Chapter II Implications of the Manual on Statistics of International Trade in Services

Chapter III Data Collection Procedure

Chapter IV Summary and Recommendations

Annexures

2.1 Extended Balance of Payments Services Classifications

3.1 New Purpose Codes for Reporting Forex Transactions-Receipt Purposes

3.2 New Purpose Codes for Reporting Forex Transactions-Payment Purposes

3.3 Revised Form A2

3.4 Summary Distribution of New Critical AD Branches

Report of the Technical Group on Statistics of International Trade in Services

1.1 The Reserve Bank of India (RBI) has primary responsibility of compilation and dissemination of balance of payments (BoP) statistics. The foreign exchange transactions reported through R-returns by authorised dealers (ADs) essentially form the basis of compilation of BoP statistics which are disseminated on a quarterly basis with a lag of a quarter. The conceptual framework of compilation of the BoP is consistent with the standard set out in the 5^th Edition of the International Monetary Fund (IMF) Balance of Payments Manual (BPM5). During the recent period, however, there has been pressing demand for disaggregated data on the services component of the BoP from international agencies as also from the standpoint of our trade negotiations with the World Trade Organisation (WTO).

1.2 The emerging requirement calls for finer disaggregation of various BoP components recommended under BPM5. For instance, travel needs to be further classified into business travel, medical travel, education related travel etc. while transportation is required to be broken into sea transport, air transport and other transport with further sub-classification into passenger, freight and others. The timely and disaggregated BoP data, in turn, are critical for appropriate policy response to various developments and have attained an added importance in view of the following three major recent developments:

• acceptance of obligations by India under the IMF's Special Data Dissemination Standards (SDDS).
• requirement of disaggregated data on services as per the Inter-Agency Task Force’s Manual on Statistics of International Trade in Services (MSITS).
• the inclusion of services and the concomitant negotiations under the WTO jurisdiction.

1.3 In addition to disaggregated data, the details of the country of the source of funds are also required to analyse BoP developments with partner countries. This information forms an important input for bilateral discussions with the visiting delegations from other countries. Country-wise details are also needed for certain policy purposes like double taxation treaties.

1.4 Against this background, in one of the meeting of the Standing Committee on Balance of Payments it was suggested by the Chairman of the Committee (Dr. Y.V. Reddy, Deputy Governor, Reserve Bank of India) that a technical group may be set up with representation from the concerned agencies to examine the purpose of modifying the data reporting mechanism for foreign exchange transactions by ADs to capture statistics on international trade in services in a more disaggregated form.

1.5 Accordingly, the RBI constituted this Technical Group on Statistics of International Trade in Services in November 2000 with the following members.

1.	Shri Deepak Mohanty Director, Division of International Finance Department of Economic Analysis and Policy Reserve Bank of India	Convenor
2.	Dr.H.A.C. Prasad Economic Adviser Ministry of Commerce	Member
3.	Shri R.S. Ahlawat Additional Economic Adviser Department of Economic Affairs Ministry of Finance	'
4.	Shri N. Chandrasekaran General Manager International Banking Division State Bank of India	'
5.	Shri P.A. Sethi General Manager International Operations Bank of Baroda	'
6.	Shri R.N. Deodhar, General Manager, Exchange Control Department, Reserve Bank of India	'
7.	Dr. C.L. Agarwal, Director, Department of Statistical Analysis and Computer Services, Reserve Bank of India	'
8.	Shri Ashok Sahoo, Assistant Adviser, Division of International Finance Department of Economic Analysis and Policy Reserve Bank of India	Member Secretary

1.6 The Technical Group has the following terms of reference :

1. To examine the implications of the draft Manual on Statistics of International Trade in Services (MSITS) prepared by the Task Force drawn from European Commission (EC), International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations (UN) and World Trade Organisation (WTO) for India’s Balance of Payments (BoP) statistics.
2. To suggest appropriate modifications to ‘purpose codes’ for recording foreign exchange transactions reported through R-returns by the Authorised Dealers (ADs).
3. To suggest relevant revisions to pre-printed A-2 form.
4. To suggest revisions to Foreign Exchange Transactions Electronic Reporting System (FET-ERS) software package.
5. To suggest training programmes for officials of critical AD branches for smooth transition to the new reporting mechanism.
6. Any other relevant issues.

