to provide clarity even to the service supplier to ensure that over time, transactions are recorded as far as possible by modes of delivery. For this, it is essential to have industry consultations and pilot surveys to understand the trade patterns. This approach is likely to make the framework robust and ensure that institutional mechanism for collecting services trade data is all inclusive.

-Tanu M. Goyal