Time to raise the bar in services exports

Growth in travel, wellness, and financial services is essential to reduce concentration risk

- DHARMAKIRTI JOSHI, ADHISH VERMA & BHAVI SHAH

Global services exports grew at an average 6.1 per cent annually from 2014 to reach $8.6 trillion in 2024. In the same period, global goods exports rose at a more sedate 2.9 per cent to $24.5 trillion. The upshot of that acceleration? The proportion of services in total global exports climbed up a good 500 basis points to 27 per cent, spurring job creation, especially in developing economies.

According to a 2022 World Bank blog, services exports created 16 million new jobs across a sample of major developing economies between 2005 and 2018, while those supported by goods exports declined 31 million.The trend is expected to have continued in recent years, given the increasing reliance of modern manufacturing on capital-intensive production and highly skilled labour force.

In this milieu, India’s services export trajectory has been phenomenal. For instance, while India accounted for only 1.8 per cent of global goods exports over the past decade and ranked 18th globally (with China ranked first), its share of global services exports rose to 4.2 per cent in 2024, from 3 per cent in 2014. That translates into a services export growth rate of 9.1 per cent versus 6.1 per cent globally, positioning India as the eighth-largest services exporter in the world in 2024, with China being the only developing country ahead of India (more on this later).

Nearly half of our exports are in services, which have been less affected than goods trade by the new United States tariff regime that has kicked in, and that has helped navigate the ensuing turbulence. Services used to account for only around 30 percent of our total exports a decade ago.

Additionally, the composition of services exports is undergoing a rapid transformation. In recent years, the other business services (OBS) segment has emerged as the biggest exporting sector globally, replacing travel services, which dominated before the pandemic.