1.7 The Group places on record its grateful thanks to Dr.Y.V. Reddy, Deputy Governor, RBI for providing encouragement and taking active interest in its proceedings. The Group had the benefit of the guidance of Shri M.R. Nair, Officer-in-Charge, DEAP, RBI in its deliberations. The Group wishes to record its high appreciation of technical help received from S/Shri Muneesh Kapur, Assistant Adviser, DIF, DEAP, RBI, Shri Brijesh P, Research Officer, DIF and Shri S.B. Gogate, Assistant Manager, DIF, DEAP, RBI. The Group expresses its thanks to Shri S.S. Jogale of RBI for his assistance.

1.8 The remainder of the report has been organised in three chapters. Chapter 2 examines the implications of draft Manual on Statistics of International Trade in Services (MSITS) prepared by the Task Force drawn from international agencies for India’s BoP statistics. Chapter 3 suggests necessary modifications to the reporting mechanism of foreign exchange transactions by the ADs and deals with the logistics for quick implementation of revised reporting framework. The last chapter contains the summary and recommendations.

2.1 The format of presentation of the balance of payments (BoP) data in India broadly follows the recommendations of the 5^th Edition of the IMF Balance of Payments Manual (BPM5). According to the BPM5, services cover items such as travel, transportation, communications, financial services, computer and information services, royalties, license fees and other business services given their importance in international transactions (Box 2.1)

1. Transportation
2. Travel
3. Communications services
4. Construction services
5. Insurance services
6. Financial services
7. Computer and information services
8. Royalties and licence fees
9. Other business services
10. Personal, cultural and recreational services
11. Government services n.i.e.

2.2 Recently, a Manual on Statistics of International Trade in Services (MSITS) has been prepared by the Task Force on Statistics of International Trade in Services drawing representation from European Commission, IMF, OECD, United Nations and WTO. The Extended Balance of Payments Services (EBOPS) classification of transactions between residents and non-residents recommended in MSITS is a further extension of the OECD-Eurostat classification and provides information required by the WTO in connection with the GATS agreement. The principal aim of the manual is to meet user needs and to facilitate evaluation of market access opportunities and the assessment of the extent of opening up achieved in specific services and markets.

2.3 The conceptual framework of MSITS is so designed as to make it compatible with related international standards such as the BPM5, the System of National Accounts (SNA) 1993 and the Central Product Classification (CPC). The Manual builds on the strengths of these existing systems to develop an extended statistical framework for the compilation of statistics of international trade in services.

2.4 The BoP data components according to the EBOPS Classification, which involves disaggregating the BPM5 standard components for services into sub-components of major economic importance are given in Annexure 2.1. The Group examined all the components proposed under EBOPS for their relevance. The Group is of the view that while disaggregated information under most of the component would be useful, data on certain components such as space transport, rail transport and inland waterway transport may become relevant in the Indian context at a later date when negotiations on multi-modal transport take place. The Group, therefore, recommends that the EBOPS components may be adopted with suitable modifications to capture the important items in India’s international transactions in services.

2.5 Furthermore, the manual distinguishes service transactions by four modes of supply such as: (i) cross-border supply, (ii) consumption abroad, (iii) commercial presence and (iv) presence of natural persons.

2.6 Apart from implementation of the BPM5 recommendations and compilation of disaggregated BoP data according to EBOPS classification, the full implementation of the provisions of MSITS involves collection of certain additional statistics such as (i) recording of certain basic Foreign Affiliates’ Trade in Services (FATS) Statistics such as number of enterprises, value added, sales, exports, imports etc. (ii) collection of complete foreign direct investment (FDI) statistics, (iii) compilation of statistics on BoP transactions for trade in services by partner country for services exports and imports, (iv) compilation of additional FATS statistics. The broad mapping of the BoP standard components to the four modes of supply is given in Box 2.2.

