As Services Grow Big In Exports, Needs Govt Support To Touch $1 Trillion by 2030

Chennai: The services export will grow from $418 billion in FY26 to $500 billion in the current financial year to overtake merchandise exports and is well on its path of achieving $1 trillion by 2030, finds Abhay Sinha, Director General, Services Export Promotion Council. The services industry has been growing on its own and has been cushioning the trade deficit of goods export. It expects the support of the government in the form of duty and tax remission schemes to grab a larger share of the growing global services market.

Q) In the trade basket, services have been performing well in the past few years. Last November, you saw monthly services exports overtake merchandise exports. What factors are supporting this growth and when will services exports surpass goods exports annually?

Services exports have shown sustained growth despite disruptions like COVID-19, which hit sectors such as tourism and medical travel. Recovery has been driven by new opportunities, with IT contributing around 40–42% and business services about 22–25%. Together, they account for nearly 65% of exports. Engineering and R&D services are also emerging strongly. With the gap between merchandise and services exports narrowing to about $23 billion, services are likely to overtake goods exports by the end of this financial year.

Q) Services trade has maintained a surplus, cushioning the overall trade deficit. Which sectors contribute most to this surplus?

The surplus in services—growing at double-digit rates—has significantly offset the goods trade deficit, at one point by about $155 billion. This strength comes largely from IT, business services, and other professional services.

Q) What constitutes the fast-growing business and professional services segment?

This includes bookkeeping, accounting, legal services, LPO, architecture, consulting, market research, and construction-related services. These are skill-based offerings delivered by professionals such as chartered accountants and consultants, forming a diverse and rapidly expanding segment.

Q) What are India’s key markets and the challenges in diversification?

Exports remain concentrated in the US and EU. There is some traction from Africa and CIS countries through education and medical tourism, but high-value tourism and strong engagement with regions like Latin America are limited. Diversifying markets remains a key challenge.

Q) What are the key challenges across the four modes of services trade?

Each of the four Modes of service delivery—digital delivery, consumption abroad, commercial presence, and movement of professionals—faces regulatory hurdles. Mode 4, involving workforce mobility, faces visa and compliance barriers. FTAs with regions like the EU, UK, UAE, and upcoming deals are expected to ease some constraints and expand opportunities.

Q) What more should trade agreements address to boost services exports?

Key issues include lack of reliable bilateral data, visa restrictions, and qualification barriers. Professionals often need to clear costly exams abroad. Sectors like nursing face hurdles despite strong demand in aging economies. These barriers need to be negotiated in trade deals.

Q) How do you view concerns around data provisions in trade deals, especially with the US?

While details are still unclear, any provisions on data could impact services. However, there is optimism that such agreements will open more opportunities for Indian professionals.

Q) Does India have adequate regulatory frameworks for services trade, especially in emerging areas?

There is a need for enabling regulation that enhances credibility without restricting growth. For example, medical tourism thrives on quality but lacks regulation of intermediaries, which can limit potential.

Q) What is the impact of AI and digital transformation on services exports?

AI is both a disruptor and an enabler. While it may affect some sectors, it enhances service delivery, improves market intelligence, and strengthens digital transactions. It will expand opportunities across sectors.

Q) Where do you see new opportunities emerging?

AI-driven sectors such as health tech, fintech, agri-services, space, defence, and SaaS show strong potential. Startups, largely services-driven, will play a key role in pushing exports from $418 billion in FY26 to $500 billion in this financial year and eventually to $1 trillion by 2030.

Q) What support does the sector need from the government?

Unlike manufacturing, services receive limited policy support despite comparable export value. Schemes like PLI and RoDTEP are not extended to services. The industry has proposed a duty remission scheme - DRESS (Duty Remission on Export of Services- similar to RODTeP to support future growth.