India's Services Exports Reach New Heights Amid Global Demand

India's services sector, encompassing IT, BPO, telecom, financial services, and more, is experiencing record growth in exports, driven by robust international demand and resilient domestic sales.

Services ExportsEconomic GrowthGlobal DemandIndian EconomyTrade AgreementsReal EstateAug 11, 2025

India's Services Exports Reach New Heights Amid Global Demand

Real Estate:The services sector remains the backbone of India’s economy, contributing over half of GDP and a substantial share of employment and exports. At a time when the economy faces multiple headwinds, services exports are providing a welcome lift.

July brought encouraging signs. Indian service providers began the second quarter with output and new orders rising at the fastest pace since August 2024. The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, edged up to 60.5 from 60.4 in June, defying the flash estimate of 59.8. A PMI reading above 50 signals monthly growth in activity.

The acceleration was fueled by robust international demand and resilient domestic sales. The new export business sub-index — a key gauge of overseas demand — posted its second-strongest expansion in a year.

India’s services sector spans IT, business process outsourcing, telecom, financial services, tourism, transport, real estate, healthcare, education, and consulting. The country ranks seventh globally in services exports, supported by a skilled workforce, English proficiency, technology adoption, and policy support through initiatives like Digital India and the Software Technology Parks scheme.

Services exports have helped offset the merchandise trade deficit, strengthening the balance of payments. They are projected to surpass merchandise exports by 2030, with earnings potentially reaching $800 billion. India’s services export momentum is also shaped by the shifting geopolitics of trade. Western economies are diversifying away from China in critical service domains, creating opportunities for Indian IT, consulting, and design capabilities.

Trade agreements, such as the India–Australia Economic Cooperation and Trade Agreement, have eased market access for professional services, while ongoing negotiations with the UK could further expand opportunities in legal, accounting, and fintech sectors. However, tightening visa regimes in some developed markets remain a risk, particularly for segments dependent on onsite project delivery.

A notable driver has been the rapid growth of Global Capability Centres (GCCs) set up by multinationals to deliver high-value functions such as R&D, data analytics, and financial consulting. Bengaluru, Hyderabad, and Pune now host over 1,500 GCCs employing more than 1.3 million professionals, adding materially to export revenues.

Services exports have acted as a buffer against supply-side shocks, from oil price spikes to food price volatility, while also bolstering domestic consumption. In July, finance and insurance led both new orders and business activity, while real estate and business services lagged. Overseas demand strengthened from Asia, Canada, Europe, the UAE, and the US, with the pace of external sales growth the second-fastest in a year.

One concern is the stagnation in job creation. Hiring slowed to a 15-month low, with fewer than 2% of companies adding staff. Most firms reported no change in headcount from June. Rising costs — for food, freight, and labour — prompted companies to pass increases to customers, with output price inflation slightly exceeding input cost inflation.

Another dimension is the rapid integration of artificial intelligence, automation, and cloud technologies into service delivery. While these tools promise higher productivity and new export lines — such as AI-driven analytics or autonomous customer support — they also threaten to displace lower-skilled roles in the BPO and call centre segments. India’s ability to upskill its workforce at speed will determine whether it captures these high-value niches or cedes ground to competitors in Eastern Europe and Southeast Asia. This makes continuous investment in reskilling as critical as infrastructure upgrades for sustaining export leadership.

Business confidence improved in July, underpinned by expectations from marketing campaigns, technology upgrades, and stronger online reach. The resilience mirrors trends in manufacturing, where the PMI hit a 16-month high of 59.1. Still, higher US tariffs announced by President Donald Trump have added a fresh source of uncertainty.

Inflationary pressures could also ease in coming months, suggested by recent CPI and WPI readings. Yet, optimism remains below the levels seen in the first half of FY25.

According to Goldman Sachs Research, only Singapore and Ireland have seen services exports grow faster than India’s. Sustaining this momentum will require addressing bottlenecks, particularly the supply of qualified technology graduates. Environmental strains are also mounting in hubs like Bengaluru, where the concentration of IT firms and GCCs is stretching local resources. Diversifying operations to other cities is already under way and could help ease this burden.

In an interconnected world, India’s services sector has the capacity to drive long-term growth and secure the country’s position as a global services powerhouse. The challenge will be to match capacity with opportunity — and to ensure that the gains are spread across jobs, infrastructure, and environmental sustainability.

Frequently Asked Questions

What is the HSBC India Services Purchasing Managers’ Index (PMI)?

The HSBC India Services Purchasing Managers’ Index (PMI) is a key economic indicator that measures the performance of the Indian services sector. It is compiled by S&P Global and provides insights into the health of the sector based on factors like new orders, business activity, and employment.

Which sectors are included in India's services exports?

India's services exports span a wide range of sectors, including IT, business process outsourcing (BPO), telecom, financial services, tourism, transport, real estate, healthcare, education, and consulting.

How do trade agreements impact India's services exports?

Trade agreements, such as the India–Australia Economic Cooperation and Trade Agreement, ease market access for professional services. Ongoing negotiations with countries like the UK could further expand opportunities in legal, accounting, and fintech sectors.

What are the risks associated with India's services export growth?

Risks include tightening visa regimes in developed markets, rising costs for food, freight, and labour, and the displacement of lower-skilled roles due to the integration of AI and automation.

How is India addressing the challenges in the services sector?

India is addressing challenges through continuous investment in reskilling its workforce, infrastructure upgrades, and diversifying operations to other cities to ease environmental strains in hubs like Bengaluru.