2.7 Analysis of the international best practices indicates that most of the countries rely upon well-designed and periodical surveys to garner information on trade in services. Therefore information at a disaggregated level can be obtained on the basis of periodic and well-designed surveys rather than relying on banks for regular information on all transactions.

2.8 In this regard, the Group recommends that identification of associations, bodies and forums of business, professional and technical services (such as legal, accounting, management, advertising, market research, architectural, engineering, mining, agricultural services etc.) for collecting information on the receipts on account of export of various items of services would be desirable to supplement the data obtained through banking source.

3.1 The Group reviewed the extant compilation procedure of BoP statistics in India with an emphasis on disaggregated data on international trade in services. The classification of India’s BoP statistics into various accounts and components is done with the help of purpose-wise disaggregated data reported by the critical Authorised Dealers (ADs), essentially banks, through floppy media following the recommendations of the Sub-Group on Reporting of Foreign Exchange Transactions by Authorised Dealers (Chairman : Shri S.P. Paniyadi). The Sub-Group had identified 417 AD branches out of 2500 AD branches which accounted for 80 per cent of total foreign exchange transaction in 1997 as critical AD branches for the collection of data through floppy media. On the basis of the recommendations of the Paniyadi Sub-Group, the list of purpose codes was thoroughly revised in April 1997. Currently data are collected by the RBI from the ADs for 7 groups comprising of around 60-65 purpose codes.

3.2 Inward/outward remittances, other than merchandise trade, can be analytically classified in to the following broad groups:

• services (travel, transportation, insurance, financial services, software services, royalties, management fees, other services, etc.,),
• income (interest, dividends and compensation of employees),
• transfers (worker remittances, gifts/donations and official transfers) and
• capital flows (FDI flows, portfolio flows, flows on account of external commercial borrowings , external assistance, NRI deposits etc.)

3.3 The purpose codes prescribed by the Paniyadi Sub-Group covered disaggregated data on most of the above items. The Group noted that the floppy based data reporting mechanism has worked satisfactorily and has resulted in considerable reduction in time lag in reporting of BoP data. The Group, therefore, proposes that the floppy based reporting mechanism may be continued with revision of purpose codes to capture disaggregated items of data required for EBOPS.

3.4 The data base for the floppy based reporting system at the level of ADs emanates from the existing exchange control requirements, which requires customers of all individual inward remittances, routed through the banking system, above the cut-off limit (presently US $ 10,000, say Rs 5,00,000) to indicate the purpose of the transaction and the country of the source of funds to the bank. This requirement is not imposed on transactions below the cut-off limit which are known as "unclassified receipts". A sampling procedure has, however, been adopted under which the selected branches of banks are required to collect purpose-wise/country-wise details of unclassified receipts only for two days in the reporting fortnight. The proportions emerging from the sample results are then applied to the aggregate of 'unclassified receipts'.

3.5 The international practices with regard to recording BoP data indicate that most of the countries use a combination of the foreign exchange transactions reported through banking channel and surveys/census to gather the necessary details. While the banking data evolved as by-products of foreign exchange control systems in a number of countries, the relaxation of exchange control over a period of time and the need to collect an extended break-down of various categories has necessitated more frequent use of surveys. The IMF's Balance of Payments Compilation Guide has recommended the use of either of the approaches or a combination of the two approaches for data compilation. The Group feels that as exchange regulations are relaxed over time, it would be increasingly difficult to obtain various disaggregated information from banking channel. Hence, greater reliance would have to be placed on surveys for obtaining various details.

3.6 As such in the Indian context, a combination of banking data and surveys design is employed to gather details. For receipts above a certain cut-off limit, all details are collected by reporting banks. The details of transactions below the cut-off limit are collected through surveys. The information is supplemented by various focused surveys like surveys on freight and insurance, the NASSCOM survey of software companies, etc. The Group recommends that while the present practice of reliance on bank data and surveys may continue, it would be desirable to strengthen both the channels.

