Services led exports are a mixed blessing for the Indian economy
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Subscribe to enjoy similar stories. If every cloud has a silver lining, the glow around India’s data that shows November’s trade deficit at a record high of $37.9 billion is the remarkable performance of service exports. According to provisional numbers released by the government, service exports are projected to overtake merchandise exports in November 2024.
This is in line with the trend of relative growth over the past few years. In a scenario where US President-elect Donald Trump has threatened to slap “reciprocal" tariffs on India (“If they tax us, we tax them the same amount," he said on Tuesday), this strong showing of service exports and declining reliance on the export of goods is a matter of comfort. Unlike goods trade, which is easily hit by protectionist barriers going up in big markets and is also exposed to geopolitical disruptions, as in West Asia and Ukraine, service exports are largely free of such constraints.
Luckily for us, even as the heydays of infotech and IT-enabled exports appear to be behind us (though software accounted for a sizeable chunk of exports last year), and AI has newly cast a long shadow on a big slice of this business, global capability centres or GCCs have emerged as the new golden geese. They deliver more high-end work than many run-of-the-mill software companies, and value realizations are also higher. Unlike China, which became the factory to the world, India seems set to become the world’s provider of tradable services.
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