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Dated: 14.03.2026

Union Budget 2026-27: Paving the Way for India’s Global Leadership in Services Exports

India’s services sector has emerged as a key driver of economic growth, contributing significantly to the country’s GDP and employment generation. ​ The Union Budget FY 2026-27 builds on this momentum, introducing targeted reforms and initiatives to further enhance India’s global competitiveness in services exports. ​ With a vision to achieve a 10% global share in services exports by 2047, the budget outlines a comprehensive roadmap to position India as a global leader in the services sector. ​

India’s Services Export Performance: A Snapshot

India’s services exports have demonstrated remarkable resilience and growth in recent years, becoming a critical pillar of the country’s external sector performance. ​ Key highlights include:

• Record Services Exports: Services exports reached USD 348.4 billion during April-January FY26, accounting for 10% of India’s GDP in the first half of FY26. ​
• Software Services Lead: Software services remain the largest component, contributing over 40% of total services exports. ​ Business and consulting services have also emerged as significant growth drivers. ​
• Employment Generation: The services sector accounts for nearly 30% of total employment, adding 40 million jobs in the post-COVID recovery period. ​

Key Drivers of Services Export Growth ​

India’s services export growth is driven by several high-performing sub-sectors:

1. Software Services: Software services account for over 40% of total services exports, growing at an average rate of 13.5% during FY23-FY25. ​
2. Business Process Outsourcing (BPO): BPO services form the largest component of IT-enabled services (ITES) exports. ​
3. Professional and Management Consulting: This segment has grown at an impressive rate of 25.9% during FY23-FY25, increasing its share from 10.5% in FY16-FY20 to 18.3% in FY23-FY25. ​

Together, these segments account for over 65% of India’s services exports, showcasing the country’s growing expertise in knowledge-intensive and cross-border activities. ​

Union Budget FY 2026-27: Key Initiatives for Services Sector ​

The Union Budget FY 2026-27 introduces several measures to strengthen India’s services sector and boost exports:

1. Tax Incentives for Cloud Services ​

To attract global cloud service providers, the budget proposes tax holidays until 2047 for foreign companies delivering cloud services using India-based data centre infrastructure. ​ Additionally, related entities providing data centre services will benefit from a safe harbour margin of 15% on costs. ​

2. Safe Harbour Reforms for IT Services ​

The budget consolidates various IT services under a single category with a common safe harbour margin of 15.5%. ​ It also increases the safe harbour threshold for IT services from ₹300 crore to ₹2,000 crore, simplifying compliance and enabling companies to opt for a five-year safe harbour regime. ​

3. Advance Pricing Agreement (APA) Reforms ​

The budget aims to fast-track the Unilateral APA process for IT services companies, with agreements to be concluded within two years. ​ The facility of filing modified returns will also be extended to associated entities entering into APAs. ​

4. Skill Development Initiatives ​

The budget focuses on developing a strong care ecosystem, training 1.5 lakh caregivers in NSQF-aligned programs that combine core care and allied skills such as wellness, yoga, and medical device operation. ​ This initiative is expected to address the global demand for caregivers and expand India’s care economy. ​

5. Boosting Tourism

The budget introduces measures to enhance tourism, including:

• Setting up five regional medical tourism hubs. ​
• Upskilling 10,000 guides across 20 iconic destinations. ​
• Developing 15 major archaeological sites into world-class experiential hubs. ​
• Launching a new Buddhist Circuit in the Northeast for religious tourism. ​
• High-speed rail routes to improve connectivity between major business and cultural destinations. ​

6. Promoting AYUSH

The budget aims to expand the global reach of AYUSH through:

• Establishing three new All India Institutes of Ayurveda. ​
• Upgrading the WHO Global Traditional Medicine Centre in Jamnagar. ​
• Enhancing AYUSH pharmacies and drug testing labs for higher certification standards. ​

Global Trade Agreements: Expanding Market Access ​

India’s growing network of trade agreements is playing a pivotal role in boosting services exports. ​ Key agreements include:

• India-UK CETA: Comprehensive market access in 137 sub-sectors, simplified visa procedures, and an agreement on social security contributions. ​
• India-EU FTA: Commitments across 144 services sub-sectors, mobility provisions for AYUSH practitioners, and social security arrangements. ​
• India-Oman CEPA: Market access in 127 services sub-sectors, including professional and IT services, and enhanced ICT ceiling for Indian companies. ​
• India-New Zealand FTA: Commitments across 118 services sub-sectors, including Ayurveda and yoga, and a quota of 5,000 visas for skilled Indians. ​
• India-EFTA TEPA: Market access in over 100 sub-sectors, mobility provisions, and mutual recognition agreements in professional services. ​
• India-Australia ECTA: Commitments across 135 sub-sectors, temporary entry provisions, and offshore tax relief for Indian tech companies. ​

Emerging Drivers of Services Export Competitiveness ​

Global Capability Centres (GCCs) ​

India has become the world’s largest hub for Global Capability Centres (GCCs), hosting over 1,700 GCCs and employing more than 1.9 million professionals as of FY24. ​ These centres have evolved into integral components of multinational firms’ global operations, contributing to India’s exports of knowledge-intensive services. ​

AI and Digital Ecosystem ​

India ranks second globally in AI skill penetration and is among the fastest-growing countries in generative AI patenting. ​ The country’s data centre capacity is projected to grow from 1.4 GW in 2025 to 8 GW by 2030, further strengthening its digital infrastructure and global service delivery capabilities. ​

Conclusion

The Union Budget FY 2026-27 underscores India’s commitment to becoming a global leader in services exports. ​ With targeted reforms, skill development initiatives, and enhanced global partnerships, India’s services sector is poised to drive economic growth, create employment opportunities, and establish the country as a hub for knowledge-intensive and digitally enabled services. ​ As talent, technology, and trade converge, India’s services sector is set to play a pivotal role in shaping the nation’s global economic narrative.

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Source: Ministry of Finance, PIB, Ministry of Commerce & Industry, Govt. of India

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