COVID-19 Impact on Exports of Services: Opportunities, Challenges and Suggestions for India

Abstract

The COVID-19 outbreak has put the global economic scenario out of order. The mechanism of lockdown and social distancing has paved a grave situation for global trade in general and services in particular as they are inseparable and requires proximity between the supplier and the consumer. In view of the outstanding contribution of services in India’s foreign trade, this study examines the impact of the pandemic on aggregate, sectoral and mode-wise services exports from India. It ultimately seeks to highlight key opportunities, challenges and suggestions to protect and promote India’s services interest amid this global disruption. We review the quarterly and monthly services exports patterns from January to July 2020 based on the data obtained from the World Trade Organization and the Reserve Bank of India. The perspective on mode-wise services exports is derived from the Trade-in Services by Modes of Supply (TISMOS) data set of the WTO for 2017. The analysis highlights a severe drop in overall services exports, by over 10% during the second quarter of 2020. Travel, transport and financial services have been hit hardest. However, the decline in India’s services exports found as relatively much lower in comparison to other major services exporting economies. The comparative edge in digital or Mode 1 services offers greater opportunities for the country in the longer period if urgent policy initiatives and support are extended to potential online services sectors.