Services trade surplus to cover nearly two-thirds of merchandise trade deficit in FY24

economictimes.indiatimes.com:

Ind-Ra) expects the services trade surplus to grow 17.8% yoy in FY24 (FY23: 33.3%) and reach USD168.9 billion (FY23: USD143.3 billion). This is expected to finance 62.2% of the merchandise trade deficit in FY24 (FY23: 54.0%). India’s overall exports (merchandise plus services) grew 14.3% yoy in FY23.

While merchandise exports touched USD456.1 billion in FY23 (FY22: USD429.2 billion), services exports reached USD325.3 billion (USD254.5 billion). Both merchandise and services exports registered the highest-ever annual exports. However, external demand in FY24 would remain uncertain due to global headwinds.

Monthly export data suggest that indeed the yoy growth of both merchandise and services exports has declined lately. As global headwinds, high interest rates, and low consumer spending in advanced economies affect the budgets of businesses, spending on IT/ITES is likely to slow down and affect India’s software exports in FY24. However, Ind-Ra believes the fast-growing category of business services, despite global headwinds, holds immense export opportunities for India.

In FY23, business services exports grew 36.3% yoy compared to software exports of 20.2% yoy. Business services is the second-largest category accounting for 23.2% of India’s services exports in FY23 after software exports (45.1%). Business services include services such as accounting, audit, R&D, legal, business/management consultancy, quality assurance, after-sales service centres, advertising, trade fair, architecture, engineering, tax consulting, market research, public opinion polling, and wholesale and retail trade.