Services exports likely to touch $1 trillion 3 years before target

An expected rebound in inbound tourism and growing demand for India’s services in sectors such as medicine, law and even gaming may help the country boost services export revenue to $1 trillion in 2027, three years ahead of estimates, said a senior official at a top trade promotion body.

Experts, however, said the target is ambitious and would require boosts, enhanced trade agreements and incentives from the government across various services sectors.

"We had a meeting with the commerce minister (Piyush Goyal) a few days ago. In that meeting, it was discussed that the way things are going, we may achieve this target by 2027,” said Karan Rathore, vice chairman of Services Export Promotion Council (SEPC). The current target is 2030.


Service exports contribute to 40% of total exports but have been growing at a faster clip than merchandise exports. India’s target for merchandise exports for FY22is $400 billion while that for service exports is $240 billion.

The target for service exports in FY23 is $325 billion. Merchandise exports are expected to reach the $1-trillion target in FY27, said Ajay Sahai, director general, Federation of Indian Export Organisations.

Service exports contracted during the Covid19 pandemic but the fall was cushioned by increased digitisation and hybrid modes of working.

Services are exported under four modes: direct exports such as an IT executive servicing a client abroad; services, primarily hospitality, provided to foreign tourists coming into India; an Indian educational, medical or financial organisation opening up outlets abroad; individuals travelling abroad to provide services, which is different from salaried jobs.

“IT and ITES remain one of the top service exports from the country. Nearly 50% of the total services exports comprises IT exports. According to the RBI, Software services exports went up by 2.1 percent to $148.3 billion in 2020-21. Exports include services of foreign units affiliated with Indian companies. IT exports dominate the industry and constitute the majority of the total revenue,” said Rathore.

“However, apart from IT&ITES, there are several other sectors that are performing well and growing at a rapid pace. These include consultancy services, AVCG ( Audio visual and gaming), travel and tourism, logistic services, other business and financial services led by fintech,” he added.

Rathore said a push on tourism will also help. For example, the Rajasthan state government’s investment on tourism quadrupled to Rs 1,000 crore for FY22 compared to Rs 400 crore.

The one significant incentive to service exports is Service Exports from India Scheme (SEIS), through which the government aims to promote export of services from India by providing duty scrip credit for eligible exports. But more must be done, said Rathore.

“SEPC has proposed an alternative scheme to SEIS called DRESS (Duty Remission on Export of Services Scheme) as an alternative to SEIS since the Government is planning to do away with SEIS. Services industry has grown on its own with minimal support from the government, with immense contribution to the country’s GDP, employment, FDI inflows and exports. Therefore, the industry expects recognition and due appreciation from the government,” said Rathore.

Sahai said that the trade agreements like the Comprehensive Economic Partnership Agreement recently signed between India and UAE will help. India already has such agreements with ASEAN nations including Singapore and Malaysia.

He however added there need to be more facilitation in services through the mutual recognition agreement degrees between countries as well as easier immigration rules to exploit the huge potential in Mode4 of services.