3.7 Table 3.1 lists out the frequency distribution of receipts by size for the recent period. The column "number of transactions" in the Table provides the frequency distribution of the number of transactions under various categories ranging from amount up to Rs. 1 lakh to amount above Rs.50 lakh, while the column "value of transactions" provides a frequency distribution of total value of foreign exchange receipts.

3.8 It could be seen from Table 3.1 that total number of transactions increased sharply from 243.2 lakh during 1997-98 to 307.6 lakh during 1998-99. The number of transactions during 1999-2000 stood at 425.7 lakh. Frequency distribution indicates that while the number of transactions with individual receipts in the range of Rs.1-5 lakh constituted around 97.9 – 98.9 per cent of total transaction, their value in total transactions fell sharply from 36 per cent in 1997-98 to 22 per cent in 1999-2000. The Group noted that the quality of reporting suffers because of large number of small transactions as evident from the past experience. The Group, therefore, is of the view that there is a need for periodic review of the cut-off limit. While this process would reduce the reporting burden on the banks, it would enhance the quality of reporting.

3.9 The Group noted that the cut-off limit has already been raised to US $ 10,000 (about Rs. 4.9 lakh at current exchange rates) effective January 2001. The cut-off limit is reviewed on an ongoing basis. The cut-off limit was Rs. 10,000 till March 1992 and then raised to US $ 50,000. The cut-off limit translated to around Rs.15,00,000 at the exchange rate prevailing in April 1992 and around Rs. 18,00,000 by March 1997 reflecting the nominal depreciation of the rupee. However, as a significant amount - around two-thirds in value terms - of transactions exceeded the cut-off limit and which coupled with poor response to surveys had a bearing on the quality of data, the limit was revised down to Rs. 1,00,000 in April 1997. In dollar terms, the limit was around US $ 2,750 in April 1997 or around US $ 2,100 at current rates.

3.10 The Group is of the view that since the ADs would have to report the value of transactions in Rupees, the prescription of a cut-off limit in US dollar terms may give rise to ambiguities in terms of cross-currency transaction of value. The Group, therefore, recommends that for the purpose of data reporting the cut-off limit may be placed at Rs.5,00,000 which is slightly higher than US$ 10,000 at the current exchange rate. The ADs should be required to report disaggregated data for receipts over Rs.5,00,000 and the information for receipts up to Rs.5,00,000 may be collected through surveys.

3.11 The survey on unclassified receipts collects purpose-wise information for receipts up to Rs.1,00,000 ( up to Rs. 5,00,000 since January 2001). The Group recommends that the RBI should change the survey design to capture purpose/country-wise information for receipts up to Rs.5,00,000 from a representative sample of critical AD branches based on their performance in recent period.

3.12 The Group feels that the need for having disaggregated information has to be weighed against the additional burden it would entail on the AD branches to furnish this information. Since the thresh-hold limit for reporting of individual inward remittance has already been raised from Rs. 1,00,000 to US $ 10,000 effective January 2001 (Rs.5,00,000 proposed by the Group), this would significantly reduce the reporting burden on the commercial banks. In this direction, the ‘purpose list’ could be expanded to a manageable level by choosing important items. As ADs would be required henceforth to report detailed information for a less number of transactions, the Group is of the view that it should be feasible to capture more disaggregated statistics with revision of purpose codes.

3.13 The Group feels that keeping in view the dynamic nature of trade in services, the coding system should have the desired flexibility to easily accommodate changes from time to time in the ‘purpose’ list. In the extant reporting mechanism through floppy media, all transactions are broadly classified as sales (outward remittances) and purchases (inward remittances) with a prefix ‘S’ and ‘P’, respectively. The Group, therefore, recommends a four-digit coding system with the first two digits representing the main components and the last two digits indicating further disaggregation of the main components. Keeping in view the requirements of EBOPS and the format of the extant reporting mechanism, the Group recommends that disaggregated data may be collected under 15 major purpose groups (Box 3.1). The main services group numbers ‘02’ to 12’ exactly conform to the EBOPS classification. Since , the ADs are required to report all foreign exchange transactions, other main group codes for capital account (00), exports/imports of goods (01), transfers (13), income (14) and others (15) have been rearranged.

