Services poised to surpass goods in exports by 2030, GTRI projects

India’s services exports are poised to surpass goods exports by the end of the decade, policy think tank Global Trade Research Initiative (GTRI) said in a report.

Services exports at $618.21 billion will overtake merchandise exports at $613.04 billion by fiscal 2030, GTRI said, while advocating that India concentrate on increasing its share in ‘other business services’ category comprising transport and travel, maintenance and repair services, where it holds just a 1.9% share globally.

“India holds just a 1.9% share in other business services, which comprises 64% of global services trade,” GTRI founder and director Ajay Srivastava said in the report.

Key areas in the ‘other business services’ category where India’s share is low include transport and travel (2.4%), maintenance and repair services (0.24%), insurance and pension services (1.38%), financial services (1.30%), and intellectual property-related charges (0.23%), he said.

“Globally, ‘other business services’ trade is more than twice the size of the IT sector. In 2023, global ‘other business services’ trade stood at $1.8 trillion, accounting for 25.4% of world services exports, compared with $762 billion (10.7%) for software and IT,” he said.

Fueled by faster growth and a larger global market, exports of ‘other business services’ are set to overtake IT as the most significant contributor in the category, he added.

Between FY19 and FY24, merchandise exports grew at a compound annual growth rate (CAGR) of 5.8%, while services exports surged at a robust CAGR of 10.5%.

Software and IT services, and ‘other business services’ accounted for 86.4% of total services exports in FY24.

Software and IT services, which are grouped under the broader telecom, computer, and information services, contributed $190.7 billion to India’s exports in FY24. The report said this segment represents 56.2% of India’s total services exports, with about 80% delivered digitally.

The report said emerging technologies such as generative AI, machine learning, and Internet of Things are expanding opportunities for Indian firms and driving innovation and global demand for Indian expertise.

About 70% of India’s IT export revenue comes from the US, the report said, while suggesting that the country diversify its IT exports beyond the US and tap newer markets.

US President-elect Donald Trump’s Make America Great Again (MAGA) policy and likely restrictions on H-1B visas and automation and artificial intelligence are expected to threaten 40% of IT jobs, the report added.

“India needs to target categories like transport, travel, maintenance and repair, insurance, and financial services to shore up its exports in these underserved service categories,” Srivastava said. “Strategic efforts to increase India’s share in these segments could diversify the country’s services export portfolio and reduce dependence on IT and other business services.”

To realize India’s untapped potential in services exports, Srivastava suggested regulating the dominance of top US tech firms like Google, Facebook, Amazon, and Open AI to boost the growth of Indian digital enterprises.

Strengthening India’s manufacturing sector can create additional demand for engineering, design, AI, IoT, and robotics services, which will further boost exports, he added.