India’s services exports to surpass goods exports by FY30, says GTRI report

New Delhi: India’s services exports will outpace merchandise exports by 2030, marking a major shift in the country’s trade dynamics, economic think tank Global Trade Research Initiative (GTRI) said in a report on Wednesday.

The report, titled 'India’s Services Export Revolution: Set to Outpace Merchandise by 2030' said services exports are projected to be $618.21 billion, slightly higher than merchandise exports at $613.04 billion by FY30.

Between FY2019 and FY2024, services exports rose at a compound annual growth rate (CAGR) of 10.5%, nearly double the 5.8% CAGR of merchandise exports, it added.

India's forte

The services sector’s growth is fuelled by two dominant segments – software and IT services, and other business services (OBS). They accounted for 86.4% of total services exports in FY24.

Software and IT services, categorised under ‘telecommunications, computer, and information services’, contributed $190.7 billion or 56.2% of India’s total services exports in FY24, the report said.

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Innovations in artificial intelligence, the internet of things and digital transformation continue to drive demand for India’s IT expertise globally, with about 80% of these services delivered digitally.

OBS, which includes legal, tax, consulting and market research services, generated $102.8 billion in FY24, or 33.2% of total services exports.

"With a global market more than twice the size of IT, OBS is poised to outpace IT services in growth, driven by rising demand for specialised expertise and integration with manufacturing processes," the report said.

Room for improvement

Despite its dominance in IT and OBS, India remains underrepresented in other global service sectors such as transport, travel, financial services and insurance, which collectively account for 64% of global services trade, it added.

During FY24, India's merchandise exports stood at $437.06 billion, down from $451.07 billion during the previous fiscal. Goods imports fell to $677.24 billion from $715.97 billion over the same period.

Meanwhile, India's service exports stood at $339.62 billion in FY24, up from $325.33 billion in the previous fiscal, while imports fell to $177.56 billion from $182.05 billion in FY23.

The overall trade deficit, including merchandise and services, shrank to $78.12 billion in FY24 from $121.62 billion in FY23.

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During FY24, the main drivers of merchandise export growth included electronic goods, drugs and pharmaceuticals, engineering goods, iron ore, cotton yarn/fabric, handloom products, and ceramic products & glassware, according to the commerce ministry.

To maintain momentum in services exports, GTRI recommended diversifying IT exports beyond the US, promoting OBS in non-Gulf markets, and expanding into underrepresented sectors such as transport and financial services. Improving data transparency and leveraging manufacturing growth to boost service integration are also critical, it said.

"With the right policies and investments, India’s services sector can achieve sustained growth, contributing significantly to the country’s economic aspirations and cementing its position on the global stage," it added.

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