Context

While international trade is often visualized as the shipment of physical goods across borders, a significant and growing part of global commerce involves intangible flows—services, remittances, capital, data, and ideas.

In India’s case, these “invisibles” have surpassed merchandise trade in shaping the country’s external balance.

This article examines how India’s foreign trade narrative has largely overlooked this critical shift, and why recognizing the rising importance of invisibles is essential for understanding the true nature of India’s global economic engagement.

What’s in Today’s Article?

• India’s Evolving Trade Landscape: Tangibles vs. Intangibles
• India’s Invisible Trade: Breaking Down the Components
• India vs China: Contrasting Trade Models

India’s Evolving Trade Landscape: Tangibles vs. Intangibles

• Surge and Stagnation in Goods Exports
  • India’s merchandise exports grew from $66.3 billion in 2003–04 to $318.6 billion by 2013–14, followed by a slowdown.
  • After a post-Covid recovery peak of $456.1 billion in 2022–23, they dipped again to $441.8 billion by 2024–25.
• Steady Rise of Invisible Receipts
  • In contrast, receipts from invisibles—services and private remittances—rose consistently, from $53.5 billion in 2003–04 to $576.5 billion in 2024–25, showing long-term stability and resilience.
  • Where goods exports once outpaced invisibles by $85 billion in 2013–14, the trend has reversed by 2024–25, with invisibles exceeding merchandise by $135 billion.
• Time to Rethink Trade Narratives
  • Despite the growing dominance of intangibles in India’s trade, current trade negotiations—including those with the U.S.—remain largely focused on physical goods and cargo.
  • India’s foreign trade story is increasingly defined by intangibles, signaling a need to shift policy and perception beyond just the movement of goods.

India’s Invisible Trade: Breaking Down the Components

• In 2024–25, services accounted for $387.5 billion of India’s $576.5 billion in invisible receipts—up from just $26.9 billion in 2003–04 and $151.8 billion in 2013–14.
• Private transfers or remittances contributed $135.4 billion in 2024–25, growing from $22.2 billion in 2003–04 and $69.6 billion in 2013–14.
  • These are earnings from the global Indian workforce.
• India’s services exports now span software ($180.6 billion in 2024–25), business, financial, and communication services ($118 billion), and professionals like auditors, consultants, and analysts.
• Resilient to Global Shocks
  • Unlike merchandise exports, invisibles have shown resilience to global economic cycles, crises, and geopolitical tensions—growing steadily without reliance on trade deals or incentive schemes.
  • However, current India–US trade negotiations remain focused on tariffs for goods like textiles and agriculture, leaving out services exports and worker mobility—India’s real trade strength.

India vs China: Contrasting Trade Models

• India’s goods trade deficit nearly doubled from $147.6 billion in 2013–14 to $287.2 billion in 2024–25, driven by high imports of $729 billion against exports of $441.8 billion.
• Despite the growing deficit in merchandise trade, India’s net invisible receipts surged from $115.3 billion in 2013–14 to $263.8 billion in 2024–25, helping limit the current account deficit to $23.4 billion.
• China’s Manufacturing Dominance
  • China posted a massive goods trade surplus of $768 billion in 2024, with exports at $3,409 billion and imports at $2,641 billion—cementing its status as the “factory of the world.”
  • China faces a significant deficit in services trade, importing $613 billion against $384 billion in exports, resulting in a $344.1 billion net invisibles deficit.
• India: The “Office of the World”
  • India’s strong services trade surplus of $188.8 billion, supported by remittances, helped stabilize its external balance.
  • This proved that invisibles, not goods, are India’s true trade drivers.