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China Trade Takes a Hit As Hawala Channels Are Caught In Currency Crunch

Date 21-Nov-2016
Subject China Trade Takes a Hit As Hawala Channels Are Caught In Currency Crunch

MUMBAI: For a New Delhi-based trading company that mainly imports electrical goods from China and then sells them in India, demonetisation has wiped out more than 50% of profit. 

The company has for years been importing goods from China and under-invoicing them to save on taxes in India. The balance would be paid into the bank account of the seller in Hong Kong through illegal hawala channels. 

Since the government banned Rs 500 and Rs 1,000 notes on November 8, not only has the company been finding it hard to send money by hawala, the cost of the process has shot up, an executive told ET. In the grey market, one renminbi rose to Rs 16 against the official exchange rate of Rs 9.89 on Saturday evening. 

“We are aware that many Indian traders while importing goods from China show only 10% to 20% of the original price of goods on each container,” an Indian customs officer told ET. “The arrangement with the Chinese counterpart is that the remaining money would be remitted through informal channels a few months down the line.” He added that the Indian government had introduced anti-dumping duty on many goods imported from China, but the practice continued and flourished due to the connivance of imp .. 

Demonetisation is set to have an unintended impact on India-China trade, experts said. The government may see a rise in taxes collected on goods imported from China in the coming months as the value of these goods will go up, even as actual imports may dip. 


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