INTRODUCTION
The services sector in India is the largest contributor to the country’s economy. It accounts for over 50% of the GDP of India. The services sector in India comprises trade, tourism, aviation, telecom, shipping, ports, communication and storage, financing, insurance, transportation, real estate, business services, software services, IT-BPM, etc. The sector is essential for India’s economy as the IT services and BPO alone employed about 4.47 million people directly and more than 12 million indirectly in 2020-21. The IT industry accounts for about 8% of India’s GDP and has a share of more than 52% global outsourcing market. The growth of the sector in the first half of 2020-21 was 10.8%. The tourism and hospitality services industry in the country picked up sharply after the Covid-19 pandemic in 2022, with the total employment in the sector increasing by 48% in March 2022.
India is the fifth-largest recipient of FDI inflows with the services sector being the highest FDI recipient in the country. During the first half of 2021-22, the sector’s FDI inflows were US$ 16.73 billion; accounting for 54% of the country’s total FDI inflows. The computer software and hardware services sector of India is among the largest recipient of FDI with a share of about 25% in 2021-22 (India’s 2021-22 total FDI was US$ 83.57 billion).
EXPORT TREND
India's economy is largely dependent on the services exports. The country exports various services, namely, travel, transportation, insurance, software – IT-BPM, business services, financial services and communication, etc. The total export of services from India in 2020-21 was US$ 206 billion, which reached the targeted US$ 250 billion in 2021-22 and is expected to reach US$ 325 billion by 2022-23. During 2021-22, the trade surplus for Indian services exports was US$ 105.2 billion, a 24% rise from 2019-20.
From April-September 2022 the total exports of services stood at US$ 150.43 billion, a 27.88% rise as compared to the same period the previous year. The services exports of India during March 2022 was US$ 22.52 billion. This was a growth of US$ 8.31% from March 2021 and 28.3% from March 2020. The exports during March 2022 increased 6% over February 2022.
The IT-BPM is the largest exported service out of India accounting for about 49% of the total service exports during first half of 2021-22. The share of business services, transportation services, travel services and financial services during April-September 2021 was 23%, 12%, 3% and 2%, respectively. Between April-December 2021, India's services exports increased by 18.4% to US$ 177.7 billion driven mainly by IT exports. Business and transportation services are also among India's top exported services comprising about 23% and 11% of the total services exports, respectively.
EXPORT DESTINATIONS
India exports services to many parts of the world. USA, the UK and Japan are the largest importers of Indian services. Due to the large scale workforce availability, cheap labour and english language skills, India’s services are popular around the world. Hence, the software, computer, IT, BPO and call centre are some of largest services that are exported to America, Europe, Asia and also the Gulf countries.
For the software services and the IT sector of India, USA, the UK and the EU are the top importers accounting for about 62%, 17% and 11% of the total IT-ITeS exports, respectively. Some of the other major software services from India are Canada, Asia, Australia, New Zealand. During 2020-21, USA and Canada imported US$ 75 billion of software services from India. The share of Europe and Asia combined during the same period was about 37% (i.e. US$ 49 billion). Also during the same period, the share of the same for Australia and New Zealand combined was 3% (i.e. US$ 4.2 billion). Some of the other importers of services from India are Asia Pacific, Latin America and Middle East Asia.
Some of India’s other top export markets are Hong Kong, Singapore, Germany, Bangladesh, Netherlands and Nepal.
GOVERNMENT INITIATIVES
a) Service Export from India Scheme (SEIS)
Under SEIS, an incentive of 3-7% of net foreign exchange earnings is provided to services exporters of certain services in India. This scheme aims to promote the export of services by giving duty scrip credit for eligible exports. These services covered under this scheme are professional, R&D, rental/leasing, construction, education, environmental, health, tourism, travel, transport services, etc.
b) Software Technology Park (STP) Scheme
The STP is scheme is provided for the promotion of software exports from India. Under this scheme provides several benefits such as a single-window clearance, 100% foreign equity, exemption from payment of duty of customs, refund on GST on capital goods procurement from DTA and import of second-hand capital goods.
c) Digital India Internship Scheme
The Digital India Internship Scheme was launched by the Ministry of Electronics and Information Technology (MeitY). The objective of this scheme is to provide a first hand experience to students under guidance of experienced and qualified mentors. The internship will cover cyber law, digital forensics, semiconductors and nano-electronics technology, digital literacy, digital payments and economy, information services management systems, etc.
d) PhD Scheme
The objective of this scheme is increase the number of PhDs in the Electronics Systems and Design Manufacturing (ESDM) and IT enabled services in India. The scheme was approved in 2014 with a financial outlay of Rs. 466 crore (US$ 59 million).
GOVERNING BODY
Service Export Promotion Council (SEPC)
The Ministry of Commerce and Industry set up the SEPC. It is the apex body for the trade-related activities of services sectors. It acts as an advisory to the government of India in terms of regulations and policy and acts as a liaison between the industry and the government. It also works towards trade intelligence generation, export development of services industries, promotion and enabling business environment.
Ministry of Electronics and Information Technology (MEITY)
The MeitY is an apex agency of the Union Government of India. The ministry's objective is to provide e-infrastructure to the government, promote electronics hardware and IT-ITeS industry, implement an R&D framework, and provide support to e-Skills and knowledge networks. The functions of MeitY are promoting digital transactions and payments, promoting IT education, handling cyber law matters, undertaking development initiatives, etc.
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