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INDIA'S BALANCE of payments, which is built up of a large trade deficit sustained by large positive invisible inflows, is truly a miracle of the new service-oriented global economy. The liberalised environment has made India's services attractive to the new IT dependent sector of the developed countries. The trade deficit, which ranges around $17 billion, is financed mostly by net invisible earnings consisting of remittances from expatriates and software. The importance of invisibles in the BoP is increasing.
The RBI's Bulletin for January 2001 has included a timely review of the role of invisibles in the BoP from 1998 to 2000. As the Bulletin reiterates, the invisibles have been providing substantial support to BoP in recent years. The account of invisibles includes remittances by expatriate compatriots, especially those working in West Asia, as also remittances for software services, which have become increasingly important, and provide for payment of interest and dividends.
It is a fact of economic life that India's foreign trade on goods shows a large negative balance. It is fortunate for us that given this large gap, the invisibles account for a net …