India strengthens position in digital service exports: Report

India's burgeoning strength in digital service exports, as highlighted by The Global Value Chain Development Report 2025, marks a significant milestone in its economic journey. This development is not an overnight phenomenon but the culmination of decades of strategic policy shifts, a robust talent pool, and the inherent adaptability of its private sector. It underscores a crucial global economic trend: the increasing integration and importance of services within the broader manufacturing and trade landscape.

Historically, India's tryst with the global services sector began in earnest with the economic liberalization reforms of 1991. These reforms opened up the economy, reducing trade barriers and inviting foreign investment, which laid the groundwork for the burgeoning IT and IT-enabled services (ITES) sector. The late 1990s and early 2000s saw India emerge as a global outsourcing hub, driven by its large pool of English-speaking, technically skilled graduates and significant cost advantages. The Y2K phenomenon further accelerated this growth, positioning Indian companies as reliable partners for global enterprises seeking to modernize their systems. This period saw the rise of giants like TCS, Infosys, Wipro, and HCL Tech, transforming cities like Bengaluru, Hyderabad, and Pune into global technology centers.

What the Global Value Chain Development Report 2025 now observes is an evolution of this trend. While traditional IT and BPO services remain strong, India, along with the Philippines and several African economies, is strengthening its position in *digital* service exports. This implies a shift towards higher-value, more specialized services such as cloud computing, cybersecurity, data analytics, artificial intelligence (AI) integration, and digital transformation consulting. The report's emphasis on the 'growing importance of services in manufacturing' indicates that even traditional manufacturing GVCs are now heavily reliant on digital services for design, logistics, supply chain management, customer relations, and automation.

Key stakeholders in this ecosystem are diverse and interconnected. The **Government of India** plays a pivotal role through policy formulation and infrastructure development. Initiatives like 'Digital India' (launched in 2015) aim to transform India into a digitally empowered society and a knowledge economy, directly supporting the growth of digital services. Policies such as the Foreign Trade Policy (FTP) provide incentives for service exports, while the IT Act, 2000, provides the legal framework for electronic transactions and cybersecurity. **NASSCOM**, the apex body for the Indian IT-ITES industry, acts as a crucial facilitator, advocating for policies, fostering innovation, and promoting India's capabilities globally. **Indian IT and BPO companies** are the primary drivers of these exports, continuously investing in new technologies and skill development to remain competitive. The **Indian skilled workforce**, comprising engineers, data scientists, and digital specialists, forms the backbone of this industry. Internationally, organizations like the **World Trade Organization (WTO)** and the **World Bank** (involved in GVC reports) provide the global framework and analysis that highlight these trends.

This strengthening position in digital service exports holds immense significance for India. Economically, the services sector is the largest contributor to India's GDP, and digital services are a high-growth segment within it. It generates substantial foreign exchange earnings, helping to bridge the trade deficit and strengthen India's balance of payments. Socially, it creates millions of direct and indirect jobs, often high-paying, contributing to rising disposable incomes and a growing middle class. Strategically, it enhances India's global standing as a reliable digital partner and strengthens its soft power. This resilience in service exports also offers a crucial buffer against global manufacturing slowdowns, providing stability to the overall economy.

Looking ahead, the future implications are profound. India is poised to become a global hub for advanced digital services, driven by emerging technologies like AI, machine learning, blockchain, and the Internet of Things (IoT). However, challenges remain. The rise of automation could impact lower-end service jobs, necessitating continuous skill upgradation for the workforce. Global protectionist tendencies and competition from other emerging economies also pose threats. India's ability to maintain its competitive edge will depend on sustained investment in digital infrastructure, fostering a robust innovation ecosystem, and ensuring a continuous supply of highly skilled talent through initiatives like the Skill India Mission. The focus must shift from mere cost arbitrage to value addition, innovation, and specialized niche services, solidifying India's position at the higher end of global value chains.