Economic Survey 2023-24- India Analysis Series 1

We have come up with the in-depth analysis of Indian Economic Survey portraying the growth of Indian economy and the upcoming one based on the economic data based out of the survey of 2023-24.India's services exports in US Dollar terms have grown at an impressive compound annual growth rate (CAGR) of over 14% over the last 30 years (1993-2022). This growth rate significantly outpaces India's merchandise export growth of 10.7% and the global services export growth of 6.8%. As a result, India's share of global services exports has increased dramatically from 0.5% in 1993 to 4.3% in 2022. India is now the seventh-largest services exporting country globally, having risen from the 24th position in 2001.

 Sector-Specific Achievements

·       Telecommunication, Computer, and Information Services: India ranks 2nd globally.

·       Personal, Cultural, and Recreational Services: India ranks 6th globally.

·       Other Business Services: India ranks 8th globally.

·       Transport Services: India ranks 10th globally.

·       Travel Services: India ranks 14th globally.

 

UNESCAP Global Survey on Digital and Sustainable Trade Facilitation

In the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) Global Survey on Digital and Sustainable Trade Facilitation, India achieved a score of 93.5% in 2023, up from 90.3% in 2021. India excelled with a perfect score of 100% in four critical areas: Transparency, Formalities, Institutional Arrangement and Cooperation, and Paperless Trade. Moreover, India's score for "Women in Trade Facilitation" saw a notable increase from 66.7% in 2021 to 77.8% in 2023, reflecting a strong commitment to gender inclusivity and women's empowerment in the trade sector.

 

National Time Release Study (2023)

The Central Board of Indirect Taxes and Customs (CBIC) conducted the National Time Release Study in 2023, revealing a 20% improvement in the overall average import release time compared to 2022. This efficiency enhancement underscores the effectiveness of India's trade facilitation measures.

 World Bank’s Logistics Performance Index (LPI)

India's efforts to reduce logistics costs have significantly improved its ranking on the World Bank’s Logistics Performance Index (LPI). In 2023, India advanced to the 38th position from 44th in 2018 among 139 countries.

 Sagarmala Scheme

The Sagarmala scheme has been pivotal in promoting port-led development by utilizing India's 7,500 km long coastline, 14,500 km of potentially navigable waterways, and strategic location on key international maritime trade routes.

 Nation, One Tax' Regime

 The implementation of the 'One Nation, One Tax' regime under the Goods and Services Tax (GST) has drastically reduced wait times for trucks at state borders, cutting travel time by up to 30%. According to a report by the Ministry of Road Transport and Highways, this initiative has also increased the average distance traveled by trucks from 225 km before GST to 300-325 km.

These advancements highlight India's ongoing efforts to enhance trade facilitation and logistics, contributing significantly to the country's economic growth and global trade integration.

 The Reserve Bank of India (RBI) notes that the steady growth in services exports has bolstered India's Balance of Payments (BoP) position by offsetting a significant portion of the merchandise trade deficit.

 Evolution of Services Exports Composition

India's deep integration into the global software industry value chains has transformed the composition of its services export basket. In the early 2000s, business process outsourcing (BPO) services that provided cost-effective back-end IT services dominated. By 2020, India had moved to offering upstream and high-value-added services in fields like law, IT, and management, as noted by the Asian Development Bank (ADB). The Russia-Ukraine conflict and global inflationary pressures on wages have further driven global players to set up back-office operations in India to balance their cost models, leading to a proliferation of Global Capability Centres (GCCs).

In FY24, 'Other Business Services' emerged as the second-largest contributor to services exports (26%), following IT services (48%). The 'Other Business Services' sector achieved a remarkable CAGR of 18% between FY20 and FY24, reflecting its growing contribution to overall services exports. The share of software exports in overall services exports decreased slightly from 50% in FY21 to 48% in FY24.

 India's Rising Participation in Global Value Chains (GVC)

The World Trade Organization's (WTO) World Integrated Trade Solutions (WITS) database indicates that India's GVC-related trade surged nearly fourfold, from USD 62.9 billion in 2010 to USD 233.1 billion in 2022. Key products driving India's GVC participation include coal and petroleum, business services, chemicals, and transport equipment. India's GVC trade grew at a CAGR of 14.6% between 2018 and 2022, outpacing the 13.3% CAGR between 2014 and 2018, and the 6.9% CAGR between 2010 and 2014.

This robust growth in services exports and GVC participation underscores India's expanding role in the global economy and highlights the strategic shifts that have driven its remarkable progress.