Roadmap to diversify Indian services export

Over the last two decades, India’s services sector witnessed phenomenal growth and increased export. Now it contributes more than 50 per cent of India’s GDP and around 40 per cent in total export. Excited by this performance, India set an ambitious target of achieving US$ 1 trillion in services export by 2030. India identified 12 champion services sectors while launching many initiatives to promote them further. However, despite this performance, there remains a handful of challenges in India’s services export.

India’s service export is overdependence on a limited category of services and a particular mode of delivery. Among the 13 types of services categorised by the IMF, (in Balance of Payment Manual Sixth Edition) two services, viz. commercial and other commercial services, contribute 63 per cent of India’s export, while six services accounted for 97.4 per cent of India’s export in 2019 (latest category wise data available at WTO) . Notably, most of these services are exported through the mode1 (cross border trade) of the services trade. In addition, India’s services exports are directed towards only a few destinations, making it vulnerable to external shocks. around 62 per cent of India’s IT-BPM services exports are directed to the USA alone. Any demand-side fluctuation can bring a miserable situation for the whole IT industry in India.

Though India’s share in global services export is proliferating, it is shallow compared to other emerging service-led economies. India’s share was 4.4 per cent against 6.9 per cent of the UK and 6 per cent of China in global services export in 2022. In the same years, India ranked seven among the significant services exporting countries, as reported by the WTO.

India’s services trade volume in 2022-23 was US$ 322.72 billion. To achieve the target of US$ 1 trillion in export, India needs to add US$ 677 billion. Over the last five years, India’s services export on average is growing at 13 per cent per year. However, to achieve the desired target on time, the sector needs to grow at 18 per cent every year. Additionally, India needs to build an overall narrative of trade optimism through its actions beyond just the numbers.

One of the approaches may be to catch the low-hanging fruits first. India can work on three sub-sectors of services: medical value travel, education services and nursing services. Enhancing the export of these three sectors would be easier than other sectors as the necessary infrastructure is already in place.

Till now, many of the government initiatives have been to promote tourism from a leisure perspective. Limited attention was paid to health and education tourism. This is visible in the campaigns such as Incredible India. Moreover, our health tourism has been endorsed primarily by yoga practice. Despite offering medical treatments to a large number of foreigners, Indian tourism ministry or commerce ministry has not adequately focused on this aspect. In education tourism, India significantly encouraged engineering and management courses. Also, medicine and education have been seen from the lenses of tourism, missing the services export attribute. 

India has the potential to emerge as a central hub for medical tourism. Indian prominent trade association FICCI expected the sector to reach a US $9 billion capacity by 2020. However, the industry performed considerably below its potential due to the global pandemic. But the prospects remain bright as the post-pandemic world has become more cautious towards health. A large number of Indian hospitals with modern state-of-the-art technology to treat life-threatening diseases at a minimal cost would help to boost medical services export. India, known as the world’s pharmacy with available quality medicines at a lower price, would further complement the treatment export.

Indian nurses are well-recognised all over the world for their skills and services. As the post-COVID world is shaping up well, Mode 2 services is likely revive in the coming days as the fear of COVID comes down and normalcy is restored. As some countries have relaxed their norms to allow doctors and nurses, a great avenue exists to increase the export of Indian healthcare professionals. For example, the UK has around 40,000 nurse vacancies as of December 2022. Germany needs approximately 22,000 nurses currently. With about 2000 nursing colleges, India is in an advantageous position to tap this tremendous opportunity. Indian nursing colleges can collaborate with foreign hospitals and frame the curriculum following the standard of the primary nursing service-importing nations. Tie up with foreign hospitals to recruit Indian nurses should also be explored.

Given its large and technically advanced academic environment, India stands in an illuminating position. India had 1,113 universities, 43,796 Colleges and 11,296 Standalone Institutions in 2021. Government proactively supports the establishment of new academic institutions. With recent changes in education policy, several reputed foreign universities intend to establish campuses in India. India can leverage its position and project itself as a significant facilitator of education services. This will also boost India’s aspiration to become Vishwaguru and impart knowledge to the world. However, to achieve this, India needs to upgrade the quality of the education services to the global standard.

All these can be achieved at a comparatively low cost and short span. India should take advantage of the already established ecosystem to boost the export of these three services only by carefully curating a concrete strategy.  

Opinions expressed in this article are those of the author.

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