India has become world's 'services factory', services export to rise to $800 billion by 2030: Goldman Sachs report

India has risen as world’s services factory, as per a Goldman Sachs report (Photo: Reuters)

India has become the ‘services factory’ of the world as the country’s services exports have more than doubled in the past 18 years and are expected to touch $800 billion by 2030, said a report by Goldman Sachs.

The report, titled India’s rise as the emerging services factory of the world, said that India’s services exports reached $340 billion in 2023.

Between 2005 and 2023, Indian services exports grew from 2% to 4.6% whereas the country’s goods exports in the same period only grew to 1.8% from 1%.

While the report hailed India’s rising services exports, it also said country should not be complacent. It also flagged the resource stress that Bengaluru, a hub of computer services export, is facing and the issue of a skilled workforce for the future.

Services export to be 11% of GDP by 2030

The report said that India’s services exports will comprise 11% of the GDP by 2030, which would amount to $800 billion, according to Moneycontrol.

“Our baseline scenario suggests that services exports could reach around 11 percent of GDP by 2030 (versus 9.7 percent of GDP in 2023), which amounts to around $800 billion (compared to around $340 billion in 2023),” the report quoted Goldman Sachs as saying.

It further projected that the current account deficit would be 1.1% of the GDP by 2030 “assuming no significant moves in commodity prices and goods trade balance beyond 2024”.

The projected growth of the services exports would still fall short of the government’s target. In India’s foreign trade policy unveiled in 20230, the government had set the target of $1 trillion for services exports by 2030, as per Moneycontrol.

India should not take services exports for granted

The Goldman Sachs also warned against taking the growth of services exports for granted.

The Goldman Sachs’ report flagged the challenges, such as the lack of enough skilled workers and environmental stress that key services export hubs like Bengaluru are facing, according to The Hindu.

“In terms of domestic constraints, training technology graduates as fit for the job market has been cited as a challenge in some cases. From an environmental perspective, the growth in these sectors is putting pressure on the natural resources of cities – the city of Bengaluru, which has the largest share of IT companies and GCCs in India, is facing a water crisis,” said Goldman Sachs in its report.

In addition to these domestic constraints, the report also highlighted that the exports are dependent on global demand for information and communications technology (ICT) spending and rising protectionism in destination countries could hurt export prospects.