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Invisible Export and INDIA by Anil Kumar Singh, Senior Consultant, McKinsey & Company

Invisible Export and INDIA

By : Anil Kumar Singh, Senior Consultant, McKinsey & Company
Industry : Foreign Trade Functional Area : Growth
Keywords :

INDIA

Export

Services Sector

FICCI

Invisible

Service Export

Invisible Export

Activity:  2 comments  1318 views  last activity : 07 06 2010 20:18:04 +0000
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Invisible export is the part of international trade that does not involve the transfer of goods or tangible objects, which mostly include service sectors like banking, advertising, copyrights, insurance, consultancy etc. invisible exort also known as invisible trade is basically associated with the person’s own skill and knowledge is what is 'sold' rather than a piece of software or books. 

 

Invisible trade is composed of invisible imports and invisible exports. Since nothing tangible is transferred, the importer is defined as the person, group or country that receives the service. The exporter is defined as the supplier of the service. The net total of a country's invisible imports and invisible exports is called the invisible balance of trade and is a part of the country's balance of trade. For countries that rely on service exports or on tourism, the invisible balance is particularly important. 

 

An analysis of the consultancy contracts secured by Indian project in the foreign market has been carried out by Exim Bank of India. As per the analysis, done during 1995-96 to 2000-01 indicates that consultancy contracts were secured largely in West Asia which accounted for 39% number wise and 46% value wise followed by South East Asia and Pacific & South Asia.   

 

South East Asia constituted 22% both by number and by value whereas South Asia was 18% number wise and 16% value wise. According to the 2002 data of the Federation of Indian Export Organizations (FIEO), India's share in global trade in services was about 1.3%. India’s share of consultancy exports is about 0.5% of global trade in services.    


In the recent years the Government of India has take some important step for the improvement of service based export. The Foreign Trade Policy, 2004 – 09 is one of them, which has announced the setting up of Services Export Promotion Council for promoting the Indian service sector in the foreign market. Government of India has also introduced Market Development Assistance (MDA), Market Access Initiative (MAI) scheme, proactive EXIM Policy and EXIM Bank schemes. Government also provides exemption on service tax for export of consultancy services. However due to lack of clarity in the provisions in the present notification, consultancy export may be affected.  


Strength and Weakness of Indian Consulting Industry

  • The major strengths of Indian invisible export or invisible trade include professional competence, low cost structure, diverse capabilities, high adaptability and quick learning capability of Indian consultants.

 

  • The major weaknesses of Indian invisible trade or invisible export include low quality assurance, low local presence overseas, low equity base, lack of market intelligence and low level of R&D.


 

Here is a trend for how this sector is going to rise in the future; India's export of services is expected to touch $310.9 billion by 2011/12, powered by the booming software, consultancy, engineering and tourism sectors, according  to the Federation of Indian Chambers of Commerce and Industry (FICCI) survey. Services exports could surpass merchandise exports, which are expected to more than double to $305.5 billion in the next five years.
 

India: Projected Exports of Services and Merchandise 

  Services ($ billion) Merchandise ($ billion)
2006 71.6 112.4
2007 91.5 132.7
2008 116.9 156.8
2009 149.2 185.3
2010 190.6 218.9
2011 243.4 258.6
2012 310.9

305.5

 

Key Highlights of Service Sector Exports this year:

  • India exported goods worth $112.4 billion during 2005/06 while export of services was $71.6 billion.
  • Indian services exports are estimated to reach $91.5 billion this fiscal, and merchandise exports to hit $132.7 billion.
  • India's service exports grew at 28% annually for the last five years, faster than the 22% growth in goods exports during the same period.
  • Software services was the highest foreign exchange earner at $21.8 billion during April-December 2006, followed by business and management consultancy at $16.5 billion and travel services at $6.4 billion.

 

So if you are trying your hand for exports, this is not a bad choice taking consideration of the fact that, you are capable of delivering the services required in the world.

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2 comments on "Invisible Export and INDIA"
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  Commented by  Amit Abrol, Freelancer, Freelancer    | 10 19 2009 09:37:50 +0000 
There are several of us who have worked in abroad , are reasonably well versed with conditions in important sourcing destinations. This very important resource pool, should be harnessed to its fullest by those seeking to expand export/ import activities - not only giving consultancy a boost but actually directed towards honing inherent skills for furthering prospects of the nation's industries!
  Commented by  varsha mishra, Analytical Chemistry Manager, rfrac    | 10 29 2008 18:30:04 +0000 
nice sharing
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