India’s Services Exports Surpass Merchandise Exports, Reach Record High of $322 Billion in FY23
The Reserve Bank of India (RBI) released data on Tuesday showing that India’s services exports had risen by a record 26.6% in FY23 to $322 billion, narrowing the gap with merchandise exports, which only grew 6% to $447 billion in the same period. Meanwhile, services imports increased 22.2% to $179.7 billion, resulting in a services trade surplus of $142.5 billion. Although India recorded a $267 billion merchandise trade deficit in the last financial year, the strong growth in services exports helped to mitigate the overall trade deficit, leaving the country with a net exports deficit of $124.5 billion.
India’s services exports cover a wide range of industries, including information technology (IT), healthcare services, and more. The Reserve Bank of India’s quarterly balance of payment data includes various sectors such as transport, travel, construction, insurance and pensions, financial services, telecommunications, computer and information services, and personal, cultural, and recreational services, as well as other business services. While software exports are the main contributor to India’s services exports, there has been a recent increase in “other business services” exports, which accounted for 24% of the total services exports in the first nine months (April-December) of FY23. This category includes legal services, accounting, auditing, book-keeping, tax consultancy services, management consulting, managerial and public relations services, as well as advertising, market research, and public opinion polling services.
In April, Kotak Institutional Equities released a report stating that the growth in business services was being propelled by the expansion of global capability centres (GCC) in India. The report mentioned that India’s abundant supply of skilled labor and the significant wage difference with developed markets would likely provide a sufficient labor supply for the growth of business services exports. While the macroeconomic factors appear promising, the report called for more clarity on the specific composition of these exports, given the substantial increase in exports in recent quarters.
In April, Kotak Institutional Equities released a report stating that the growth in business services was being propelled by the expansion of global capability centres (GCC) in India. The report mentioned that India’s abundant supply of skilled labor and the significant wage difference with developed markets would likely provide a sufficient labor supply for the growth of business services exports. While the macroeconomic factors appear promising, the report called for more clarity on the specific composition of these exports, given the substantial increase in exports in recent quarters.
