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Carnelian Bharat Amritkaal Series - Services Exports: Bigger & Better

Updated: Jul 10

Greetings from Team Carnelian!


We have been writing in our recent letters on various trends and opportunities during Amritkaal. In our previous letters, we discussed re-beginning of India’s story (read) - India transitioning from a developing nation to a Viksit Bharat. We wrote about India – factory to the world (read), Youngest, Largest & Aspiring population – the biggest mega trend (read). On the similar lines, we are writing this letter on the “Services” part.


India is the youngest country in the world today with a median age of 28 years. India is going to contribute ~25% of the incremental global work force over the next decade. India produces 2.55mn STEM graduates annually constituting 34% of the global STEM addition. These STEM graduates form the backbone of India’s IT industry.


World over we have observed that when economies transition from developing to developed, there is a disproportionate rise in the share of “services” sector. Today, the US, UK, Japan and Singapore have >70% of their GDP coming from services vs 52.8% for China and 48.4% for India. As the US economy travelled its composition from 42% agriculture in 1840s to 40% industrial in 1940s to 77% as the dominant service sector now – labor productivity has risen all-throughout the period.


Labor productivity is the highest in the services sector followed by industrial and then agricultural. This is because among all the three sectors - service sector requires more skill, ends up accessing the latest tech advancements, is more subjective/customized. Banking, finance, healthcare, engineering, and research are among the high-end services that drive labor productivity for the services sector.


India’s labor productivity stands at a meagre USD 8/hr vs USD 60-70/hr for developed economies. As India will move from developing to developed – “Services” will be an important sector that will bridge this gap. We see below important trends emerging in India’s services sector in this transition:


  • Strong hold in traditional IT services to continue.

  • India to be the brainpower for GCCs. (Number of centres to rise from 1580 currently to 2400 by 2030)

  • ERD and SaaS to emerge as incremental value drivers. (ERD exports will be 20x and reach USD 1tn by 2047)

  • Newer areas of services such as tourism, space, education will start becoming important from sectoral size perspective.

Strong hold in traditional IT services to continue.

Post introduction of the internet, it became possible for global corporations to offshore the work and reduce overall cost of delivery. This is how the Indian IT companies started in the 1990s by under-taking large scale back-end work. This work was high in volume, low in value addition. During the 2000s, Indian IT growth was more led by IMS, BPO/KPO, ITeS and some part of application development. Fast-forward 2023, Indian IT services today undertake the complete end-to-end digital transformation, cloudification, high end application development, product engineering, etc. Skilled, tech-savvy and hard-working English-speaking workforce led to the creation of IT sector in India. In a real sense, India is transitioning from “Run the support” to “Transform the business” function.


IT services exports today account for USD 146bn worth of services vs USD 4bn in 2000. It funded ~55% of the Balance of Trade deficit in 2023. As discussed above, India’s demographics (read) are going to remain favourable in the upcoming 25-30 years making it the only country in the world to be able to provide skilled workforce at a large scale.


TCS, Infosys, HCL Tech, Wipro, Tech Mahindra, LTIMindtree are some of the Indian-origin large IT services companies that have made a large-scale global impact. Apart from this, MNCs such as Accenture, Cognizant, Capgemini, Endava, EPAM, Genpact, WNS Global, ATOS, etc. have their large workforces operating out of India. Given the competitive advantage India enjoys, we believe its strength in the core IT services will continue in the entire Amritkaal period.


India to be the brainpower for GCCs

India today has 1,580 GCCs (vs 1,000 in 2015) employing 1.7mn people. Indian GCCs are estimated to go up to 2,400 by 2030. Indian GCC market is projected to rise at 13.3% CAGR to USD 110bn by 2030. As per Zinnov (a leading IT industry consultancy firm), ~20% of the Forbes 2000 global companies have set up their GCCs in India till 2023. This share is estimated to grow to up to ~55%. India accounts for more than 50% of the global GCC market, and GCCs account for ~25% of direct employment generated by India’s IT sector. GCC headcount is projected to rise massively by 2030 to 4.5mn from 1.7mn currently.

India is at the unique cross-roads where a large talent pool is available within reasonable cost structures. LatAm (Brazil, Mexico, Argentina), Philippines and even Vietnam may have a cost structure/skills of software engineering talent similar to that of India’s; however, India is the frontrunner on the size of its talent pool (>3mn relevant engineering talent in India vs 775k in Brazil).

