Services shore up India’s foreign trade performance

India’s services export during the financial year 2017-18 was recorded at over US$192 billion, registering a growth of 17.8 per cent over the US$163 billion achieved in the previous year

May 30, 2018

Total exports of goods during the financial year worked out to US$302.84 billion, showing a growth of 9.78 per cent over the US$275.85 billion recorded in the previous year

The cumulative value of export amounted to US$494.98 billion during the year, registering a growth of 12.75 per cent over the US$438.97 billion recorded in the previous year

This is an impressive performance considering the slowness in global economy as well as the impact of the Goods and Services Tax, which was introduced in India on July 1, 2017

While merchandise exports during the financial year crossed the US$300-billion mark after a gap of two years, at 9.78 per cent, goods exports recorded the fastest growth in six years

Services export recorded a stellar performance during the financial year 2017-18, buoying India’s overall annual foreign trade performance. Services export during the period was reported at $192.14 billion, showing a growth of 17.8 per cent over the $163.12 billion achieved in the previous year. Even exports of goods reported improvement from the previous years. Total exports of goods during the financial year worked out to US$302.84 billion, showing a growth of 9.78 per cent over the US$275.85 billion recorded in the previous year. The cumulative value of exports—which includes both goods and services—amounted to US$494.98 billion during the year, registering a growth of 12.75 per cent over the US$438.97 billion recorded in the previous year. This is an impressive performance considering the slowness in global economy as well as the impact of the Goods and Services Tax, which was introduced in India on July 1, 2017.

India’s foreign trade performance crossed other important milestones as well. For one, merchandise exports during the year crossed the US$300-billion mark after a gap of two years. This came in despite exports declining slightly during March 2018, thus indicating an infusion of fresh energy in the overall export sector. Secondly, at 9.78 per cent, goods exports recorded the fastest growth in six years. Both data indicate that a trade recovery might be underway, which will require further nurturing. Imports of goods at US$459.67 billion showed a sharp rise of 19.59 per cent. This widened the trade balance to US$156.83 billion, a steep rise of 44.5 per cent over the previous year. Part of the reason for the widening trade deficit can be attributed to the rising oil import bill of US$109.11 billion during 2017-18, registering a sharp increase of 25.47 per cent in value terms over the previous year. This has been warranted by India’s rapid economic growth.

The top contributors to services exports remain software services, information technology and business process management, tourism and aviation

The enhanced oil import bill is primarily due to rising global oil prices– the increase roughly corresponds to the 26 per cent jump in the average Brent crude oil prices for the 12 months between April 2017 and March 2018. Or, on a point-to-point basis, global Brent crude oil prices increased by 27.86 per cent in March 2018 over March 2017, according to commodity price data from the World Bank. India’s growing trade deficit has been ameliorated somewhat by the smart recovery in service exports, which recorded a surplus of US$76.21 billion during the year. The overall trade deficit was thus contained at US80.62 billion. Hence, services exports will continue to remain pivotal for India’s trade strategy and growth prospects. In fact, services contribute to more than 50% of India’s gross domestic product (GDP). The top contributors to services exports remain software services, information technology and business process management, tourism and aviation.

With steady expansion in global consumption base, India’s exports are expected to continue along the same growth path. The World Trade Organisation (WTO) sees world trade volume growing by 4.4 per cent during calendar year 2018. Presenting his global trade assessment for 2018, WTO director general Roberto Azevedo said, “The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation.”