Box 3.1 : List of Major Purpose Groups

Group Numbers Main Group Names

1. Capital Account
2. Exports/Imports of Goods
3. Transportation
4. Travel
5. Communication Service
6. Construction Service
7. Insurance Service
8. Financial Services
9. Computer Information Services
10. Royalties / License Fees
11. Other Business Services
12. Personal, Cultural and Recreational Services
13. Government not included elsewhere (G.n.i.e.)
14. Transfers
15. Income
16. Others

3.14 The Group proposes introduction of additional codes for reporting of inter-bank transaction and ADs’ transactions with the RBI (to be entered as a single-entry in a fortnight) to facilitate periodic validation of the data.

3.15 At the disaggregated level, the Group proposes increase in the number of purpose codes for purchases from 58 to 86 and for sale from 64 to 98. The revised purpose codes are given in Annexures 3.1 and 3.2. While the number of codes would increase by 62, the Group feels that the reporting burden on the ADs would not increase as the ADs would be required to provide regular disaggregated data for less number of transactions with the increase in the cut-off limit to Rs.5,00,000. The Group recommends that the software package circulated by the RBI to the ADs for the purpose of reporting BoP data may be modified to provide drop-down menus under various groups, so that it should be convenient for the ADs to feed relevant information.

3.16 The Group recommends that for the purpose of the survey of ‘unclassified receipts’, the selection of critical branches may be based on reporting of non-export receipts of at least Rs.5 crores in a year. Sample of branches may be drawn separately for 'Foreign Currency Receipts' and 'Rupee Receipts' as the coverage of purposes under these two categories could be significantly different. These selected AD branches may report purpose-wise details of receipts under Rs.5,00,000 for two days in a fortnight instead of four days as is the current practice for the extant survey. In this process, the Group feels that while the sample size could be enlarged, reporting burden could be reduced without loss of details.

3.17 For payment other than imports and remittances covering intermediary trade, the purchasers of foreign exchange are required to fill in form A2 with ADs. The purpose code enlisted in form A2 forms the basis of recording R-return data by the ADs. In view of the revision of the purpose code, the Group also undertook the exercise of revising the form A2. Notwithstanding the proposed increase in the number of codes from 64 to 98 (Annexure 3.2) at the disaggregated level, the Group is of the view that that the contents of the form A2 should be confined to a single sheet for the convenience of the recording of the information. The revised form A2 is given in Annexure 3.3. While one side of the single sheet form provides the space for the required particulars of the remittances, the other side of the form gives a complete list of the purpose of remittances for easy identification. The Group recommends that the existing form A2 may be, replaced by the revised form A2 to reflect changes in the purpose codes at the disaggregated level.

3.18 The Group is of the opinion that the new reporting mechanism could be facilitated by giving wider publicity so as to sensitise the officials in AD branches working at the operational level. It is also essential that the bank customers appreciate the need for proper reporting of their foreign exchange transactions which is critical for improving BoP data. The Group, therefore, feels that the report of the Group should be published and placed on the RBI website. The Group recommends that copies of the published report should be provided to ADs; concerned ministries, such as Ministry of Commerce, Ministry of Tourism, Ministry of Labour etc.; and also to trade organizations, such as NASSCOM and FIEO.

3.19 The Group is of the view that apart from the wide publicity given to the need for detailed statistics on trade in services, the quality of reporting of data would depend significantly on structured training given to the concerned officials of the ADs, who would be operating the software at the branch level or would be training such officials in their respective banks. For the purpose of training, the Group identified 500 critical AD branches on the basis of volume of transactions as at the end of March 2000. The region-wise and bank-wise list of the critical AD branches is given in Annexure 3.4. It could be seen that out of the identified 500 critical branches, major number of branches are in Mumbai region (179), followed by New Delhi (81), Chenai (59) and Calcutta (41). The Group is of the view that while the RBI should take an initiative for the training programme, there is a need for support from the commercial banks in terms of making available their training infrastructure to conduct the required training. For this purpose the RBI may design an appropriate training programme which could be of duration of two days. The Group recommends that the training programme should be a hands-on computer based training to familiarise bank personnel with the practical aspects of the new data reporting mechanism.

