The Economic Survey 2023-24, presented today by Union Minister of Finance and Corporate Affairs, Ms. Nirmala Sitharaman, underscores the crucial role of the services sector in India's economic growth over the past three decades. Now contributing about 55% to India's economy in FY24, the sector has thrived due to policy reforms, improved infrastructure, and logistics.

Rapid Digital Transformation

A significant transformation has occurred with the rapid shift towards digital services, including online payments, e-commerce, and entertainment platforms. The services sector has consistently driven growth, with its Gross Value Added (GVA) contribution increasing notably. In FY24, the sector grew 7.6%, while gross GST collections reached US$ 241.27 billion (Rs. 20.18 lakh crore), an 11.7% increase from the previous year.

Robust Expansion and Business Activity

The survey highlights the robust expansion of services, with the Purchasing Managers’ Index (PMI) reaching 61.2 in March 2024, reflecting significant business activity. Services exports constituted 44% of India’s total exports in FY24, with India ranking fifth globally.

Also Read : India's Electronics Sector Booms: Record Production and Exports in FY23-24

Rise in Digitally Delivered Services

The rise in India’s share of digitally delivered services exports from 4.4% in 2019 to 6.0% in 2023, coupled with a reduction in imports, has improved net services receipts, mitigating the current account deficit. Financing for the sector has seen a boost through domestic credit and international inflows, including US$ 14.9 billion in External Commercial Borrowings (ECBs) in FY24, marking a 58.3% YoY increase and representing 53% of total ECB inflows.

Detailed Analysis of Growth Drivers

Policy Reforms: Over the past three decades, comprehensive policy reforms have been instrumental in unlocking the potential of the services sector. These reforms have streamlined regulations, reduced barriers to entry, and fostered a competitive business environment.

Infrastructure and Logistics: The development of infrastructure and logistics has significantly enhanced the efficiency and reach of services. Improved transportation networks, telecommunication facilities, and digital infrastructure have provided a solid foundation for the sector's growth.

Digital Services Boom: The rapid adoption of digital services has been a game-changer for the sector. The proliferation of online payment systems, e-commerce platforms, and digital entertainment has revolutionized how services are delivered and consumed, driving unprecedented growth.

Economic Contributions and GST Collections

The services sector's Gross Value Added (GVA) has shown remarkable growth, contributing significantly to the economy. The sector grew by 7.6% in FY24, underscoring its pivotal role in economic expansion. Additionally, gross GST collections for the services sector reached US$ 241.27 billion (Rs. 20.18 lakh crore), reflecting an 11.7% increase from the previous year. This surge in GST collections indicates robust business activity and compliance within the sector.

Services Exports and Global Position

India's services sector has made substantial strides in the global market. In FY24, services exports accounted for 44% of India’s total exports, with India ranking fifth globally. The rise in digitally delivered services exports has been particularly noteworthy, increasing from 4.4% in 2019 to 6.0% in 2023. This growth in exports has played a crucial role in improving net services receipts and mitigating the current account deficit.

Financing and Investment Inflows

The services sector has attracted significant financing through domestic credit and international inflows. In FY24, External Commercial Borrowings (ECBs) amounted to US$ 14.9 billion, marking a 58.3% YoY increase and representing 53% of total ECB inflows. This influx of funds has provided the necessary capital for expansion and innovation within the sector.

Conclusion

The Economic Survey 2023-24 highlights the exceptional growth and transformation of India's services sector. With a contribution of 55% to the economy, robust growth in GVA, and substantial increases in exports and GST collections, the sector is a cornerstone of India's economic landscape. The rapid shift towards digital services, bolstered by policy reforms, infrastructure development, and increased financing, has positioned the services sector for continued success.

As India advances, the focus on digital innovation, infrastructure enhancement, and strategic policy support will be crucial in maintaining the momentum and achieving sustainable growth. The services sector's evolution reflects India's dynamic economy and its potential to become a global leader in services delivery, driving economic growth and creating a wealth of opportunities for its population.

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