Advantage India
Robust
Demand
*India is the export hub for software services.
*On July 2, 2025, IDC reported that India’s domestic IT & Business Services market reached Rs. 1,41,389 crore (US$ 16.5 billion) in 2024, growing by 6.9% YoY, while maintaining a projected CAGR of approximately 8% between 2022 and 2027.
*India's software service industry is expected to reach Rs. 86,63,000 crore (US$ 1 trillion) by 2030.
*India’s services exports stood at approximately Rs. 11,00,517 crore (US$ 128 billion) in FY26 (April-July 2025), while service imports stood at Rs. 5,56,128 crore (US$ 65 billion) in the same period reinforcing India's global standing.
Competitive
Advantage
* India has climbed to the 39th position out of 133 economies in the Global Innovation Index (GII) 2024, according to the World Intellectual Property Organization (WIPO).
*The Confederation of Indian Industry (CII) has unveiled a plan to position India as a global logistics hub, calling for a collaborative effort among stakeholders to unlock opportunities across industries and regions. The initiative aims to create aspirational career paths, facilitate professional growth, and develop leadership opportunities.
Policy
Support
*The Ministry of Health and Family Welfare (MoHFW) is leveraging artificial intelligence (AI) to enhance public health services across India focusing on developing and adopting AI-driven healthcare solutions.
*Government is planning to setup over 100 branches of India Post Payment Bank in the Northeast region to enhance banking services.
Increasing
Investments
*100% FDI is allowed for any regulated financial sector activity under the automatic route.
*As of March 2025, experts forecast that India is poised to attract over Rs. 52,32,600 crore (US$ 610 billion) in alternative investments, primarily private equity and venture capital, from 2025 to 2027, substantially powering the startup ecosystem.
Introduction
The expansion of India’s services sector has been closely linked to the economic reforms of the 1990s. While the sector began to grow in the mid-1980s, it gained significant momentum after India initiated a series of structural reforms in response to a severe balance of payments crisis. Today, the services sector is not only the largest contributor to India’s GDP but also a major driver of employment, foreign investment, and exports. It encompasses a wide range of activities, including trade, hotels and restaurants, transport, storage and communication, finance, insurance, real estate, business services, community and personal services, and services associated with construction.
To enhance India’s share in the global services market from 3.3% and enable multi-fold growth in GDP, the government has implemented several initiatives to strengthen commercial services exports. As a result, India’s services exports stood at approximately Rs. 11,00,517 crore (US$ 128 billion) in FY26 (April to July 2025), while imports were Rs. 5,56,128 crore (US$ 65 billion), highlighting India’s strong position in global trade. The services trade surplus during this period reached Rs. 5,44,389 crore (US$ 63.53 billion), up from Rs. 4,65,639 crore (US$ 54.34 billion) in FY25.
India’s services sector has steadily increased its share of Gross Value Added, rising from 50.6% in FY14 to about 55.3% in FY25, with an average growth of 8.3% since FY23. The sector also ranked first in attracting Foreign Direct Investment, according to data from the Department for Promotion of Industry and Internal Trade. India’s unique skills and competitive advantage in knowledge-based services, supported by initiatives such as Smart Cities, Clean India, and Digital India, have created a conducive environment for growth and innovation.
The Confederation of Indian Industry has outlined a plan to position India as a global logistics hub, emphasizing collaboration among stakeholders to unlock opportunities across industries and regions. This initiative aims to create aspirational career paths, facilitate professional development, and cultivate leadership opportunities. Positive demand trends in the sector have driven growth in new business volumes and further job creation, with the gig economy comprising 12 million workers, over 2% of the workforce, growing at a 17% CAGR and posting a 38% YoY increase, fuelled by digital connectivity, urbanization, and flexible work preferences.
Global agencies have recognized India’s growth trajectory. The World Bank forecasted India’s GDP between 6.3%-6.5% for FY26, owing to increased government spending on infrastructure and rising household investment in real estate as key drivers. With a growing services trade surplus, rising employment in knowledge and gig-based work, and continued government support, India’s services sector is poised to unlock multi-trillion-dollar opportunities, stimulating sustained economic growth both domestically and globally.
Market Size
The services industry performed strongly in FY26 (April to June 2025), driven by robust export demand and record hiring. In FY25, the sector generated nearly three jobs for every one created in manufacturing, reinforcing its position as the primary driver of employment. It now employs approximately 182 million people, with major contributions from trade, transport, education, finance, and healthcare.
