Software exports may be hit by geopolitical issues

Software exports may be hit by geopolitical issues, warns Economic Survey

Representative image. (iStock Photo)

The share of software services has declined by four percentage points over the past decade to reach 40 per cent of total services exports in 2018-19. Yet, services exports remain concentrated in software services, accounting for twice the share of the second-largest component, business services, the Economic Survey said. 

This situation, the Economic Survey says, has made the software sector, and overall services exports, susceptible to changes in the exchange rate, global IT spending, stringent visa norms, and rising cost pressures due to increased local hiring in export destinations.

 It warns that rising production costs and uncertainty related to Brexit and US visa norms may pose downward risks to the country's software exports. 

Meanwhile, services import growth (YoY) during April-September 2019 stood at 7.9 per cent. An increase in import growth for transport, software, communication and business services offset the contraction in imports of financial and insurance services and the slowdown in imports of travel services.

Increased business services payments were primarily driven by professional, management and consultancy services, technical and trade-related services, the survey said. Net exports of services increased 4 per cent from $38.9 billion during April-September 2018 to $40.5 billion during the same period in 2019.

Another interesting insight is that the services trade surplus, largely driven by the surplus in software services, financed about 48 per cent of merchandise deficit during April-September 2019, partially offsetting the impact on the current account deficit.