‘Travel & Transport To Be 21% Of Services Exports In FY23

Travel and transportation services, one of the worst hit by the pandemic, are set to make a strong recovery during this financial year, according to the Services Export Promotion Council (SEPC).

The two services combined are likely to account for 21% of India’s total services exports in the year through March, compared to around 15% in the first half of 2021-22 and 2020-21, when the pandemic struck, according to SEPC. In pre-pandemic 2019-20, travel and transportation services made up nearly 23% of services exports of $213 billion.

SEPC has shared its estimates with the commerce ministry. It has sought support for faster recovery of the sector and help meet the ambitious target of $350 billion service exports in FY23, a 37% growth over $254 billion last year.

Travel services include inbound flows of tourists for medical, education, and tourism purposes. Transportation services are mostly freight, including postal and courier by air and sea.

Exports of transportation services are expected to touch $44.1 billion in the current fiscal, or 12.6% of total services exports, which would be more than the 9.84% share in pre-pandemic FY20. Travel exports are estimated at $29.9 billion, or 8.5% of total services exports. This would surpass the 4.12% share in 2020-21, but still lag the 14% share seen in 2019-20.

Telecom, computers, and IT services are estimated to touch $156 billion in 2022-23, making up the largest chunk of total services exports at 44%.

However, the sector is yet to return to pre-pandemic levels, said Abhay Sinha, director general, SEPC.

“In this context, the role of export incentives to the sector either through notification of SEIS (now suspended Services Exports from India Scheme) 2020-21 and 2021-22 or through alternative export incentive schemes would play a crucial role in achieving the overall target in general and the sectoral targets in particular," Sinha said.

The services exports sector continues to look for support and incentives from the government in the foreign trade policy likely to be unveiled this year, Sinha said.

“The sector is pinning its hopes on the post-pandemic recovery made by some key sectors, including travel, hospitality and entertainment. Thus, the importance of continued incentives to the services industry to achieve targets cannot be overstated," he said.  

The Asian Development Bank. in its supplementary outlook issued on Thursday, said that the services sector will do well in FY22 and beyond as the economy opens up and travel resumes. It has meanwhile, lowered the overall gross domestic product (GDP) forecast for India for this fiscal to 7.2% from 7.5% estimated previously.

The finance ministry, in its monthly economic review, pointed out that credit support to the services sector in the second week of June increased mainly because of a surge in credit growth to hotels and restaurants, and shipping in the second week of June. 

The services sector will lead growth recovery in FY23, said Aditi Nayar, chief economist, ICRA. “Middle-to-high income households are likely to prioritise spending on contact intensive services, which were avoided during the pandemic, at the cost of consumer durables," Nayar said.

India’s services exports in FY22 had touched an all-time high of $254 billion despite the travel and tourism, aviation, and hospitality sectors being severely hit by the pandemic.

The focus of exporters will also be on market research, consulting, engineering and construction services, which together will contribute to the target of $350 billion for FY23, Sinha said.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. More Less

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

First article