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Services Exports
Context:
After registering double-digit growth for two consecutive years, the slow growth rate in services exports can be attributed to both the base effect and lower demand resulting from stagnant growth in developed economies.
More on News:
- India’s services exports decelerated in FY24 to a three-year low.
- Modest increase of 4.9% to $341.1 billion.
- Net services exports grew at a robust pace of 13.6%.
- Services imports contracted by 2%.
What Includes Services?
While purchasing is typically associated with goods, customers also acquire services in a market. Services are defined as intangible products, constituting a transaction transferred from the buyer to the seller in exchange for consideration. Classification of services is basically of three types-
- Business Services: Examples of such services include banking, warehousing, insurance, communication, and transportation.
- Personal Services: Personal services encompass various activities such as catering, hospitality and lodging, healthcare, and artistic pursuits like painting and sculpting.
- Social Services: Social services encompass services provided in education, sanitation, healthcare, housing, and related sectors.
Impact of Services on Balance of Payment:
- In a country like India, a merchandise trade deficit (Balance of Trade) that results into a Current Account Deficit is eased by service trade surplus, remittance, and capital account.
- Reduced Services Imports: Services imports contracted by 2% to $178.3 billion during the financial year, which contributed to the strong growth in net services exports.
- Positive Services Trade Surplus: The trade surplus in services during March 2024 was $13.4 billion, indicating a positive balance of payments contribution from the services sector.
