• Factor income:  Net international earnings on factors of production such as labor, land, and capital; 
• Non-factor income: Net sale of service products like shipping, banking, tourism, and software services.
• In terms of economy, the visit by foreign nationals to witness the XIX common Wealth Games in India amounted to  Export [UPSC 2011]
• India’s Share: In global merchandise trade is only 1.8% and 4% in global services. [UPSC 2023]

Actions which the government can take to  reduce the current account deficit [UPSC 2011]

• By increasing exports or by decreasing imports  by manipulating the exchange rate through devaluing of domestic currency. 
• Reduction in the export subsidy might impact negatively. 
• Adopting suitable policies which attract greater FDI and more funds from FIIs.

• The major portion of India’s current account deficit is in the area of merchandise trade; India’s exports of services are more than its imports of services; India suffers from an overall trade/current account deficit. [UPSC 2020]
• Currency crisis is brought about by a decline in the value of a country’s currency; The foreign current earnings of India’s IT sector and remittances from abroad would lead to more inflow of foreign currencies in the economy and boost the foreign exchange reserves; Increasing government expenditure will have no effect on the value of the currency since it is not related to change in foreign exchange reserves or any currency fluctuations. [UPSC 2019]
• If another global financial crisis happens in the near future, low dependence on short term foreign borrowings are most likely to give some immunity to India. [UPSC 2020]
• Import Cover: It is the number of months of imports that could be paid for by a country’s international reserves. [UPSC 2016]
• Old Balance of Payment Accounting Standards
• Components of BoP: Current Account and Capital Account
• New Balance of Payment Accounting Standards
• Components of BoP: Current Account ,Capital Account and Financial Account (all transactions related to trade in financial assets like bonds and equity shares)
• Intangible Asset: An  identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.
• Intangible investments: Market knowledge and trademarks (including brand names and publishing titles), computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licenses, import quotas, franchises, customer or supplier relationships, customer loyalty, market share and marketing rights, goodwill etc. [UPSC 2023]
• Types of international economic transactions
• Autonomous Transactions: when transactions are made due to some reason other than to bridge the gap in the balance of payments. These items are called ‘above the line’ items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments.
• Accommodating transactions : Termed ‘below the line’ items, are determined by the gap in the balance of payments; Official reserve transactions are seen as the accommodating item in the BoP.

• India consistently generated a large export surplus during the colonial period. 

RoDTEP

• Various Central and State duties, taxes, and levies imposed on input products, among others, would be refunded to exporters; 
• It has succeeded the Merchandise Exports from India Scheme (MEIS) as the latter was not compliant to WTO (World Trade Organisation) regulations. 

External Commercial borrowings

• Regulated by: Ministry of Finance and RBI
• Route: Automatic and Approval
• Commercial borrowings are the largest component of external debt with a share followed by NRI deposits and short-term trade credit; US dollar denominated debt continues to be the largest component of India’s external debt followed by the Indian Rupee, SDR , Yen and Euro. [UPSC 2019]

• Tight monetary policy of the US Federal Reserve could lead to capital flight; 
• Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs); 
• Devaluation of the domestic currency would increase the currency risks associated with ECBs and will result in higher interest cost for borrowers. [UPSC 2022]
• Problem of international liquidity is related to the nonavailability of Dollars and other hard currencies [UPSC 2015]

Government Initiatives to promote trade

• Nirvik (Niryat Rin Vikas Yojana) Scheme
• Introduced by Credit Guarantee Corporation of India 
• It is an Export Credit Insurance Scheme (ECIS). 
• To enhance loan availability and ease the lending process
• Services Exports from India Scheme (SEIS)
• To promote exports in services.
• Rewards (duty credit scrips) to exports of services.
• Scrips are transferable and can be used to pay certain central duties & taxes
• Special Economic Zone (SEZ)
• Created by SEZ Act 2005
• Aim: develop expert hubs to promote growth and development.
• India had set up Asia’s first ‘Export Processing Zone’ (EPZ) in Kandla in 1965 itself.
• Minimum Land Area requirement reduced to 50 per cent for multi-product and sector-specific SEZs. 
• A new agro-based food processing sector has been introduced.
• Dual use of facilities like Social and Commercial infrastructure by SEZs and non-SEZs entities has been allowed in order to make SEZ operations more viable.
• Sectoral broad-banding has been introduced to encompass similar and related areas under the same sector.
• ‘SEZ India’ mobile app launched to help the SEZs to track their transactions.
• Trade Infrastructure for Export Scheme
• Provides financial assistance in the form of grant-in aid to Central/State Government owned agencies for setting up or for up-gradation of export infrastructure.
• Agriculture Export Policy 2018
• To double agricultural exports from present US$ 30 Billion to US$ 60 Billion by 2022.
• Strive to double India’s share in world Agri exports
• Export Credit Guarantee Corporation of India (1957)
• Objective: To promote exports from the country by providing credit risk insurance and related services for exports.
• Wholly owned by the Ministry of Commerce and Industry
• Duty-Free Import Authorization (DFIA) 
• Duty-free import of inputs, fuel, oil, energy sources, a catalyst which is required for the production of export goods is allowed. 
• The importer is required to meet certain export obligations w.r.t. the finished goods.
• The minimum value addition of 20% is mandatory to be required to be achieved.
• Export Promotion Capital Goods (EPCG)
• Allows import of capital goods for pre-production, production and postproduction at Zero customs duty.
• To apply for an EPCG scheme, an IEC is required
• Electronic Import Exporter Code (IEC) 
• Import exporter code is an export permit that is mandatory for carrying out exports and imports from/ to another country.
• New Foreign Trade Policy
• To make India a leader in the area of international trade and channelize the synergies gained through merchandise and services exports for growth and employment. 
• To make India a USD 5 Trillion economy.