The Government of India has introduced several export benefit schemes to enhance Indian exports. However, different forms of fraud have arisen as a result. In this presentation, Assistant Professor Adrien Bussy and Research Assistant Mehtab Jagil at Lee Kuan Yew School of Public Policy discussed a fraud method plaguing in one of India’s main export promotion schemes - The Duty Drawback (DBK) Scheme, which aims to provide reimbursement of import duties paid on inputs used in the manufacture of export goods.
Broadly speaking, fraudsters tend to overstate the value of exports, meaning they wrongfully gain the cash drawbacks. In their research, Dr. Bussy and Jagil used international trade mirror statistics to measure fraud and argue that fraud is present in the DBK Scheme, even though the resulting fraud amounts are not high relative to export volumes. Several empirical patterns also suggested that enforcement appears to be effective in eliminating fraud. When it comes to the high value of drawback rates, trade with risky importers (UAE, Singapore, and HKG), and trade of differentiated products, customs tend to be more cautious, thus lead to less fraud. Moreover, fraudsters tend to put their efforts into transactions that are more likely to be less intensively monitored. Their findings provide a clear understanding of export fraud in India and contribute to the future examination of India’s export promotion schemes.