A critical soar in service exports of India is likely noted in recent times, with the ability to protect the nation’s economy from external risks.                          

An unprecedented soar in the service exports of India was witnessed in the October-December quarter, which shielded the economy from external risks. A tapered global economy will likely weigh on the country’s merchandise exports.

Service exports in the arena are driven by varied sources like IT services and lucrative offerings like consulting, research and development, analysts, and economists. The Reserve Bank of India (RBI) service exports of India managed to rise to nearly 24.5 percent in October-December 2022, thereby, hitting a record of 83.4 billion USD during the quarter.

Alongside this, the service surplus, deducting imports from the criteria also has increased to 39.21 percent, recording up to 38.7 billion USD.  It has likely resulted in the current account deficit shrinking per the anticipated value to nearly 18.2 billion USD, with a gross domestic product of 2.2 percent. Sunil Talati, chairman of the Services Export Promotion Council has underlined the scope for the growth of service exports to almost 375 billion USD by March 2024, soaring invariably per the value calculated in March 2023 at 320-350 billion USD. Hence, service exports are all set to surpass goods exports in the future.

October-December merchandise exports in the past annual period were valued at 105.6 billion USD, where IT services accounted for 45 percent of India’s total service exports accordingly. Moreover, Professional and management consulting has been elevated alongside a compound annual growth rate (CAGR) of 29 percent in the past three annual periods.

The increased growth in service exports is highly powered by global capability centers, that critically aim at offering a range of high-end and critical solutions like accounting and legal support for global clients. These exports will undoubtedly hold up better compared to goods exports in the face of a weakened global economy. The chief strategy officer at the software industry lobby group, National Association of Software and Service Companies (Nasscom), Sangeeta Gupta has observed rapid growth in global capability centers in the past three years.

India is home to over 45 percent of global capability centers in the world. And, the chief Indian economist at Hongkong and Shanghai Banking Corporation Limited (HSBC: LON) Securities and Capital Markets, Pranjul Bhandari has briefed that these centers were commenced to provide support functions, that have likely moved up the ladder to tech enablement, business operations, R&D, and capability and business development.

This critical rise in service exports will assist India in the current account deficit, where Vivek Kumar, an economist at QuantEco Research suggests revising CAD estimates for the 2022-23 and 2023-24 annual periods.