India becomes the 7th largest services exporter

India has emerged as the seventh-largest services exporter globally, up from 24th in 2001. Services exports increased from US$ 53 billion in 2005 to US$ 338 billion in 2023, contributing nearly 10% to GDP and helping reduce the Current Account Deficit to USD 23.2 billion in FY 2023-24. Goldman Sachs forecasts that services exports will reach $800 billion by 2030, highlighting their critical role in India’s economic future.

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India becomes the seventh-largest services exporting country globally, up from 24th place in 2001, reflects a significant transformation in its economic landscape. The country now excels in several areas of the service sector: ranking second in telecommunication, computer, and information services; sixth in personal, cultural, and recreational services; eighth in other business services; tenth in transport services; and fourteenth in travel services.

India’s share of global services exports rose to 4% in FY 2022-23, up from an average of 3.3% between 2016 and 2020. Historically, India’s share has expanded from 0.5% in 1993 to 4.3% in 2022.

Between 2005 and 2023, India’s services exports surged from US$ 53 billion to US$ 338 billion. Over the past decade, exports have grown at a 10-year CAGR of 9%, which is almost twice the global average. Services exports now contribute nearly 10% to India’s GDP, outpacing the growth rate of merchandise goods exports.

Source: UNCTAD

The growth in services exports has been a significant contributor in improving India’s Current Account Deficit (CAD). In FY 2023-24, the CAD narrowed to US$ 23.2 billion (0.7% of GDP), down from US$ 67 billion (2% of GDP) the previous year. This improvement underscores how increased services exports have bolstered India’s balance of payments and contributed to overall economic stability.

The Indian government’s diverse range of initiatives has contributed to make notable impact across various sectors and is set to deliver further benefits. The ‘Action Plan for Champion Sectors in Services’ is driving growth in critical areas such as healthcare and IT, while the tourism sector is poised to generate US$ 50.9 billion in visitor exports by 2028.

In education, the expansion of universities supports a growing academic landscape. Financial inclusion has been significantly enhanced by the ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’, which has led to a substantial increase in bank accounts and deposits.

The PLI scheme for telecom is attracting major investment and creating thousands of jobs, and skill development programs like PMKVY are effectively empowering the youth.

In healthcare, the PM Ayushman Bharat Health Infrastructure Mission and a new credit incentive program are bolstering infrastructure. Investments in BharatNet and the National Broadband Mission are improving digital connectivity, while increased FDI limits in insurance are expected to boost investment. Efforts to enhance the digital economy and develop cloud-based infrastructure are fostering innovation, and international collaborations, such as with Japan, are advancing telecom capabilities.

Services exports have witnessed a steady momentum post-pandemic and accounted for 44% of India’s total exports in FY24, according to the Economic Survey. India ranked fifth in services exports, with other countries being the EU (excluding intra-EU trade), the US, the UK, and China.

Additionally, India’s rise as a preferred destination for Global Capability Centres (GCCs) by multinational corporations has significantly boosted software and business services exports.  The country’s share in digitally delivered services exports globally increased to 6% in 2023 from 4.4% in 2019. 

Looking ahead, Goldman Sachs projects that India’s services exports will reach around $800 billion by 2030, making up 11% of GDP. This forecast highlights the ongoing expansion of India’s services sector and its crucial role in improving the current account balance and supporting overall economic growth.