Journal Press India^®

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This paper aims to explore the extent of illicit financial flows through trade misinvoicing between India and Gulf countries over the period 1991-92 to 2017-18. This study measures that the net illicit financial flows through trade misinvoicing between India and Gulf countries are US$ 478.78 billion. The result of bilateral intensity indexes proposed by Kojima (1964) and modified by Kunimoto (1977) related to trade misreporting indicates that India has intense relationships with UAE and Saudi Arab in both export as well as import side. The analysis also reveals that more intense relationship countries are the major source of illicit financial inflows of capital in India through overstated exports (financial fund flow) or understated imports (commodity flows). It implies that the trade agreement between India and Gulf countries did not helps to mitigate trade misinvoicing. So India needs to establish more effective management of its international trade flows.

Keywords

Illicit financial flows; Trade misinvoicing; Gulf countries; Bilateral intensity index; Exports; Imports

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