The Context

According to the World Trade Organisation (WTO), in 2024, global trade in goods was USD 25 trillion (75.8 per cent of the total), while trade in services was USD 8 trillion (24.2 per cent of the total). In general, services trade has been growing more rapidly than the goods trade. The WTO argues that this trend is attributed partly to increased digitalisation, which facilitates cross-border service delivery. Sectors like information and communication technology (ICT), transport, and travel services have seen notable growth. It may be noted that tariffs levied by President Trump of the USA, and more recently by Mexico, are on goods trade and not on services trade.

The structure of India’s global trade is somewhat different from the global trade. In 2024, India’s total exports of goods and services were USD 824 billion (2.5 per cent of the global exports), with goods exports contributing USD 437 billion (53 per cent of India’s total exports), and services exports USD 387 billion (47 per cent of India’s global exports)¹.

A more recent official data for April to November 2025 suggests that this pattern has continued, with services trade accounting for 48.0 per cent of India’s total exports of USD 562.1 billion. Thus, India’s share of services exports in total exports is nearly twice that of the global share, underlying the importance of sustaining momentum in services exports for India, while strongly suggesting the need to accelerate exports of goods.

Figure 1 provides data on India’s ranking in global manufacturing output. The data suggest that in 2023, India was tied jointly with South Korea as the fifth-largest manufacturing country. Japan and Germany were tied at third place with 5.1 per cent global share. To attain the 2047 Viksit Bharat goals, India must have an ambitious target of surpassing the 2023 share of Japan and Germany by 2047.

Figure 1: India’s Ranking in Global Manufacturing Output

India’s Digital Services Exports in Global Perspective

Digital services in the domain of software, IT, finance, insurance, and telecommunications are becoming a cornerstone of the global economy. According to the WTO, global exports of digitally delivered services reached USD 4.25 trillion in 2023, equivalent to 53 per cent of total global service exports. This growth represents a compound annual growth rate (CAGR) of 8.2% from 2005 to 2023. Such a remarkable increase underscores the expanding role of digital services in the global economy, driven by rapid technological advancements and increased connectivity across the world.

When compared to traditional goods trade exports, the growth rate of digitally delivered services is even more impressive. It outpaced goods trade exports by 4.6% and exceeded the overall services export growth by 6.2%. This comparison highlights the shifting dynamics in global trade, where digital services are becoming a crucial component, offering more agility and scalability than their traditional counterparts.

The following observations may be made from the global rankings in digitally delivered services exports for 2024, given in Figure 2. The original data are from the WTO.

It is noteworthy that many countries around the world (the exception is African nations) are participating in digital service exports. The United States, with USD 741 billion (15.4 per cent of the global total), is by far the largest exporter of digital services. While these exports include Meta and Google’s multi-billion-dollar advertisement businesses, they also cover online education, financial activity, and a wide spectrum of services delivered without in-person human interaction.

The United Kingdom, at USD 488 billion (global share of 10.2 per cent, is another global leader in digital exports. It is estimated that roughly 3.2 million jobs in the country are linked to digital exports, driven by its technical and financial services industries.

Ireland, with a global share of 8.9 per cent (USD 425 billion), ranks third in digitally-delivered exports. Ireland’s role as a European hub for major tech firms means many regional digital sales are attributed to the country, boosting its role in the global digital economy.

The above three countries accounted for more than a third of global service exports in 2024. The other countries are far behind. Thus, the fourth-ranked Germany had digital service exports of USD 280 billion (share of 5.8 per cent), and India, ranked fifth, had exports of USD 276 billion (share of 5.8 per cent).

Other noticeable digital services exporters were China and Singapore (share of 4.6 per cent each), and the Netherlands and France (share of 4.3 per cent each).

The above suggests that India will need to overcome intense competition from well-established high-income countries to improve its global ranking in the digital service exports. India’s new generation economic agreements with the United Kingdom, and hopefully soon with the European Union, and with others, will need to consider the impact on its digital services export competitiveness. Broader geographical reach through diplomacy, positioning India as a reliable and trusted partner, could help in this regard.

Figure 2: Global Rankings in Digitally Delivered Services Exports, 2024- Accessed on 17 December 2025

GCCS (Global Capability Centres)

“Global Capability Centres (GCCs), also referred to as Global In-house Centres (GICs), are offshore facilities set up by multinational corporations (MNCs) to manage a variety of business functions and processes for their parent organisations”.

In the past, these centres focused on back-office and business support tasks, as well as end-to-end IT support services like maintenance and help centres. Activities were confined to outsourced business functions, including data processing, document management, and customer service.

Today, GCCs have helped India become a premier destination for global corporations to establish Centres of Excellence (CoEs) across multiple areas, such as IT, business process management (BPM), research and development (R&D), finance, human resources (HR), healthcare, banking and financial services (BFSI) and other corporate roles”².

GCCs represent an important avenue through which India can improve its global competitiveness in digital service exports. Many multinational companies in India have set up GCCs to handle verticals like business processes, IT services, R&D centres, innovation hubs, customer service centres, and other key functions. These GCCs have rapidly grown into strategic hubs for innovation and value creation.

