India’s Services Exports Set To Surpass Merchandise By 2030: GTRI

"At this rate, by FY2030, services exports are expected to reach $618.21 billion, edging past merchandise exports, which are projected at $613.04 billion," the Global Trade Research Initiative said

India is poised for a significant shift in its export landscape, with outbound shipments from the services sector expected to surpass merchandise exports by 2030, reaching $618 billion, according to a report by think tank GTRI released on Wednesday. 

From 2018-19 to 2023-24, India’s merchandise exports grew at a compound annual growth rate (CAGR) of 5.8 percent, while exports of services outpaced this growth, expanding at a strong CAGR of 10.5 percent.

"At this rate, by FY2030, services exports are expected to reach $618.21 billion, edging past merchandise exports, which are projected at $613.04 billion," the Global Trade Research Initiative (GTRI) said.

The report highlighted that the majority of growth in India's services sector comes from two key categories: Software & IT services and Other Business Services (OBS). Together, these sectors accounted for 86.4 percent of the country’s total exports in the last fiscal year.

GTRI Founder Ajay Srivastava noted that OBS, which includes sectors such as legal, accounting, tax consultancy, management consulting, and market research, generated $102.8 billion in 2023-24, making up 33.2 percent of total services exports. 

These industries benefit from India’s highly skilled workforce and its rapidly expanding IT infrastructure, further cementing the country's position as a global services hub. 

Software and IT services, categorized under 'telecommunications, computer, and information services,' contributed $190.7 billion to India's exports in 2023-24. This segment alone accounted for 56.2 per cent of total services exports, with approximately 80 per cent of these services delivered digitally.

"Emerging technologies like generative AI, machine learning, and the Internet of Things are expanding opportunities for Indian firms, driving innovation and global demand for Indian expertise. While software and IT services remain the largest segment, OBS is poised to outpace them in growth, driven by rising global demand for specialised services and the integration of services into manufacturing," Srivastava added.

Globally, trade in Other Business Services (OBS) is more than twice the size of the IT sector, highlighting its immense potential. In 2023, global OBS trade reached $1.8 trillion, making up 25.4 per cent of world services exports, while software and IT services accounted for $762 billion (10.7 per cent).

The GTRI emphasised that diversifying India's IT exports beyond the US is a crucial first step. The US currently accounts for 70 per cent of India's IT export revenue, leaving the sector vulnerable to shifts in US policies. 

"President-elect Donald Trump's criticism of outsourcing and restrictive H-1B visa policies underscore these risks. Automation and artificial intelligence further threaten 40 per cent of IT jobs," Srivastava stated. 

He added that expanding into new markets and focusing on high-value services like digital transformation and AI integration could reduce reliance on the US and drive greater earnings.

The report also called for promoting OBS exports, noting that despite its potential, this segment remains underutilized by many Indian firms. Raising awareness of global opportunities in OBS among professionals in fields like engineering, research, and management could unlock significant growth in this area.

"India should actively target services with high global trade volumes but low domestic participation. Categories such as transport, travel, maintenance and repair, insurance, and financial services offer immense growth potential," it added.