Global demand and movements in India's real effective exchange rate emerge as key determinants of India's services exports

Reserve Bank of India (RBI) has stated in a latest monthly update that an analysis of the long-term trend and cyclical components of India's services export growth shows a moderately increasing trend in services export growth since 2016. The dominating trend component during the early 2000s boom of the services sector moderated after the global financial crisis of 2008-09. However, it reversed around 2016, benefiting from the improvements in infrastructure (transport, logistics and information technology), technological advancements and services value chains.

An analysis of India's revealed comparative advantage in services exports indicates that it has an edge in telecom and IT services. The significant growth in India's software and business services exports in the recent years is a reflection of the expansion of global capability centres (GCCs) in India and the rise in digital delivery of services. Empirical estimates suggest that global demand and movements in India's real effective exchange rate are significant determinants of India's services exports in the post-global financial crisis period.