India’s breakthrough in the services exports

The continuous efforts of the government have boosted India’s service exports trajectory, India is now well-positioned to achieve its target of US$ 1 trillion services exports by 2030. The strong services exports trajectory strengthens its path to development and a leading position across the world.

The service sector contributes significantly to India’s overall driven by key segments such as professional and management consulting services, freight transport services, audio visual related services and telecommunications.

The high growth in exports is majorly backed by increasing demand for India’s software services across the World.  The government plans to focus on various service segments such as healthcare, tourism and IT & BPM, to achieve the US$ 1 trillion services exports target by 2030.

Globally, USA, UK, Germany, Ireland and France are the top exporters among the developed countries and Chin, India, Singapore, UAE and Turkey are the top exporters among the developing countries.

Services sector contributes more than 50% to India’s GDP, supported by the robust expansion of the service sector across the segments. The revenue generated from India’s services exports increased from USD 95 billion during the Post-Lehman crisis period of 2009-10 to USD 340 billion recently in the year 2023-24.

The software services accounts for 47% of the total services exports followed by 24% by business services. Primarily driven by these sectors, India’s portion of global commercial services exports has surged from 3% in 2010 to 4.7% in 2023.

The manner in which services are exported has a significant impact on India’s GDP, displaying a unique characteristic. Labour services play a crucial role in driving growth of services and GDP. India’s services exports encompass a diverse array of sectors, demonstrating the country’s robust capabilities in the global market. Among these, professional consulting has emerged as the fastest-growing segment, driven by a large pool of skilled professionals, English-speaking experts, and chartered accountants, among others who offer high-quality advisory services worldwide.

Financial services are poised for significant expansion in India, particularly with initiatives like Gujarat International Finance Tec-City (GIFT City), which aims to position India as a global financial hub. This dynamic landscape underscores India’s potential to capitalize on its human capital and technological advancements to further enhance its service exports trajectory.

India’s services exports initially began to grow on the back of offshoring, a cost-saving measure in which global companies started outsourcing their back-office operations to units in India. But over the period, these units have grown increasingly specialized and moved up the value chain over the past decade. Now these units support a variety of business processes, such as IT, finance, human resources, and analytics.

On the back of such a transformation, India’s service exports have seen a remarkable expansion over the past decade, from USD 142 billion in 2011-12 to an impressive USD 340 billion in 2023-24. This substantial increase highlights India’s strengthening position in the global services market, driven by advancements in technology, a skilled workforce, and strategic policy initiatives. The robust growth trajectory underscores the vital role of the services sector in India’s economic development and its increasing contribution to the nation’s GDP.

India’s Service exports from 2011-12 to 2023-24

India’s service exports as a percentage of total exports (%)
Source: Compiled from RBI and Ministry of Commerce, GOI.

The share of service exports in India’s total exports has risen significantly, growing from 35% in 2009-10 to 37% in 2015-16, and reaching 44% in 2023-24. This upward trend highlights the increasing importance of the services sector in India’s economy.

This growth signifies a shift towards a more diversified export base, reducing dependency on traditional goods exports and enhancing economic resilience. The rise in service exports underscores India’s competitive edge in knowledge-based industries, leveraging its skilled workforce, particularly in IT, consulting, and financial services.

The sustained growth in service exports will foster higher employment rates, contributing to overall economic development in the country.

India’s exports of services are diversified to many regions globally, with the USA, the UK, and Japan being the largest importers. The popularity of India’s services is attributed to its large, cost-effective, and English-speaking workforce. Consequently, software, computer services, IT, BPO, and call centres are among the most significant services exported to America, Europe, Asia, and the Gulf countries.

Other major markets for Indian software services include Canada, Australia, and New Zealand. Additionally, the Asia-Pacific, Latin America, and the Middle East are notable importers of Indian services.

The United States is the most prominent destination of India’s services exports. India’s large chunk of services exports goes to the United States. Thisdemonstrate India’s persistence and relevance in the global service trade arena. The United States is the largest market for India’s services exports. Despite the pandemic’s hurdles, India’s dedication to building a rich talent pool and sustaining Atmanirbhar Bharat initiatives has made India a strong player in the global services exports.

In conclusion, as the world has grown more wired and interconnected, India has been able to export more services, expanding the exports trajectory from advanced economies to emerging and developing countries. The large talent pool has benefited India to remain net exporter.

The trajectory of India’s services exports strengthens each day and create advantages in the augmentation of foreign exchange reserves, thereby aiding in the management of balance of payments.