Bt C. P. Chandrasekhar and Jayati Ghosh in IDEAS, 14 May 2024
Interest in India’s almost unique success as a services exporter in global markets persists. India’s services export receipts rose from $95.8 billion in post-crisis year 2009-10 to $341.1 billion in 2023-24. Close to one half (47 per cent) of those exports were exports of software services, with business services accounting for another 24 per cent. Led by those sectors, India’s share in global exports of commercial services has risen from 3 per cent in 2010 to 4.7 per cent in 2023. India has indeed done well in this area.
Charts 1 and 2 illustrate how the increase in global exports share has made a significant difference to India’s performance as an exporter of services. Chart 1 tracks the revenues from the exports of commercial services in the case of India and the world, showing the degree to which India’s services export growth has exceeded that of the world. Chart 2 shows what India’s performance (relative to actual) would have been if its share had remained at the 3 per cent level it recorded in 2010. The ability to win larger shares of the global market, by retaining its competitive advantage, has been crucial to India’s success.
But that does not necessarily justify the view that this success in services export is driving India’s GDP growth in a way that makes its development trajectory unique. The criticism that the share of manufacturing in India’s GDP has been (and remains) disappointingly low is discounted in this assessment, since the country is seen as pioneering an altogether different road to developmental success, in which labour absorbing services serve as the growth drivers.
However, as of now, in a country where services contribute more than 50 per cent of GDP, net revenues from services exports amounted to just 3.4 per cent of GDP in 2022. Thus, the direct contribution to GDP of the 22 per cent increase in net services exports in 2021-22, for example, would have been just three-fourths of a percentage point.