India global services export to reach $800 billion by 2030: Goldman Sachs

Report says services exports could reach around 11% of GDP by 2030, helping increase demand for top-tier discretionary spending

India's services exports will be worth $800 billion by 2030, up from $340 billion last year as the growth strengthens the external sector against supply-side shocks and reduces rupee volatility, Goldman Sachs has said in a report.

“Our baseline scenario suggests that services exports could reach around 11 per cent of gross domestic product by 2030 (as compared to 9.7 per cent of GDP in 2023), which amounts to around $800 billion (compared to around $340 billion in 2023),” said the report called ‘India’s rise as the emerging services factory of the world’.

"Assuming no significant moves in commodity prices and goods trade balance beyond 2024 are observed", the current account deficit is estimated to be around 1.1 per cent of GDP on average from 2024 to 2030.

The report said the projections for the current account in 2024 remain unchanged at 1.3 per cent of GDP. This is because any potential gains from services exports are expected to be balanced out by two primary risks arising from geopolitical tensions in West Asia pushing up oil prices and reduced agricultural exports to Iran.

In the last 18 years, India's contribution to global services exports has more than doubled, with the emergence of global capability centres (GCCs) playing a pivotal role in this growth, said the report. "India’s services exports grew to nearly $340 billion in 2023 at a compound annual growth rate (CAGR) of around 11 per cent from 2005-2023 (nearly double global growth) outpacing goods export growth. As a result, India’s share in global services exports rose from under 2 per cent in 2005 to 4.6 per cent in 2023, while India’s share of goods exports only increased from 1.0 per cent in 2005 to 1.8 per cent in 2023."

There will be robust growth in high-value services over the years, helping increase demand for top-tier discretionary spending and driving commercial and residential real estate activity in the domestic market.

Computer services in India

Computer services comprised almost half of India's services exports in 2023. "However, professional consulting exports have been the fastest growing sector at 17 per cent CAGR from 2005-2023 to 18 per cent share of India’s services exports. This has mainly been driven by the rise of GCCs in India, where revenues have grown four times over 13 years to $46 billion in FY23, employing 1.7 million people," the report stated.

Services exports are correlated with global demand, competitive trade-weighted exchange rates, the quality of infrastructure and human capital, among other factors.

Services exports correlate with various factors such as global demand, competitive exchange rates based on trade weights, infrastructure quality, and human capital, among others. "For India, our baseline forecast is for services exports to reach around 11 per cent of the GDP by 2030, compared to 9.7 per cent of GDP in 2023. In this scenario, assuming no significant moves in commodity prices and goods trade balance beyond 2024, the current account deficit could likely stay around 1 per cent of GDP on average from 2024-2030," the report showed.

Travel services

Since 2005, travel services exports have constituted approximately one-fourth of global services exports. However, in the initial stages of the pandemic, travel fell to one-tenth of world services exports in 2021, and it continues to lag behind its pre-pandemic levels as of 2023.

Indian IT industry

The Goldman Sachs reported that over the last eight years, the revenue of the Indian information technology (IT) industry has grown at a CAGR of 8 per cent. This growth rate accelerated during the pandemic period (FY21-FY23) to 12 per cent, driven by the urgent need for technology and digital services adoption.

According to the National Association of Software and Service Companies (Nasscom), the IT industry’s revenue reached $245 billion (around 7 per cent of nominal GDP) by FY23, up from $132 billion in 2015 (about 6.5 per cent of nominal GDP). Over the same period, the industry has seen an addition of around 1.9 million employees (at a CAGR of 5.6 per cent), bringing the total employee count to around 5.4 million by FY23.

The report said that in the coming years, a sustained robust expansion is expected in high-value services. This growth is projected to fuel premium discretionary spending domestically, as well as drive demand in both commercial and residential real estate sectors.