Budget 2026: Services sector put in the front seat of growth strategy

Budget targets 10% global services share by 2047

With the aim of capturing a 10 per cent share of global services exports by 2047, Finance Minister Nirmala Sitharaman put a renewed emphasis on the services sector, pushing it to the forefront of the growth strategy. 

In her Budget speech, Sitharaman announced a high-powered standing committee on education, employment and enterprise. The committee’s mandate will be to identify future sectors of growth and job creation in an economy where artificial intelligence (AI) is expected to become a mainstay, and to recommend measures to stay ahead of global shifts. The prominence given to services points to the government’s acknowledgement that manufacturing alone will not suffice to generate jobs for the growing youth workforce. 

 

The proposed committee is expected to undertake a wide-ranging, ministry-level exercise. According to the indicative terms of reference outlined in the Budget, it will identify sector-specific gaps as well as cross-sectoral policy and regulatory challenges. Its responsibilities will include standards- setting and accreditation, along with recommending measures to unlock employment potential across services. 

The committee will also examine opportunities for services exports and assess the impact of emerging technologies on jobs and skill requirements. It will propose specific measures to embed AI into education curricula from the school level onwards and to upgrade State Councils of Educational Research and Training for teacher training. 

Upskilling and reskilling of technology professionals and engineers in AI and emerging technologies will be another key focus area. The panel will also suggest measures for AI-enabled matching of workers, jobs and training opportunities. Other areas under consideration include making informal work more visible and verifiable, preparing it for future demands, and identifying ways to attract skilled diaspora and foreign talent to India. These measures, Sitharaman said, will focus on the services sector as a core driver of Viksit Bharat. “This will make us a global leader in services, with a 10 per cent global share by 2047,” she said. 

Industry leaders welcomed the intent, while flagging execution as critical. “Success will depend on execution,” said Ashwin Damera, co-founder and chief executive officer of ed-tech firm Eruditus. “If industry is meaningfully integrated into curriculum design and institutions are held accountable for placement outcomes, this can materially improve employability and align education with workforce needs,” 

The Budget also proposed a tax holiday until 2047 for foreign cloud service providers using Indian data centres, subject to conditions such as servicing domestic customers through Indian resellers. In addition, software, IT-enabled services, knowledge process outsourcing and contract research and development will be clubbed under a single IT services category to simplify taxation. 

Analysts at brokerage DBS pointed to the continuation of safe harbour provisions, which they said would improve compliance ease and reduce disputes for service providers. Exemptions on global income for non-resident experts would also benefit the sector, they added. 

“The Budget places strong emphasis on employment generation and human capital development. Initiatives covering education, skilling, healthcare, tourism, creative industries and services will help create quality jobs across the economy,” said Chandrajit Banerjee, director general at the Confederation of Indian Industry. “The focus on emerging sectors reflects a long-term vision for building a future-ready workforce.” 

Tourism received particular attention as a major employment generator and source of foreign exchange. Sitharaman proposed creating the country’s first National Institute of Hospitality by upgrading the National Council for Hotel Management and Catering Technology in Noida. Culture and tourism minister Gajendra Singh Shekhawat said the government was already working on the institute’s curriculum, aimed at strengthening professional training and aligning hospitality education with global standards. 

“The renewed emphasis on the services sector, coupled with the recognition of tourism’s potential to generate employment, boost foreign exchange earnings and expand local economies, is particularly encouraging,” said KB Kachru, president of the Hotel Association of India and chairman, South Asia, Radisson Hotel Group. “It is expected to boost hotel viability, diversify India’s offerings and enhance global competitiveness.” 

The finance minister also announced a pilot scheme to upgrade 10,000 tourist guides across 20 destinations through a standardised 12-week hybrid training programme, in collaboration with an Indian Institute of Management. Tax collected at source (TCS) on overseas tour packages was reduced to 2 per cent from 5 per cent. 

“The rationalisation of TCS on overseas tour packages is a welcome step that addresses the upfront liquidity impact on Indian outbound travellers,” said Rajesh Magow, co-founder and group CEO, MakeMyTrip. 

To promote adventure and eco-tourism, Sitharaman announced the creation of hiking and trekking trails, turtle trails near nesting sites along the coasts of Odisha, Kerala and Karnataka, and bird-watching trails near Pulicat Lake on the border of Andhra Pradesh and Tamil Nadu. Heritage and cultural tourism also featured prominently, with proposals to develop 15 archaeological sites, including Lothal, Dholavira, Rakhigarhi, Adichanallur, Sarnath, Hastinapur and Leh Palace, into experiential cultural destinations. 

Excavated landscapes would be opened to the public through curated walkways, while immersive storytelling technologies would be introduced to support conservation labs, interpretation centres and trained guides, she said. 

“The Budget’s renewed focus on tourism is a strong vote of confidence in an industry that creates livelihoods at scale,” said Anil Chadha, managing director of ITC Hotels. “It supports local entrepreneurs, artisans and communities across the tourism value chain.” 

In the Northeastern region, Sitharaman proposed a scheme for developing Buddhist circuits across Arunachal Pradesh, Sikkim, Assam, Manipur, Mizoram and Tripura, covering temple and monastery preservation, connectivity, interpretation centres and pilgrim amenities. She also announced the development of an integrated East Coast Industrial Corridor with a node at Durgapur and the creation of five tourism destinations across the five Purvodaya states. 

In healthcare, she proposed training 100,000 allied health professionals through new and upgraded institutes across the public and private sectors. An additional 150,000 multi-skilled caregivers would be trained to support geriatric and allied care services.