India’s sustainable tourism market is projected to grow significantly over the next decade, reaching Rs. 1,851 crore (US$ 216 million), up from Rs. 317 crore (US$ 37 million) in April 2025, according to the Founder and Chairman of MakeMyTrip, Mr. Deep Kalra. This growth reflects increasing domestic and international interest in eco-friendly travel and experiential tourism.
The Ministry of Health and Family Welfare (MoHFW) is leveraging artificial intelligence (AI) to strengthen public health services across the country. In the healthcare sector, the telemedicine market is also expanding rapidly, reaching Rs. 31,191 crore (US$ 3.64 billion) in 2025 and projected to rise to Rs. 90,660 crore (US$ 10.58 billion) by 2030, driven by growing demand for remote consultation and digital healthcare solutions.
Connectivity in remote regions is improving, particularly in the Northeastern Region, where as of June 2025, 42,093 out of 45,934 villages now have mobile access,
including 40,663 with 4G coverage. This expansion was supported by 2,485 towers commissioned under the Digital Bharat Nidhi program, extending services to remote and border areas.
Financial inclusion is also being strengthened through the expansion of Digital Banking Units (DBUs). The Government of India plans to nearly double the number of DBUs to 200 by the end of FY26, enabling them to offer a broader range of financial products, including insurance and pension schemes, to underserved populations.
Recent Investments/ developments
Some of the investments/ developments in the services sector in the recent past are as follows:
- As of June 2025, the wireless subscriber base of Jio stood at 483 million, followed by Bharti Airtel 294 million, Vodafone Idea 127 million, and BSNL 29 million.
- India has emerged as the world’s third-largest mobile phone exporter with shipments worth Rs. 1,75,665 crore (US$ 20.5 billion) in CY24, driven by the Production-Linked Incentive (PLI) scheme and greater global value-chain integration.
- India’s fintech sector ranked third globally in H1 2025, raising Rs. 7,618 crore (US$ 889 million), with Bengaluru attracting 55% of investments.
- As of June 2025, India stays in the lead with the fintech adoption rate of 87%, substantially higher than the world average of 67%.
- According to RBI’s Scheduled Banks’ Statement, deposits of all scheduled banks collectively surged by a whopping Rs. 2,39,99,113 crore (US$ 2,800.69 billion) as of August 2025.
- The Indian services sector was the largest recipient of FDI inflows worth Rs. 10,46,481 crore (US$ 122 billion) between April 2000-June 2025.
- As of March 2025, experts forecast that India is poised to attract over Rs. 52,32,600 crore (US$ 610 billion) in alternative investments, primarily private equity and venture capital, from 2025 to 2027, substantially powering the startup ecosystem.
- India’s services exports stood at approximately Rs. 11,00,517 crore (US$ 128 billion) in FY26 (April-July 2025), while service imports stood at Rs. 5,56,128 crore (US$ 65 billion) in the same period reinforcing India's global standing.
- On July 2, 2025, IDC reported that India’s domestic IT & Business Services market reached Rs. 1,41,389 crore (US$ 16.5 billion) in 2024, growing by 6.9% YoY, while maintaining a projected CAGR of approximately 8% between 2022 and 2027.
- A large pool of skilled IT manpower has made India into a global outsourcing hub. In 2025 it commands a 55% share in the global sourcing market.
- India ranks third globally in economy-wide digitalisation and 12th among G20 members in individual user digitalisation. The digital economy, having contributed 11.74% of GDP in 2022-23, is expected to account for nearly one-fifth of national income by 2029-30.
- As of 2025, International Workplace Group (IWG) operates just over 100 centres in India, and plans to add 40-50 more by end-2025, aiming to quadruple its footprint over the next three to five years.
- According to experts, India is expected to receive over Rs. 52,32,600 crore (US$ 600 billion) in alternative investments over the next three years, significantly boosting the startup ecosystem.
- The Indian hotel industry experienced a resurgence in 2023, fuelled by domestic leisure travel, MICE events, and business travellers’ return. Premium hotels saw higher occupancy and room rates, with continued domestic travel growth expected in 2024.
Government Initiatives
The Government of India recognises the importance of promoting growth in the services sector and provides several incentives across a wide variety of sectors like health care, tourism, education, engineering, communications, transportation, information technology, banking, finance, and management among others.
- India's digital healthcare transformation is advancing through initiatives like the Ayushman Bharat Digital Mission (ABDM), which has successfully created over 73 crore Ayushman Bharat Health Accounts (ABHA) as of January 20, 2025, and the Digital Health Incentive Scheme (DHIS), aimed at enhancing accessibility, affordability, and efficiency in healthcare delivery.
- India’s new GST 2.0 introduces a two-tier tax for services at 5% (without ITC) and 18% (with ITC), lowering costs for essentials like insurance, waste disposal, cinemas, gyms, and hotels, while job work and petroleum services move to the 18% slab, with logistics and delivery platforms also brought under clearer compliance.