3.20 Keeping in view the regional distribution of critical AD branches and the available training infrastructure of the RBI and commercial banks, the Group has drawn an indicative training programme which is given in Table 3.2. It is suggested that training of AD officials in batches of 20 participants may be conducted in major centres. The Group recommends that in order to enhance the effectiveness of the training programme the RBI should circulate in advance the revised computer software programme and copies of the Technical Group Report to enable the ADs to familiarise themselves with the requirements before hand.

# May be split in (a) one batch for training faculty from SBI’s training centers and some important branches, and (b) One batch for 20-25 major branches of SBI (from a total of 79 branches)

3.21 The Group recommends that while the present floppy based reporting mechanism may continue, the critical ADs should be encouraged to report data through e-mail to the RBI to further reduce the time lag of reporting. The Group feels that the AD branches which have become ‘non-critical’ should be encouraged to continue the reporting of foreign exchange transactions through floppy media. The Group also recommends that the RBI should consider extending the floppy based reporting system to non-critical AD branches.

4.1 The Reserve Bank of India (RBI) has primary responsibility of compilation and dissemination of balance of payments (BoP) statistics. The foreign exchange transactions reported through R-returns by authorised dealers (ADs) essentially form the basis of compilation of BoP statistics which are disseminated on a quarterly basis with a lag of a quarter. The conceptual framework of compilation of the BoP is consistent with the standard set out in the 5^th Edition of the International Monetary Fund (IMF) Balance of Payments Manual (BPM5). During the recent period, however, there has been pressing demand for disaggregated data on the services component of the BoP from international agencies as also from the standpoint of our trade negotiations with the World Trade Organisation (WTO). (Para 1.1)

4.2 Recently, a Manual on Statistics of International Trade in Services (MSITS) has been prepared by the Task Force on Statistics of International Trade in Services. The Extended Balance of Payments Services (EBOPS) classification of transactions between residents and non-residents recommended in MSITS provides information required by the WTO in connection with the GATS agreement. The principal aim of the manual is to meet user needs and to facilitate evaluation of market access opportunities and the assessment of the extent of opening up achieved in specific services and markets. (Para 2.2)

4.3 The Group examined all the components proposed under EBOPS for their relevance. The Group is of the view that while disaggregated information under most of the component would be useful, data on certain components such as space transport, rail transport and inland waterway transport may become relevant in the Indian context at a later date when negotiations on multi-modal transport take place. The Group, therefore, recommends that the EBOPS components may be adopted with suitable modifications to capture the important items in India’s international transactions in services. (Para 2.4)

4.4 Analysis of the international best practices indicates that most of the countries rely upon well-designed and periodical surveys to garner information on trade in services. In this regard, the Group recommends that identification of associations, bodies and forums of business, professional and technical services (such as legal, accounting, management, advertising, market research, architectural, engineering, mining, agricultural services etc.) for collecting information on the receipts on account of export of various items of services would be desirable to supplement the data obtained through banking source. (Paras 2.7 & 2.8)

4.5 The Group reviewed the extant compilation procedure of BoP statistics in India with an emphasis on disaggregated data on international trade in services. The classification of India’s BoP statistics into various accounts and components is done with the help of purpose-wise disaggregated data reported by the critical Authorised Dealers (ADs), essentially banks, through floppy media. (Para 3.1)

4.6 The Group noted that the floppy based data reporting mechanism has worked satisfactorily and has resulted in considerable reduction in time lag in reporting of BoP data. The Group, therefore, proposes that the floppy based reporting mechanism may be continued with revision of purpose codes to capture disaggregated items of data required for EBOPS. (Para 3.3)

4.7 The international practices with regard to recording BoP data indicate that most of the countries use a combination of the foreign exchange transactions reported through banking channel and surveys/census to gather the necessary details. The Group feels that as exchange regulations are relaxed over time, it would be increasingly difficult to obtain various disaggregated information from banking channel. Hence, greater reliance would have to be placed on surveys for obtaining various details. The Group recommends that while the present practice of reliance on bank data and surveys may continue, it would be desirable to strengthen both the channels. (Paras 3.5 & 3.6)

