Home / News / India /  India’s export basket skews towards services, pulls down trade deficit

NEW DELHI : India’s export basket is undergoing a silent transformation, a trend that explains why the services sector, which accounts for about half of India’s gross domestic product (GDP), is doing better than other segments of the economy.

Latest official trade data released on Wednesday showed how export of services is growing at a robust pace, while that of merchandise has contracted marginally in the first four months of FY20. This trend, if it continues, could eventually make India’s exports more service oriented. Official data from commerce ministry showed that while India’s merchandise exports contracted marginally by 0.37% in the April-July period of this fiscal to $107.41 billion from the same time a year ago, export of services expanded 8.65% during the same period to $74.05 billion.

If we exclude petroleum and gems and jewellery exports, merchandise exports in the April-July period of FY20 was only marginally above service exports during the period, at $79.81 billion, showed data. It is the surplus of service trade that helped moderate India’s trade deficit during the period.

The performance of the services sector is getting reflected in other economic barometers too. Job losses are fewer in some of the services sector than among manufacturers and fewer firms in select service industries are being dragged into bankruptcy tribunals than players in other classes of industries.

Rating agency CARE Ratings Ltd. said in a note on Friday that companies in finance, retail, information technology, insurance and realty have shown above average annual growth rate in job creation in 2019 while agriculture, crude oil, mining, iron and steel, telecom and hospitality have seen a contraction in jobs created in 2019. CARE Ratings’ analysis of over 960 company annual reports said that the trend of job creation varied across sectors, with services tending to be relatively better than the others.

Also, latest data from the Insolvency and Bankruptcy Board of India (IBBI), which administers the bankruptcy code and regulates professionals, showed that manufacturers alone accounted for 42% of all the companies that ended up in bankruptcy tribunals since the new bankruptcy resolution framework came into force in 2016. Companies in the service segment, including the hotels, restaurants, transportation and communication businesses, accounted for only 15% of the 2,162 cases that ended up in bankruptcy tribunals since then.


Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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