Service Exports from India
The moment we hear the word â€˜Exportâ€™, we visualize huge cargo ships, containers, cargo planes and crane picking up containers. Goods are often the first thing that pops to mind when we think about exports. What if I say, you can actually get export status, by exporting your â€˜Servicesâ€™ as well. Service export is any service provided by a resident in one country to people or companies from another.
The services sector is an important contributor to the Indian exports. India's services exports rose by 6.6% to USD 17.94 billion in March 2019. The services sector accounts for over 55% in the country's GDP. At present, India is ranked amongst the world's top 10 exporters and importers of commercial services. In fact, the Government of India has taken several initiatives to boost services exports from India. In addition, the government also provides some incentives through Services Exports from India Scheme (SEIS) for some identified sectors.
To understand types of services, we may divide them in four modes as per delivery of services:
- Cross Border - The service itself crosses the border
- Consumption Abroad - The consumer travels across the border
- Commercial Presence - Establishment of an office or industry
- Movement of People - The service supplier travels across the border.
The basics of an export strategy are similar for services and goods, but in general, services are easier to export because they donâ€™t have to pass through as many procedures such as customs, transportation, regulation, labelling, etc. At the same time, exporting services requires a fine understanding of your clientâ€™s culture and nature of business.
Here are some broad categories of services exported from India:
- Call centre support provided to users from outside the country
- Tax advisors in India providing advice to foreign companies
- Language translation service for foreign clients
- Architects and engineers designing a project in UAE (even if they never physically leave their offices in India)
- Medical personnel based in India who read test results or compile medical reports about patients located in another country
- Financial, HR, IT and management support provided by a companyâ€™s Indian headquarters for the companyâ€™s foreign subsidiaries
- Rents paid by an Indian resident for property owned outside their home country
- Converting Pounds to Indian Rupees for a foreign bank, or arranging the purchase of Indian stocks for a foreigner
- Software designed for foreign clients
- Cloud service providers whose platform is used by companies based outside India
- Remotely accessing IT systems located outside India
- A team of consultants travelling to a foreign destination to assist with an installation or trouble-shooting equipment
- Geologists travelling to a foreign oil production site
Many services are â€œexportedâ€ but never cross any physical boundaries. Here are some examples:
- A local tailor stitches a suit for a foreign visitor
- A foreign visitor books hotels, tours, and a rental car while visiting the India
- A local dry cleaner launders and presses a foreignerâ€™s shirt
All of these are considered exports because they are provided by a service provider in one country to an individual or company in another country.
For further detailed study of Service Exports from India, you can refer the Foreign Trade Policy.
MD, Aaronica Global EXIM Pvt Ltd, Mumbai