According to India Ratings and Research (Ind-Ra), the services trade surplus in India is projected to grow by 17.8% year-on-year in FY24, reaching USD168.9 billion, compared to USD143.3 billion in FY23. This surplus is expected to cover 62.2% of the merchandise trade deficit in FY24, compared to 54.0% in FY23.
In FY23, India experienced a 14.3% year-on-year growth in overall exports, including both merchandise and services. Merchandise exports reached USD456.1 billion in FY23, up from USD429.2 billion in FY22, while services exports amounted to USD325.3 billion, up from USD254.5 billion. Both merchandise and services exports reached their highest-ever annual levels.
However, the outlook for external demand in FY24 remains uncertain due to global challenges. Recent monthly export data indicate a decline in the year-on-year growth of both merchandise and services exports.
The challenging global conditions, including high interest rates and reduced consumer spending in advanced economies, are expected to slow down IT/ITES spending, impacting India’s software exports in FY24. However, despite these headwinds, India’s business services sector, which experienced a remarkable growth of 36.3% YoY in FY23, presents significant export opportunities, according to Ind-Ra.
Business services, the second-largest category of India’s services exports, accounted for 23.2% in FY23, following software exports at 45.1%. This category encompasses various services such as accounting, auditing, R&D, legal, consultancy, quality assurance, after-sales support, advertising, trade fairs, architecture, engineering, tax consulting, market research, public opinion polling, and wholesale and retail trade. Additionally, personal, cultural, and recreational services like education, healthcare, audio-visual, museums, libraries, and archives hold substantial export potential for India.
In FY21, India exported accounting, auditing, and bookkeeping services worth USD 1.75 billion. Research and Markets.com estimates that the global accounting services market will grow to USD 1,738.7 billion by 2031, up from USD 587.94 billion in 2021. Similarly, the global legal process outsourcing market is projected to reach USD 120 billion by 2030, compared to USD 10.77 billion in FY21. India’s legal services exports in FY21 amounted to USD 1.05 billion. Healthcare and education services also present significant opportunities for export.
The realization of the full potential of services exports relies heavily on active government support. While tariff and tax barriers have become non-discriminatory due to global compliance with the World Trade Organization, non-tariff barriers still exist, hindering the seamless cross-border delivery of services. Therefore, government support is crucial to eliminating or reducing non-tariff barriers, especially in the digital delivery of services (Mode 1 under the General Agreement on Trade in Services).
Government support should encompass several key areas. Firstly, there is a need to develop robust network infrastructure to facilitate efficient and secure service delivery. Secondly, digitization efforts must be prioritized to enable digital transformation across industries. Lastly, addressing data privacy and protection issues across different jurisdictions is vital for building trust and ensuring smooth cross-border service provision.
Furthermore, the government can contribute to the growth of the services sector exports by investing in education and fostering a skilled workforce capable of meeting the demand for digital skills. By aligning educational programs with the requirements of the digital economy, the government can enhance the competitiveness of India’s services exports and drive sustainable growth in this sector.
Source: TREND News Agency