The weakness of the banking sector in America will hamper the export growth of the country's services sector

- The new trade policy lacks incentives to increase service sector exports

- It is necessary to provide strength to the service sector to maintain its position in the export market

While there are concerns that India's goods exports will decline due to the global recession, India's growing service sector exports are expected to provide protection to the Indian economy from external threats. This hope was raised when the country's service exports were at a record high in the December quarter of 2022. However, this hope arose before the banking crisis in America and Europe. The banking crisis has now ruined the fortunes of the Information Technology (IT) services industry, a major contributor to the country's service sector exports.

India's services exports rose 24.50 percent year-on-year to a record high of $83.40 billion in the December quarter. The current account deficit was reduced to 2.20 percent of GDP or $18.20 billion with growth in service sector exports and reduction in merchandise trade deficit. In the financial year ended, the country's service exports increased by 27 percent to 323 billion dollars. By March, 2024, service sector exports are expected to increase to $375 billion. It was also expected that by March 2025, the exports of the service sector will increase from the exports of the country's goods.

However, the US and European banking crisis could hit India's $245 billion IT business process management (BPM) industry. About 40 percent of the total revenue of the country's BPM industry comes from the Banking, Financial Services and Insurance (BFSI) sector.

Not only will the collapse of major banking institutions affect existing businesses, but the near-future technology spending is also looming. While the country's top IT service companies have extensive exposure to US banks, the possibility of an impact on service sector exports is not ruled out.

Globally, North American banks are leading tech investments in the banking sector. In 2022, the banks here spent 82 billion dollars on the IT budget. The total global expenditure figure was 250 billion dollars.

While the IT sector has a major contribution in the export of the service sector of the country, any serious situation in America and Europe can affect the overall export of the service sector of the country. The share of the IT industry in the export of the service sector of the country is significantly high but currently it is seeing a turning tide. The country's service exports are no longer limited to IT services but consulting and research and development are also becoming a profitable business. Which in the current situation can be considered as a deposit in the service export of the country.

Service exports have been a ray of hope for India amid the global recession, but the banking crisis has forced India to expand the country's service export sectors and markets. With India's foreign trade declining in goods and service sectors like IT and tourism, there is an urgent need to look to other export sectors and markets.

In view of the ebbing tide of the country's exports amid the global recession, it is necessary for India to be aggressive now in establishing a business presence in countries that are our major export hubs besides expanding Indian trade across borders. When India is strong in IT and IT enabled services, efforts to increase exports in other non-IT business services with the help of this service sector, along with efforts to diversify the exports of the service sector i.e. to provide opportunities for developing new export products, are becoming essential. Dependent only on exports of certain types of services, India seems reluctant to take steps to increase demand in new sectors such as education, health care.

The long awaited foreign trade policy has finally been announced. The previous foreign trade policy was announced in 2015 and was for a period of five years. Thus the new policy which was supposed to be announced in 2020 has been announced in 2023. The new foreign trade policy has not been fixed and the government is open to changing the policy whenever it sees fit. India has a wide opportunity to increase its share in foreign trade amidst the changed foreign trade calculations after Corona, but as the government's new foreign trade policy lacks a specific period, the government will change the policy at any time, which will continue to worry the manufacturers, especially the exporters. As foreign trade policy lacks a long-term strategy, exporters have to operate amidst a constantly changing trade environment.

By 2030, the export figure has been set at two trillion dollars, which seems to be too high. The country's export growth has averaged 9 percent in the last four years. In order to achieve the export figure of two trillion dollars in the next seven years, India will have to grow its exports at the rate of 15 percent annually.