India’s Service Sector Exports: Trends, Challenges and Policy Road Map

The present study is an attempt to understand the behavior of India’s services exports. To achieve this objective, the study underscores India’s potential sectors in services and identifies the key drivers of services exports. It utilizes the trend analysis for aggregate as well as disaggregate-level analysis across sectors and modes of services. For the identification of potential sectors, it uses the intra-industry trade analysis and also maps India’s service exports to that of the world service exports. A linear regression analysis is carried out to identify the key drivers of services exports. The trend analysis observes that India’s service exports are highly concentrated and not in consonance with world exports, there is much need for its diversification. The empirical estimation for services exports drivers reveals that development of financial system, improved growth prospects along with higher educational attainments, controlling exchange rate depreciation and aligning the economic structure toward industrial activities had significant positive impact on services exports of India. Finally, the study evaluates the scope of services exports for major sectors with focus on key challenges and policy recommendations.