DC Edit | Time to focus on service sector
India’s service exports outstripped merchandise exports for the first time ever in November 2024, according to the commerce ministry’s trade data. After sustained growth beginning from February 2024, service exports stood at $37.6 billion and merchandise exports at $32.1 billion in November 2024.
While India is known to export more services than it buys from other countries, the value of merchandise exports remained a few billions more than service exports, reflecting the country’s strengths. However, the gap between merchandise and services has begun to get narrower since August.
In November, the growth in merchandise exports contracted mainly because of a drastic fall in exports of iron ore (-70 per cent), oil meals (-51 per cent), petroleum products (-50 per cent), gems and jewellery (-26 per cent), mica and other mines (-10 per cent).
However, out of the top six contributors to exports, namely engineering goods, petroleum products, gems and jewellery, electronic goods, drugs and pharmaceuticals, and organic and inorganic chemicals, four have posted positive growth indicating continued industrial growth in the country.
As most of the sectors that witnessed a contraction represent primary sectors, it hints at a tightening of the global market. The government should remain cautious about a cascading effect on manufacturing, which is a secondary sector in the coming months.
For several years, the government has been keen on pushing the Make in India programme by giving subsidies to manufacturing sectors, However, it did not result in any massive growth in the country’s manufacturing capacities.
The government should, therefore, think of supporting the country’s strength — i.e., services — to take it to the next level. When one looks at the top five exported services, software services outstrips the aggregate value of the next four sectors, viz., business services, travel, transportation and financial services.
The financial services sector has an immense untapped potential, which the government should encourage by bringing in required reforms in education to allow Indian commerce and business graduates to recreate the magic that IT professionals have created for the country.