| India with its flourishing foreign exchange scenario is now emerging as a significant player in the world economy. Being the third largest economy in Asia, India’s contribution towards sustaining growth impulse in South Asian region has been significant enough. It is mainly due to the increase in capital account surplus from US $6.5 billion in April-June 2005 to US $ 12.9 billion in July-September 2005 that India’s external sector has experienced a sudden gain in strength. Huge capital inflows in the form of foreign direct investments (FDI), global depository receipts (GDRs) and foreign exchange reserves, in 2004-2005, added to the strength of India’s external sector.
Invisible earnings now contribute substantially to India’s Foreign Exchange Reserve. In 2004-2005 financial year foreign exchange earnings from invisible sources have been over US $30 billion. This was further augmented by the 31 percent growth of invisible earnings in the first half of 2005-06. In earlier days private remittances from Indians who used to work abroad was the major source of India’s invisible earnings. But the entire scenario has changed. Now non-factor services, software and IT-enabled services are the main contributors of invisible earnings in India.
The exports of services increased by 71.3 percent in 2004-05 and further propelled to 75.3 percent in the first half of 2005-06. Besides software and IT-enabled services, business services especially professional services now occupy a significant position in expanding the domain of services exports in India.
Foreign Trade
India’s performance in foreign trade has also been satisfactory enough in recent time. India’s total external trade reached as high as US $ 268 billion in 2004-05. In the first half of the fiscal year 2005-06, external trade grew by 41.5 percent. Exports in January 2006 amounted to US $ 8457.72 million, which is 21.46 percent more than the corresponding figure of US $ 6963.64 in January 2005. The growth of services export has been most prominent. There is no doubt that software service exports constitute the main component of the services that are being exported from India. In the first half of 2005-06 financial year software exports from India were valued at US $ 10.3 billion.
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