homeeducation NewsThese ‘modern services’ sectors can create 3 million jobs over three years as per Axis Bank Chief Economist
These ‘modern services’ sectors can create 3 million jobs over three years as per Axis Bank Chief Economist
An Axis Capital report, which was released on August 7, points out that three-fourths of India’s exports are ‘modern services’ that are growing faster than the overall services trade globally.
India’s global share of modern services, already high at 8 percent, should further expand and that would improve macroeconomic stability by reducing dependence on foreign capital flows, create 3 million jobs in the next three years, and drive premiumisation of consumption and growth in commercial real estate, an Axis Capital report said earlier this month.
“We expect several structural factors to keep global trade growth in modern services elevated, even as cyclical factors moderate,” the report said.
What are modern services?
In an exclusive interaction with CNBC-TV18, Neelkanth Mishra, Chief Economist at Axis Bank, and Head of Global Research at Axis Capital, said modern services are non-IT services, basically consulting jobs that are being done out of India or parts of consulting jobs being done out of India.
“Semiconductor fabs being done out of India, procurement for large US retailers being now done out of India. There is a whole range of services which are now shifting back to India. Engineering services are a very, very large move now,” he explained.
Mishra said there has been very good traction on the commercial real estate side as well. So, he believes over a period of two to three years, this can wipe out India’s current account deficit.
He added that the 3 million jobs that would be created would also include those in the travel sector, and that of these 2 million would be high-quality jobs.
Structural growth in India’s services exports
The Axis Capital report, released on August 7, points out that three-fourths of India’s exports are ‘modern services’ that are growing faster than the overall services trade globally.
India’s global share of modern services trade – already at 8 percent (versus 6 percent in 2018, and 2.4 times India’s global share of GDP) – is also rising, it said.
A slowdown in the near term
“We expect the sharp slowdown in YoY growth for India’s services exports to last for several months, led by moderating wage growth and falling job openings in the US,” the report said.
Mishra explained that there are two cyclical elements that are negative right now — wage growth in the US and the number of job openings.
Also Read | India's share of global commercial services exports doubles to 4.4% in 2022 from 2% in 2005: Report
India's growth in services or services exports is as much about skill arbitrage now as it used to be about cost arbitrage, but still cost arbitrage is important too, he said. “Therefore, if the US wage growth was very strong, there would have been an acceleration in India’s exports and on the IT services front.”
Factors driving long-term growth of Indian and global services exports
The report says a clutch of structural factors are driving the expansion of global trade in modern services. These include:
- disaggregation of services value-chains
- rapid increase in cross-border internet connectivity
- slow return to the office (work-from-home is the first step to offshoring)
- demography-driven shortage of workers in the west
- cultural resistance to immigration
- improving education in India
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