David Oks at Asterisk:
India is a massive country; and for a long time it was very poor. Unlike other once-very-poor countries in Asia, like China or South Korea, India never managed to develop a competitive manufacturing sector: Its share of global manufacturing exports today is about the same as Vietnam’s, despite having 14 times Vietnam’s population. But over the last few decades, India has managed to build a competitive service sector. As the largest exporter of IT and BPO services in the world, India is “the world’s back office.”
India’s services export industry employs only a small share of the population, perhaps five million people in a country of 1.5 billion. But IT is still crucial to the Indian economy. It accounts for roughly seven percent of GDP and about a quarter of India’s total exports; the consumption of its high-earning workers sustains a much larger ecosystem of domestic employment; and the services trade surplus it generates, about $190 billion in fiscal year 2025, substantially offsets India’s persistent goods trade deficit, which would otherwise pose severe balance-of-payments problems. Service exports are the primary mechanism by which tens of millions of Indians have entered the global middle class.
The question now, though, is how long the Indian services export model has left to survive.
More here.
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