India’s Share in World’s Commercial Services Exports Rise to 3.5 Per Cent in 2018: Economic Survey 2019-20

Growing in its significance, the Services Sector accounted for about 55 per cent of the economy and Gross Value Added (GVA) growth, two-thirds of total FDI inflows into India and about 38percent of the total Commercial Services Exports. This was emphasized by the Economic Survey 2019-20, tabled in the Parliament today by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman. The sector’s share now exceeds 50 per cent of the Gross State Value Added in 15 out of the 33 states and UTs, the Survey further noted.

The Survey added that the services sector saw a 33 per cent jump in the gross FDI equity inflows during April – September 2019, touching US$ 17.58 billion. This was driven by strong inflows into sub-sectors such as Information & Broadcasting, Air Transport, Telecommunications, Consultancy Services and Hotel & Tourism, the Survey observed.

The Survey underscored that services exports have outperformed goods exports in the recent years, due to which India’s share in world’s commercial services exports has risen steadily over the past decade to reach 3.5 per cent 2018, twice the share in world’s merchandise exports at 1.7 per cent.

The Pre-Budget Survey also observed that various high-frequency indicators and sectoral data such as air passenger traffic, rail freight traffic, port and shipping freight traffic, bank credit, IT-BPM (Business Process Management) sector revenues, foreign tourist arrivals and tourism foreign exchange earnings suggest moderation in services sector activity during 2019-20. However, on the bright side, Foreign Direct Investment (FDI) into the services sector has witnessed a recovery in early 2019-20 and services exports have maintained their momentum during April-September 2019, the Survey suggests.

From a long term perspective, the Survey advises that focusing on boosting service exports during bilateral trade negotiations augurs well for India in mitigating bilateral trade deficits with trading partners.

Within the services sector, the Survey highlighted key developments within some sub-sectors:

• Tourism Services: The sector is a major engine of growth, contributing to GDP, foreign exchange earnings and employment. However, growth in foreign exchange earnings slowed in 2018 and 2019, in line with global trends. But with the liberalization of the visa regime with the e-Visa scheme, available for 169 countries, foreign tourist arrivals to India on e-visas have increased from 4.45 lakh in 2015 to 23.69 lakh in 2018 and stood at 75 lakh in January-October 2019, recording nearly 21 per cent year-on-year growth.
• IT-BPM Services: The Indian IT-BPM industry has been the flag-bearer of India’s exports for the past two decades, with industry size reaching about US$ 177 billion in March 2019. The sector contributes significantly to the economy via employment growth and value addition. A number of policy initiatives have been taken to drive innovation and technology adoption in the IT-BPM sector, including Start-up India, National Software Product Policy and removal of issues related to Angel Tax. The Indian start-up ecosystem has been progressing and is now the third-largest in the world with 24 unicorns.
• Port and Shipping Services: The turnaround time of ships, which is a key indicator of efficiency of the ports sector, has been on a continuous decline, almost having between 2010-11 and 2018-19, from 67 days to 2.48 days.
• Space Sector: India’s space programme has grown exponentially since its modest beginnings five decades ago, moving from simple mapping services to many more uses currently. Even though India’s spending is less compared to others, ISRO has launched around 5-7 satellites per year in recent years with almost no failures.