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Monday, 17 October 2011 00:00
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Kotak Equities blasts a big hole in export data


Given how IIP growth has continued to plummet, it was always a big surprise as to how exports, engineering exports at that, continued to grow the way they did. Instead of the government’s large statistical/tax machinery picking it up, Kotak Institutional Equities appears to have cracked the mystery, leaving a more comprehensive follow up for various government bodies including possibly many involved in tracking black money. While India’s exports rose 36% in 2011, from $179bn in 2010 to $244bn in 2011, engineering exports were the major part of this—they rose from $38bn to $68bn. Compared to this, however, Kotak found exports of engineering companies in the BSE 500 rose just 11% in rupee terms. Now it’s possible, as Kotak admits, that the bulk of India’s engineering exports are taking place from small firms, but that does sound a bit counter-intuitive. Some micro-detail is in order here. Exports of iron and steel, the official exports data show, rose 102% to R42,000 crore, ‘articles of iron and steel’ by 80% to R34,800 crore—exports of the 16 largest listed steel companies, however, rose by just R700 crore in 2011. As per official data, exports of passenger cars rose by R10,000 crore in 2011—yet, the exports of Maruti and Hyundai fell in this period. Although India is not known to be an exporter of airplanes, railways or ships, official data shows the exports of ‘ships, boats and floating structures’ rose from R12,400 crore in FY10 to R24,200 crore in FY11. There are many more such gems in the report.

Indeed, when FE looked at the numbers, it found that of the $30.5bn official increase in engineering exports, only $8.3bn was accounted for by the top 10 export markets of Indian engineering products—the rest, $22.3bn, went to what are categorised as ‘other countries’. That’s strange, certainly enough to warrant a more thorough examination of the data. Similarly, in the case of FII inflows, Kotak notes that only $4.5bn of the official inflows of $22bn in FY11 can be accounted from data of listed FIIs, ETFs and other global estimates.

For Kotak, the report is obviously a big positive—some years ago, after it reported that a leading telco was giving one set of numbers to its shareholders and a completely different set to the government, an audit was ordered of the accounts of all telcos. Similarly, last year, broking firm Centrum pointed out that the sharp surge in the IIP was on account of a 308% hike in insulated cables and wires. Surjit Bhalla of Oxus Investments has been pointing out for years that the NSS consumption data, on which all poverty numbers are based, reports just half the actual consumption in India. The debate over inflation very largely centres around whether the data should be seasonally adjusted in the manner all advanced countries do ... Perhaps India’s chief statistician TCA Anant has an answer?



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