Despite the global expansion by Indian IT companies, the share of the off-site mode of exports of software services continued to increase and stood at 88.8% in the financial year 2021-22 as compared with 87.1% during FY21 and 82.8% five years ago, the Reserve Bank of India's latest annual survey on the country's computer software and information technology enabled-services exports shows.
The survey collects details on India’s exports of software services as per the type of activity, on-site or off-site nature of services, country of destination and four modes of supply.
The survey shows that the country’s on-site services accounted for 11.2% share in FY22, which declined from 12.9% in the previous year.
India’s exports of software services, excluding exports through commercial presence, are also estimated to have increased by 17.2% to $156.7 billion during 2021-22.
Computer services, including IT services and software product development, continued to account for over two-thirds of total software services exports at 67.8% in 2021-22. The share of IT-enabled services, including BPO and engineering services, however, declined to 32.2% in 2021-22 from 34.7% in 2020-21.
BPO services, including business consulting services, finance and accounting auditing bookkeeping and tax consulting, HR, and supply chain, among others, accounted for nearly 84% of the exports of IT-enabled services. Engineering services like embedded solutions, product design engineering, industrial automation and others accounted for just 16.4% of the IT-enabled services.
Also, private limited companies accounted for 60% of the total exports of software services, whereas exports by public limited companies declined to 37.3% in 2021-22 from 44.8% in 2020-21.
The top destinations for India's IT services were the United States and Canada, accounting for 55.5% share in India’s software exports in FY22, though it declined from 56.2% in 2020-21. Europe's share stood at 31%, which increased marginally from 30.1% in the previous year. In Europe, the U.K.'s share alone rose slightly to 14.9% from 14.4%. Asia's share of 6.5% in FY22 declined from 6.7% in FY21.
The U.S. dollar remained the principal invoicing currency for software exports, followed by the Euro and Pound sterling. The U.S. dollar's share, however, dipped to 70.5% from 72% in the previous year. The Euro and Pound also saw a decline, accounting for 10% and 6.4%, respectively.
In terms of modes of supplying services, the share of Mode-1 (cross-border supply) in India’s exports of software services increased further to 80.9 per cent in 2021-22 from 78.4% during the previous year; the share of the other three modes of delivery (viz., consumption abroad; commercial presence; and presence of natural persons) declined.
Total exports of software services, including services delivered by foreign affiliates of Indian companies, increased by 15.9% during 2021-22 and stood at $ 171.9 billion; local software business by foreign affiliates stood at $15.2 billion, with the United States being the major destination.
For the 2021-22 round of the survey, 6,218 software export companies were contacted, of which 2,074 companies, including most of the large companies, responded. The responding companies accounted for 89.4% of the total software services exports3 during the year.