ER&D and SaaS to emerge as incremental value drivers

ER&D is at the juncture where IT services were in 2000s. Out of ~1600 GCCs that operates out of India, ~1400 are in the ER&D space. ABB, Boeing, Airbus, Rolls Royce, Mercedez, Qualcomm, Intel, AMD, Cisco, Micron, Bosch are among the notable global MNCs having their global capability centres (GCC) based out of India. Global industrial giants are talking of setting up their manufacturing bases in India – in turn providing a tailwind for the Indian ER&D industry. We believe Indian ERD exports will hit the USD 1tn mark by 2047 vs USD 50bn currently. Tier II cities of India are becoming emerging hubs for industrial, automotive, and pharmaceutical GCCs.

Indian SaaS to rival global giants

Traditionally, India has remained strong on the IT services side, however off-late, India is seeing emergence of product companies also. Zoho, Freshworks, BillDesk, BrowserStack are among the noticeable ones. Zoho has scaled up to USD 1bn revenue now – this was USD 100mn in 2010. FreshWorks has reached USD 600mn+ revenue – this was just USD 100mn in 2014. Indian SaaS has reached USD 13bn of ARR in 2022 and we believe this will scale up to USD 500bn by 2047. We believe, by the period of Amritkaal, India will get its global equivalent of today’s Salesforce (USD 35bn).


SaaS companies operating from India/by Indian promoters:

Source - Bessener Venture Partners


Other services - travel, tourism, education, space to be the emerging areas



Countries with global dominance often have a strong cultural influence worldwide. The soft power makes it possible to attract global tourists. Political stability, economic prosperity, effective promotion and ease of travel become the further enablers.


Discretionary spending tends to increase faster than the increase in per capita income. Travel, tourism and hospitality get disproportionately benefits by rising per capita income. People upgrade their frequency and quality of travel spends. Air passenger travel was up 3.5x over 15 years in China post it crossed the USD 2000 per capita mark in 2006. India is seeing initial signs of creation of its travel eco-system. It inaugurated 74 airports over the last 10 years on a base of 148 airports in 2014.


Hospitality sector CEOs are talking of a large-scale expansion. Mr. Sunjae Sharma, Managing Director, India and Southwest Asia, Hyatt India attributes this growth to change in mindset of consumer (Gen-Z and millennials in particular) who are taking shorter trips with higher frequency. Improved connectivity is aiding domestic tourism. Airlines, hotels, luggage, airports, hospitality, and related ancillaries will be the key beneficiaries of increasing travel spending.



India has made incredible progress in the space sector. ISRO has become the first agency on the planet to land its rover on the Moon’s South Pole. Despite limited resources, India has achieved this feat and is now globally recognized as a credible low-cost innovator (ISRO’s budget at USD 1.9bn vs NASA’s USD 27.2bn). ISRO is using its technologically efficient low cost launchpad for international launches. Out of the 424 foreign satellites launched by ISRO since the 1990s, 389 (>90%) were launched in the last 9 years itself.


The Indian ministry has announced Indian space policy 2023 which enables end-to-end participation of non-government entities in all domains of space activities. Recently, the cabinet eased the FDI limits for the sector and has approved 100% under automatic route for manufacturing of components and systems/ sub-systems for satellites, ground segment, etc. Owing to the above steps, we believe India will see emergence of credible private companies in the space sector.



Education sector is also undergoing a transformational change. Foreign universities such as University of San Diego, Deakin University and Wollongong are looking to open centres in GIFT city. Government of India has also brought in CUET (Common University Entrance Test) which will enable a common university entrance exam across the entire country. Albeit, Indian CUET exams have started getting conducted overseas as well, enabling overseas student studying in India.  Also, India is seeing emergence of credible ed-tech companies such as UpGrad, Byju’s, Unacademy, Vedantu, etc. These new-age companies are ensuring necessary skill upgradation as per the corporate requirement.


Services sector to provide plethora of investment opportunities in Bharat’s Amritkaal

Bharat Amritkaal will turn out to be the most interesting time period for India’s service sector. It is an undisputed fact that the services sector tends to have the highest labour productivity. As India will transform from developing to developed economy, contribution of services sector will increase. Among IT, India will see noteworthy developments in ER&D and SaaS space. India will further strengthen its position of being “Office to the World”. Tourism, Travel, Hospitality, Education and Space sector will be the new emerging areas for investment in the service sector. Whenever such transition in economy takes place, it creates huge opportunities to invest and create wealth.


We will endeavour to capture many such emerging and high growth good businesses with credible management in the overall services sector via our “Bharat Amritkaal Fund”

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