New Delhi: India’s services exports are now on course to cross the $400-billion mark for the first time ever. And by all indicators, this milestone, once seen as aspirational and distant, will be achieved in this financial year itself.
In fact, on the Trailing Twelve Months (TTM) basis, which measures exports over the past 12-month period rather than over a fiscal year, the $400 billion mark was achieved by August.
While the performance of merchandise exports, such as smartphones and pharmaceuticals, draws much public attention, the services exports are often less talked about, but their contribution to India’s economic progress has been growing significantly.
India’s merchandise trade has always remained in deficit.
According to data available on the Directorate General of Commercial Intelligence and Statistics website, in the financial year 2024-25, India exported goods worth $437.51 billion against imports of $721.32 billion, resulting in a goods trade deficit of $283.81 billion.
However, services trade tells the opposite story. India exported $387.54 billion worth of services in FY2024-25, against imports of $198.14 billion, generating a services trade surplus of $189.40 billion—an all-time high.
This surplus offset nearly two-thirds of the merchandise trade deficit, bringing the overall trade deficit (goods plus services) down to $94.41 billion.
This is not a one-year story. Over the past decade, India’s services trade surplus has steadily expanded—from around $51 billion in 2011–12 to $65 billion in 2016–17, crossing $100 billion in 2021–22, rising to $138 billion in 2022–23, and reaching nearly $190 billion now.
At the heart of this shift is the globalisation of India’s knowledge workforce. The earlier phase of India’s services trade was dominated by software and IT-enabled services (ITES).
While they continue to be important, the real acceleration over the past few years has come from Global Capability Centres (GCCs) of multinational corporations performing R&D, analytics, cybersecurity, design and architecture in India; and growth in technology and professional services such as consulting, legal support, accounting and compliance.
Crucially, the profile of services exports has moved up the value chain. What India exports today is not just labour time, but expertise.
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Why goods trade deficit persists
India’s goods trade deficit remains structural, shaped by heavy dependence on imported crude, liquefied natural gas (LNG) and coal; high and culturally sticky gold demand; and continued reliance on imported capital goods, machinery and electronics.
Government efforts such as production-linked incentives (PLI) aim to strengthen domestic manufacturing, but any shift in this trajectory will be gradual rather than immediate.
Without the services surplus, India’s trade deficit would hover near $280–300 billion, widening the current account gap, putting greater pressure on the rupee, and increasing vulnerability to external shocks like oil price spikes or capital outflows.
The services surplus acts as a macro-stabiliser, absorbing much of the strain and helping keep the balance of payments and investor confidence on a steadier footing.
Implications of US HIRE Act
The momentum in India’s services exports, however, faces a potential headwind from the Halting International Relocation of Employment (HIRE) Act introduced in the U.S. Senate.
The proposed act would significantly alter the cost dynamics of outsourcing by imposing a 25 percent tax and denying tax deductions on payments made for overseas service delivery. If implemented, it could push U.S. companies to re-evaluate their offshore delivery models, including work carried out through Indian IT firms and Global Capability Centres.
This may, in turn, require Indian service providers to reassess their global operating strategies, depending on how the final legislation is framed and enforced.
The road ahead
Services exports currently account for a significant portion of India’s external receipts, while merchandise trade continues to reflect import dependence in energy, electronics, and capital goods. Recent data shows a rising share of higher-value services such as R&D, engineering, and cybersecurity in total services exports.
At the same time, manufacturing-linked foreign investment has increased in sectors including electronics assembly and automotive components under domestic production-linked incentive programmes. These developments indicate a gradual change in the composition of India’s trade flows.
(Edited by Ajeet Tiwari)