Services could be India’s growth driver, help generate 70mn jobs over next decade: HSBC Global Research

The spillover of India’s services to other “old India” sectors, like manufacturing and agriculture, along with policy reforms, could be a significant driver of growth and job creation over the medium term, an HSBC Global Research report stated on Thursday.

“India needs to create a whopping 70mn new jobs in the next decade. At the heart of this challenge is invigorating India’s manufacturing sector, which has been rather sluggish in the last few decades,” HSBC economists said in a research note, pointing out that services could help these such companies achieve growth.

The report noted the contribution of start-ups like Zetwerk, which is helping smaller companies secure international orders by standardizing their products and Ola, which entered into EV manufacturing.


It pointed out that services companies could help smaller manufacturing concerns achieve scale by leveraging digital infrastructure to help manufacturers gain access to “formal credit, cheaper raw materials, bigger final markets, better warehousing and logistics, and enhanced quality checks.”

The focus on digital public infrastructure to reduce inequalities and boost growth was also part of the New Delhi declaration of G20 leaders under India’s presidency.

While HSBC said that high-tech manufacturing and services could help India grow at 6.5% over the next decade, higher than the pre-pandemic level of 6%, it pointed out that it would not be able to create enough jobs if it doesn’t support labour-intensive sectors.

“We estimate that India needs to produce 70 million jobs over the next decade, and with a 6.5% growth clip, it will only be able to create one-third of that number of jobs,” it pointed out.

Export boom

The researchers also exuded confidence in India’s ability to generate higher services sector exports in the coming years.

While they did recognise that global slowdown will dent India’s services export expansion, they were hopeful that once the global growth bottoms out, India will be able to take advantage of scale, skills and cost competitiveness.

“India is at a threshold, from where services exports of other stand-out economies like Germany, Ireland, the US, the UK and Belgium, took off,” the researchers highlighted, noting the country’s movement up the value chain from software solution provider to seller of professional services could help services exports grow even stronger.

The researchers pointed to MNCs trying to expand their footprint in India and India becoming a global hub for Global Capability Centres as examples of India’s services expansion.

“We find interesting evidence that many MNCs are increasing their footprint in India,” researchers said, highlighting examples of Novartis, Boeing and Airbus crossing over to manufacturing and others like Apple and Marquardt going beyond manufacturing to set up service centres gradually.

India is targeting services exports to grow to $400 billion in FY24 and equal goods exports target of $1 trillion in 2030.