4.8 The Group noted that the quality of reporting suffers because of large number of small transactions as evident from the past experience. The Group, therefore, is of the view that there is a need for periodic review of the cut-off limit. While this process would reduce the reporting burden on the banks, it would enhance the quality of reporting. (Para 3.8)

4.9 The Group noted that the cut-off limit has already been raised to US $ 10,000 (about Rs. 4.9 lakh at current exchange rates) effective January 2001. The Group is of the view that since the ADs would have to report the value of transactions in Rupees, the prescription of a cut-off limit in US dollar terms may give rise to ambiguities in terms of cross-currency transaction of value. The Group, therefore, recommends that for the purpose of data reporting the cut-off limit may be placed at Rs.5,00,000 which is slightly higher than US$ 10,000 at the current exchange rate. The Group recommends that the RBI should change the survey design to capture purpose/country-wise information for receipts up to Rs.5,00,000 from a representative sample of critical AD branches. (Para 3.9 & 3.10)

4.10 The Group feels that keeping in view the dynamic nature of trade in services, the coding system should have the desired flexibility to easily accommodate changes from time to time in the ‘purpose’ list. The Group, therefore, recommends a four-digit coding system with the first two digits representing the main components and the last two digits indicating further disaggregation of the main components. Keeping in view the requirements of EBOPS and the format of the extant reporting mechanism, the Group recommends that disaggregated data may be collected under 15 major purpose groups. The Group proposes introduction of additional codes for reporting of inter-bank transaction and ADs’ transactions with the RBI (to be entered as a single-entry in a fortnight) to facilitate periodic validation of the data. (Paras 3.13 & 3.14)

4.11 At the disaggregated level, the Group proposes increase in the number of purpose codes for purchases from 58 to 86 and for sale from 64 to 98. While the number of codes would increase by 62, the Group feels that the reporting burden on the ADs would not increase as the ADs would be required to provide regular disaggregated data for less number of transactions with the increase in the cut-off limit to Rs.5,00,000. (Para 3.15)

4.13 The Group recommends that for the purpose of the survey of ‘unclassified receipts’, the selection of critical branches may be based on reporting of non-export receipts of at least Rs.5 crores in a year. Sample of branches may be drawn separately for 'Foreign Currency Receipts' and 'Rupee Receipts' as the coverage of purposes under these two categories could be significantly different. These selected AD branches may report purpose-wise details of receipts under Rs.5,00,000 for two days in a fortnight instead of four days as is the current practice for the extant survey. (Para 3.16)

4.14 In view of the revision of the purpose code, the Group also undertook the exercise of revising the form A2. Notwithstanding the proposed increase in the number of codes from 64 to 98, the Group is of the view that the contents of the form A2 should be confined to a single sheet for the convenience of the recording of the information. (Para 3.17)

4.15 The Group is of the opinion that the new reporting mechanism could be facilitated by giving wider publicity so as to sensitise the officials in AD branches working at the operational level. The Group, therefore, feels that the report of the Group should be published and placed on the RBI website. (Para 3.18)

4.16 The Group is of the view that apart from the wide publicity given to the need for detailed statistics on trade in services, the quality of reporting of data would depend significantly on structured training given to the concerned officials of the ADs, who would be operating the software at the branch level or would be training such officials in their respective banks. For the purpose of training, the Group identified 500 critical AD branches on the basis of volume of transactions as at the end of March 2000. For this purpose the RBI may design an appropriate training programme which could be of duration of two days. (Para 3.19)

4.17 The Group recommends that while the present floppy based reporting mechanism may continue, the critical ADs should be encouraged to report data through e-mail to the RBI to further reduce the time lag of reporting. The Group feels that the AD branches which have become ‘non-critical’ should be encouraged to continue the reporting of foreign exchange transactions through floppy media. The Group also recommends that the RBI should consider extending the floppy based reporting system to non-critical AD branches. (Para 3.21)