Invisible trade can be distinguished from visible trade, which involves the

export, import, and re export of physically tangible goods. Basic categories

of invisible trade include services (receipts and payments arising from
activities such as customer service or shipping); income from foreign
investment in the form of interest, profits, and dividends; private or
government transfers of monies from one country to another; and intellectual
property and patents. (See also intellectual-property law.)

Services account for the vast majority of invisible trade. Such services
include freight and passenger transport; banking, other financial services,
and insurance; scientific-technical exchange; and international tourism.
Income gained by foreign investment is the second largest contributor to
invisible trade, and private and government transfer is the smallest.

In many developing countries, receipts for invisibles are exceeded by payments

for them. This deficit is closely tied to the foreign debt and interest
payments often made by developing countries to the developed countries. The
growing external debt of some developing countries—and their inability to
repay the loans and interest—not only threatens the economies of those
developing countries but also threatens the foreign-investment sector of
invisible-trade earnings for many developed countries. Conditions such as
these have brought calls for creditor countries to offer debt relief to debtor
countries Sent on my BlackBerry® from Vodafone
Invisible receipts for April-June at $8.17 b

Our Bureau

Mumbai , Sept. 30

A 66 per cent increase in invisible receipts helped the country's current account end the April-June
2004 quarter with a surplus of $ 1.9 billion as compared to a deficit of $ 636 million in the year-ago
period.

Invisible receipts in the balance of payments data released by the Reserve Bank of India for the April-
June 2004 quarter have risen to $ 8.17 billion as compared to $ 4.92 billion in the corresponding
quarter year ago.

According to the RBI, invisibles receipts were buoyant mainly because of remittances from expatriate
Indians, software exports and travel earnings. A sharp rise in invisibles payments was on account of
growth in outbound tourist traffic, transportation and insurance payments associated with
merchandise trade and expanding demand for imports of business services.

"India emerged as a favoured travel destination with international tourist traffic rising by 26.8 per
cent in the quarter. Software exports were resilient during April-June 2004," the RBI said.

Private transfers, essentially comprising remittances from Indians working abroad constituted about
30 per cent of gross invisible receipts.

Trade deficit widened further to $ 6.3 billion from $ 5.56 billion in the year-ago period. This,
according to the RBI, was the highest in any quarter so far. This was because imports far outstripped
exports. Imports during the April-June 2004 quarter were at $ 23.12 billion ($18.7 billion) and
exports were $ 16.84 billion ($13.151 billion).

Capital account for the quarter stood at $ 5.6 billion as compared to $ 6.1 billion. A year-on-year
comparison for the April-June quarter shows that during Q1 of 2004/2005 foreign direct investment
(FDI), external commercial borrowings, other banking capital and short-term credits were higher
from the year-ago period.

FDI during April-June 2004 quarter was $ 1.2 billion ($ 0.7 billion). ECBs stood at $ 1.2 billion ($ 0.4
billion). NRI deposits registered net outflow responding to alignment of interest rates on these
deposits with rates of return in the international market.

With foreign exchange reserves of $ 119.5 billion at the end of June 2004, India held the first largest
stock of reserves among the emerging market economies and sixth largest in the world.

According to the RBI data, merchandise imports surged, reflecting the rising crude oil prices and
strong demand for raw materials, intermediates and finished products. Merchandise exports was
robust and well above the target of 16 per cent in dollar terms Sent on my BlackBerry® from
Vodafone.
operations carried out by a country in the conduct of international economic
relations relating to the export and import of services and to the activity of
governments and individual persons. An increase in absolute value and in the
proportion of invisible transactions in international trade is typical of
contemporary economic relations. By the early 1970’s, these transactions
constituted two-thirds the value of the trade in industrial goods and raw
materials in the capitalist world.

Three basic categories can be identified among the assorted economic

operations that make up invisible imports and exports: services, receipt of
income from foreign investment, and private transfers by citizens of one
country to those of another. Services account for more than three-fourths of
invisible exports and imports in the capitalist countries. Such services
include freight and passenger transport, various types of insurance,
scientific-technical exchange, and international tourism. Total turnover in
services equals more than three times the income gained from international
investments and is 12 times greater than the turnover in private transfers.

Some capitalist countries become stronger than others in invisible exports and
imports because of certain specific features of the international division of
labour relevant to the trade in services carried out in labour and capital
markets. (See Table 1.) Until the 1970’s, receipts from invisible exports in
the United States exceeded payments primarily because of major income derived
from private foreign capital investment. A number of European countries
achieved major advantages through the export of particular services. Examples
include Norway, Sweden, Denmark, and the Netherlands in shipping; Spain,
Italy, and Austria in tourism; and Switzerland in tourism and particularly in
banking and insurance. In 1971, Switzerland received about 5.7 billion Swiss
francs in net income just from private investments abroad, foreign insurance
transactions, and banking and other intermediary financial operations.

More than two-fifths of Great Britain’s foreign exchange receipts are gained
through invisible exports. In addition to the major invisible exports known
since colonial times, such as receipts from English capital investment abroad
and from the

Table 1. Invisible exports and imports in world capitalist trade (billions of

dollars)

Services

Investment income

Private transfers

Total

Transport

Tourism

 
 

1961

Receipts.................

31.9

8.8

6.8

9.4

2.7

Payments ................

35.7

10.2

5.5

8.7

2.4

1965

Receipts.................

46.7

12.1

11.0

14.1

4.0

Payments ................

49.0

14.4

10.2

13.4

3.9

1969
Receipts.................

59.8

13.0

14.6

19.8

5.0

Payments ................

61.9

15.1

13.4

18.8

5.4

shipping of foreign cargoes, the City of London derived income in 1971–72 from
insurance (£380 million), banking services (£53 million), other intermediary
financial operations (£45 million), and brokerage transactions (£50 million),
as well as £10 million through the London Commodity Exchange, £24 million
through the Baltic Mercantile and Shipping Exchange, Ltd., and £6 million
through ship registrations placed with Lloyd’s of London.

For most of the developing countries, invisible imports exceed exports; in the
service sector this deficit exceeds $3–4 billion. This deficit is linked to
the payment of dividends and interest on foreign capital investments at an
annual level of more than $6 billion, and reflects the unequal status of the
developing countries in the international capitalist division of labour