India’s growing share of global modern services trade can create 3 million jobs, including 2 million high-income jobs in the next three years as services trade shifts from just cost arbitrage to skill arbitrage. This would drive premiumisation of consumption and growth in commercial real estate,” Neelkanth Mishra, Chief Economist, Axis Bank and Head of Global Research, Axis Capital, wrote in a report.
The software and business services exports saw a 17.7% cagr (compounded annual growth rate) over FY20-23, twice that seen in FY17-20. This was supported by a significant growth in business services to the tune of 20.5% cagr, outperforming IT software exports which grew at a cagr of 16.4%. Global organizations leveraged India’s talent pool for higher-value functions, with the increasing acceptance of ‘work from anywhere’ and remote-working post-Covid.
Axis Capital Research estimates an 11% cagr for software and business services exports over FY23-26, global recessionary fears notwithstanding. Global companies, it points out, are expanding their Indian centres and delivery and an increasingly larger number of global enterprises, including smaller firms, setting up presence in India amidst sticky global labour inflation. This includes a significant increase in engineering and R&D exports, accounting and consulting services, as well as growth for traditional IT and business services.
The expansion of GCC (Global Capability Centres) will eat into potential growth opportunities for companies and pressure costs by playing a bigger role in programme management and relying on lateral hires, the report notes. NASSCOM data indicates 2.8 lakh GCC employee additions in FY23 versus 3.8 lakh added over FY17-22.
While initially, global enterprises were driven by the cost arbitrage to set up GCCs in India, the country’s digitally savvy talent, backed by a vibrant start-up ecosystem, has strengthened the case for leveraging India for talent and innovation. GCCs, in many cases, are no longer seen as just support centres, as they get increasingly involved across more business functions, including end-to-end processes and product ownership across industries as diverse as automotive, manufacturing and retail beyond only software services.