Abstract
India shares its majority of international trade with the United States of America. But a huge amount of discrepancy is frequently observed in the recorded bilateral trade statistics between these two countries. The main reasons are caused by several restrictions prevailing on the account of international trade in India. Export is found to be under-reported consistently whereas import data shows both over and under mis-invoicing in a periodic swing. This paper focuses on the determinants of this data fabrication with the help of empirical exercises. Several macroeconomic policy variables are taken to build up an econometric model and are tested statistically with the help of time series econometrics. Among all, relative interest rate plays the most important role to influence export and import mis-invoicing, followed by spot exchange rate and forward exchange rate. The exercise also finds a uni-directional causal relationship from import mis-invoicing of a period to export mis-invoicing of the next period.
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