Growth of Services Sector in India - Infographic

India‘s Domestic IT Services market is expected to grow by 3-5% in FY25, also the operating profit for the sector to remain 21-22%.

Advantage India

Robust
Demand

*India’s services sector is projected to grow by 9.1% in FY26, up from 7.2% in FY25, indicating an acceleration in services-led economic expansion. The sector’s share in GDP increased to 53.6% in H1 FY26, while its contribution to GVA reached a historic high of 56.4% (FY26 First Advance Estimates), underscoring the rising importance of modern, tradable, and digitally delivered services.

*India has emerged as the world’s seventh-largest exporter of services, with its share in global services trade more than doubling from 2% in 2005 to 4.3% in 2024. The sector also continues to attract the highest share of foreign direct investment (FDI) in the country.

*India's services exports are on an impressive upward trajectory, with projections indicating they will surge to an estimated US$ 465-475 billion in the current fiscal year (2025-26). This represents a substantial leap from the US$ 387 billion recorded in 2024-25.

Competitive
Advantage

*India has climbed to the 38TH position out of 133 economies in the Global Innovation Index (GII) 2024, according to the World Intellectual Property Organization (WIPO).

*NITI Aayog’s findings on state-level and sector-level dynamics 2025 report says that states like Karnataka, Maharashtra, Tamil Nadu and Telangana together account for nearly 40% of services output, driven by modern, high-productivity services such as IT, finance and professional services, resulting in a concentration of output in highly urbanised states, particularly in southern India.

Policy
Support

*The services sector is receiving strong policy support under the Union Budget 2026–27, including the proposed ‘Education-to-Empowerment and Enterprise’ Standing Committee to drive coordinated reforms and achieve a 10% global share in services exports by 2047. Targeted tax and regulatory measures for IT and IT-enabled services, such as unified classification, higher safe-harbour thresholds, automated approvals, and faster Advance Pricing Agreements.

*The Union Budget introduces incentives to attract global cloud service providers through India-based data centre infrastructure. It proposes tax holidays until 2047 for foreign companies delivering cloud services from India, along with a 15% safe harbour margin for related data centre service entities, to support infrastructure development and boost investment.

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.

*The services sector remains the largest recipient of foreign direct investment (FDI) inflows, accounting for an average of 80.2% of total FDI during FY23–FY25, up from 77.7% in the pre-pandemic period (FY16–FY20).

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Last updated: Feb, 2026

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