India’s services exports could touch $900 bn by 2030: Goldman Sachs

India’s services exports could touch $900 bn by 2030: Goldman Sachs

India’s services exports could climb to $900 billion, or about 12.4 percent of its GDP, by 2030, driven by the emergence of Global Capability Centres (GCCs), Goldman Sachs said in what it called a “favourable scenario” of the economy.

In such a scenario, the current account deficit could improve to average around 0.6 percentage of GDP over the medium term, it said.

“India has been gaining share in professional consulting globally, which is relatively less concentrated than other sectors, and India has scope of gaining further share with the rise of GCCs,” Goldman Sachs analysts said in a report.

The country’s services exports scaled new highs in 2023, at $338 billion (9.7 percent of GDP) with the momentum persisting into the first two months of 2024, providing a significant cushion to the current account deficit. India’s services exports surged over six times from $53 billion in 2005, at almost double the pace of global services export growth over the same span (5.5 percentage CAGR).

Swift growth

The country’s slice of the global services export pie soared from less than 2 percent in 2005 to 4.6 percent in 2023, while its share of goods exports increased from 1 percent in 2005 to 1.8 percent in 2023.  Notably, India experienced one of the swiftest growth rates worldwide during this period, trailing only Singapore and Ireland.

Computer services continue to hold sway as the primary category in India’s services exports, constituting almost 50 percent of services exports. However, there are noticeable divergences in trends across other categories.

The proportion of professional consulting exports has surged by about 11 percentage points to 18.3 percent in 2023, Goldman Sachs said. This growth was primarily attributable to the proliferation of GCCs in India.

Exclusive | I am not building Girish’s company, I’m building a global products company: Freshworks founder Girish Mathrubootham

However, travel services expanded the slowest. In line with global trends in travel services exports, India’s travel services exports registered the most sluggish growth over the past 18 years, with an 8.6 percent CAGR, trailing the overall services export growth during the same period.

India’s ascent in the global arena of professional consulting has been notable, particularly as this sector is comparatively less concentrated than others. Moreover, India holds promising prospects for further expansion, especially with the emergence of GCCs.

GCCs are specialised offshore units established by multinational corporations to cater to business functions such as IT, human resources, finance, and analytics. While initially conceived as cost-saving hubs for back-office operations, GCCs have evolved significantly over the past decade, moving up the value chain.

These centres have been pivotal in fostering innovation and spearheading digital transformation in India, capitalising on the nation’s engineering prowess in areas such as artificial intelligence/machine leaning and the Internet of Things. Additionally, GCCs have played a crucial role in nurturing and amplifying services exports.

GCC revenue growth

The financial metrics of GCCs in India underscore their remarkable growth trajectory. Revenue has surged almost nearly fourfold, achieving a compound annual growth rate (CAGR) of 11.4 percent over the past 13 years, reaching $46 billion by FY23.

Concurrently, the number of GCCs has more than doubled from 700 to 1,580, with the sector adding about 1.3 million employees (11.6 percent CAGR), elevating the total employee count to 1.7 million by FY23.

In addition, Goldman Sachs said, India has the potential to enhance its market presence in the insurance and financial services sector, especially as the Gujarat International Finance-tec (GIFT) city emerges as an international financial hub.

This sector is witnessing a shift, with dominant players in developed markets gradually ceding ground to emerging markets. Additionally, improvements in physical infrastructure should yield gains for the travel and transport sectors.