- The Union Budget 2025-26 has allocated Rs. 22,000 crore (US$ 2.6 billion) to the BharatNet project, marking a 238% increase from the previous fiscal year. This funding aims to extend broadband connectivity to all government-run secondary schools and primary healthcare centres in rural areas, enhancing digital infrastructure and access to services.
- India’s draft National Telecom Policy 2025 (NTP-25) aspires to achieve 100% 4G coverage and 90% 5G population coverage by 2030 underscoring a bold vision to elevate digital inclusion and infrastructure.
- As of June 2025, an impressive 42,093 out of 45,934 villages in India’s Northeastern Region now have mobile connectivity, including 40,663 with 4G access, supported by 2,485 towers commissioned through the Digital Bharat Nidhi to extend services in remote and border areas.
- As of August 2025, over 56 crore Jan Dhan accounts have been opened in the past 11 years, with a total deposit balance of Rs. 2,68,000 crore (US$ 31 billion).
- According to RBI’s Scheduled Banks’ Statement, deposits of all scheduled banks collectively surged by a whopping Rs. 2,39,99,113 crore (US$ 2,800.69 billion) as of August 2025.
- As of June 2025, India has 23 Indian Institutes of Technology (IITs), 21 Indian Institutes of Management (IIMs), and 20 All India Institutes of Medical Sciences (AIIMS), reflecting significant growth in premier higher education and research institutions.
- On July 24, 2025, India and the United Kingdom signed the India-UK Free Trade Agreement, notably liberalising the services sector by expanding market access for Indian professional, computer-related, IT and telecom services, enabling mutual recognition of qualifications, and introducing a Double Contribution Convention that exempts Indian professionals working temporarily in the UK from paying UK social security contributions, enhancing competitiveness and mobility.
- The Ministry of Health and Family Welfare (MoHFW) is leveraging artificial intelligence (AI) to enhance public health services across India focusing on developing and adopting AI-driven healthcare solutions.
- Centre has formulated an ‘Action Plan for Champion Sectors in Services’ to give focused attention to 12 identified Champion Services Sectors.
Road Ahead
The growth of India’s services sector is being shaped by both domestic and global factors. A wide range of service industries has witnessed double-digit expansion in recent years, driven by digital technologies, innovation, and supportive institutional frameworks established by the government. The ease of doing business in India has improved significantly for both domestic and foreign firms, reflecting advancements in regulatory culture and government initiatives.
Ongoing reforms, including the lowering of trade barriers, easing of FDI regulations, and deregulation, have further strengthened the sector’s growth prospects. The implementation of GST 2.0 has created a unified national market and reduced the overall tax burden on goods and services. This reform is expected to lower costs over the long term through the availability of input tax credit, ultimately contributing to more competitive pricing of services.
With these structural reforms, technological adoption, and favourable policy measures, India’s services sector is poised for sustained growth, supporting the country’s broader economic development. The digital economy alone is estimated to reach US$ 1 trillion
by 2025, highlighting the transformative potential of the sector in driving employment, exports, and innovation.
Note: The conversion rate used for July 2025 is Rs. 1 = US$ 0.011
References: Media Reports, Press Releases, DPIIT publication, Press Information Bureau, News Articles, TRIA
Note: Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech Testing and Analysis, Other
Related News
MORE
IBEF Campaigns
MORE
Aatmanirbhar Bharat Utsav 2024
Union Minister of External Affairs, Dr. S. Jaishankar and Union Commerce an...
Case Studies
MOREIndia’s Elevators and Escalators Market: Driven by Urban Vertical Growth
India’s elevators and escalators sector has rapidly emerged as a key player in the country’s urbanisation narrative. As of 2024, India has...
The Rise of Public Sector Banks in India’s Economic Revival Post-Pandemic
Public Sector Banks (PSBs) represent one of India’s most remarkable turnaround stories in its recent economic history. These financial instituti...
Makhana Goes Global: Strategies to Strengthen India’s Export Edge
Makhana (Euryale ferox) is emerging as a global superfood owing to its exceptional nutritional and medicinal value. India dominates its production, ac...
IBEF BLOG
MORE
Decoding the Growth of India’s Chocolate Market
Chocolate was once a luxury novelty reserved only for special occasions and...
How Government Initiatives are transforming the Indian Banking Sector
The Indian banking sector has undergone significant transformation over the...
How Investments Are Fuelling The Growth of E-Commerce in India
E-commerce in India is experiencing an incredible amount of change; it has ...
Partners
