How India is emerging as the world’s technology and services hub

As corporations look to adopt technology at a global scale, India has the opportunity to become a technology and innovation hub.

India’s strong services exports have grown by 14% over the last two decades and stood at US$254.5b in 2021-22. A large part of services exports is from the Information Technology (IT) Services and Business Process Outsourcing (BPO) services with US$157b in 2021-22.  This growth has been driven by both Indian headquartered and global IT companies. Besides, other global corporations are leveraging Indian talent through their capability centers in India, which employ over 5 million people. highest quality and efficiency. All of these have converged to give India an opportunity to become a hub for technology and innovation, as corporations look to adopt technology at a global scale.

As one of the largest exporters of IT and BPO services globally, India stood at US$157b in the fiscal year 2021-22 comprising US$106b of IT services and US$51b of BPO services. Direct employment in the IT and BPO segment is estimated at 5.1m in FY 2021-2022 and indirect job creation is estimated at over 12m.  

In the next two decades, as India further gains strength as the world’s technology and innovation hub, the share of transformational and more complex, expertise-based services will enable Indian IT services sector to grow faster.

• The Indian workforce is expected to solve the most complex problems and manage digital front-to-back-end functions of global corporations. It will help India transform from a technology back-office to a hybrid workforce powering the digital fabric of the world’s largest corporations. Structural tailwind around a large employable base will push India’s case further towards becoming the global hub for technology talent.
• Potential to be the robotics and AI capital of the world with as many robots as engineers serving clients 24/7 in a hybrid workforce. 
• In addition to “run the business” services, Indian and global IT services players will leverage India for higher value “change the business” services such as consulting, experience design, full stack digital engineering, product development and incubate and industrialize new business process management use cases and processes often considered core to businesses today.
• Opportunity to become a Platform and Product powerhouse - Indian IT services are being platformed and the Indian Business to Business (‘B2B”) Software as a Service (“SaaS”) ecosystem has created its unique playbook. The impact is already visible - the first billion-dollar product company from India has emerged and there are over 20 India B2B SaaS unicorns. All this is creating a potent ecosystem for Hyperscalers to emerge over the next two decades.

Growing India’s service exports faster

While India pushes ahead with growing its manufacturing sector, the services sector would continue to be an important pillar of growth for the Indian economy. It employs close to 31% of the workforce, contributes to over 50% of India’s GDP and is one of the largest recipients of FDI inflows in India. It has been recognized as one of the primary drivers of domestic growth and exports. 

With the increasing share of services in world trade there is a large opportunity for expansion of services trade to grow from current US$254.5b (2021-22). 

To accrue benefits from a higher share of services in the global economy, it would be imperative to focus on diversification of our services exports by increasing our competency in other emerging services. For this, focus could be placed on those services that complement India’s competitive ability and have potential for export growth. Sectors that can provide this opportunity include tourism, tele-medicine, medical value tourism, audio visual services with focus on mobile gaming and construction and engineering with focus on digital engineering services.