Contribution to Exports: According to the WTO, India’s services export market share improved from 3% in 2010 to 3.5% in 2019 and 4% in 2020 and 2021. Despite the impact of COVID-19, there was an increase of ~25% in net exports of services in 2021-22. The Government has set a target of services export of US$ 350 billion in FY2022-23, 37% higher than ~US$ 255 billion exports in 2021-22.

Challenges Faced by Service Sector in India

Lack of Government Incentives: Many experts feel that the Government has not provided incentives to the services sector on the same lines as the manufacturing sector e.g., under the export promotion scheme for manufacturing, MEIS (Merchandise Exports Incentive Scheme), merchandise exporters benefited to the extent of over INR 40,000 crore in 2018-19. The corresponding benefit for service exporters under SEIS (Services Exports Incentive Scheme) was INR 4,000 (10% of merchandise exporters).

Trade Restrictions: Services sector is hampered by restrictions placed by foreign governments like restrictions on the movement of service professionals, domestic certification requirements for foreign service providers tax on offshore income of Indian service firms, etc. These restrictions limit the export potential of India’s Services Sector.

Conclusion

The conclusion has to be balanced and short about the future of the service sector in India.