 In just five years, the combined revenue of the GCCs has increased from USD 40.4 billion in FY19 to USD 64.6 billion in FY24, growing at 9.8% annually. By 2025, over 1400 GCCs will employ over 1.9 million persons across the country, helping to shape the future of tech and business from right here in India. The Government of India has played a pivotal role in nurturing this ecosystem through sound policies, infrastructure development, and startup support, positioning India as a preferred destination for global enterprises.

The sector is projected to reach USD 105 billion by 2030, supported by nearly 2,400 centres employing over 2.8 million professionals³.

A recent report by the global consulting firm Ernst and Young (E and Y) has concluded- “As GCCs evolve into AI-native strategic hubs, their sustained advantage will come from innovation, talent modernisation, and operational excellence. With rising influence in enterprise-wide decision-making, India’s GCCs are poised to deliver global transformation leadership, autonomous and resilient operations, and next-generation AI innovation built in India, scaled worldwide. The future of GCCs will be shaped not from the back office, but from the global boardroom, where intelligent talent and intelligent automation work side by side”⁴.

Another positive indicator is the commitment made (needs to be implemented) by Microsoft that it would spend USD 17.5 billion over four years to advance cloud and AI infrastructure, training, and ongoing operations in India. The sum represents Microsoft’s biggest Asia investment and comes on top of $3 billion committed to India earlier this year.

Amazon has also unveiled a plan to invest more than USD 35 billion across all its businesses in India through 2030, focusing on business expansion and the three strategic pillars of AI-driven digitisation, export growth, and job creation⁵.

It is reported that Google is also planning to invest USD 15 billion in AI hubs in India

Digital Tax by the European Union (EU) on Firms from the United States

A potentially key negative factor in the growth of digital services is the decision by the EU to levy a digital tax on firms from the United States. The EU collectively and some of its member states individually impose taxes on revenue earned by large tech firms from advertising, marketplaces, and user data. The EU also has the Digital Markets Act and the Digital Services Act that regulate how Big Tech firms operate, compete, and moderate content in the region. The DMA and DSA regulate gatekeepers and content moderation.

Tech giants like Google, Meta, Amazon, Apple, and X face the major brunt of EU investigations and fines. Recent fines include €2.95 billion on Google, €500 million on Apple, €200 million on Meta, and €140 million on X, as per European Commission records.

The US has argued that these are trade barriers, disproportionately affecting American firms rather than European competitors⁶.

In general, the EU policymakers exhibit a poor understanding of how nations and groups of nations can grow. Several European countries are currently among the top exporters of digital services (Figure 1). To pursue a tax dispute with globally critical United States tech firms at this point, when its overall growth is anaemic, and it faces severe demographic imbalances, while there are major geopolitical disagreements between the EU and the United States, does not appear to be compatible with sound growth.

The EU also plans to implement a counterproductive Carbon Border Adjustment Mechanism (CBAM) from January 2026. Its ostensible purpose is to price carbon on imports, mirroring the EU's internal carbon cost, stopping EU companies from moving production to countries with weaker climate rules (carbon leakage). Initially, carbon-intensive goods like iron & steel, cement, aluminium, fertilisers, electricity, and hydrogen. The scope is expected to expand by 2030.

The CBAM mandates that the importers must declare the embedded emissions of their goods and purchase "CBAM certificates" at the EU ETS carbon price. CBAM affects both EU importers and non-EU exporters, requiring significant supply chain adjustments and data reporting.

Predictably and with strong reasons, many countries, including the United States, Brazil, and India, view it as patently protectionist.

This will disrupt the overall global trade atmosphere and adversely affect many countries. The digital services exports, though not included at present, will also be indirectly affected.

In conclusion, India should continue to focus on broad-based high growth, while increasing its social resilience and improving digital-related human skills. It also needs to become even more competitive in attracting GCCs and expanding their scope. The competition it faces in moving up the global ranking in digital service exports will increasingly become more severe, and therefore, sustaining overall good governance will continue to be critical.

 

References

1. https://www.dgciskol.gov.in/writereaddata/Downloads/20250819155439A%20Quick%20View%20of%20Indias%20Trade%20Scenario.pdf Accessed on December 15, 2025
2. https://www.businessgo.hsbc.com/en/article/what-are-global-capability-centres-gccs-in-india-Accessed on 18 December 2025.
3. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2202046&reg=3&lang=1-Accessed on 18 December 2025.
4. https://www.ey.com/en_in/insights/consulting/global-capability-centers/india-s-gccs-are-leading-the-shift-to-intelligent-ai-native-enterprises- Accessed on 18 December 2025
5. https://www.mingtiandi.com/real-estate/data-centres/microsoft-amazon-announce-52-5b-in-investments-to-drive-india-ai-plans/- Accessed on 18 December 2025.
6. https://www.wionews.com/world/after-the-trump-tariff-war-digital-tax-on-us-tech-firms-is-emerging-as-new-conflict-area-with-europe-what-is-it-1765955801620- Accessed on 17 December 2025