Source: Wall Street News

Does artificial intelligence all rely on humans? And it's Indian man-made?

Recently, it was reported that Amazon's unmanned fresh food chain stores claim to be a fully automated supermarket using AI “black technology” to achieve “grab and go, no need to scan a code”. There is actually an Indian team of up to 1,000 people behind it. Through remote video surveillance, it is possible to identify products purchased by customers with the naked eye.

After the news came to light, Amazon was ridiculed by all online groups. Some people jokingly called AI = Anonymous Indians (Indian with unknown name).

But behind the laughter, this seemingly ridiculous piece of news reflects the strength of India's computer service industry. Goldman Sachs believes that as an important hub for global software outsourcing services, India is quietly emerging as a “world service factory” in the digital age.

Goldman Sachs Asian economic analyst Santanu Sengupta and his team pointed out in a recent research report that with the acceleration of the shift in global trade focus to services such as computers and consulting, India's service export industry has ushered in a golden opportunity period for booming development.

Goldman Sachs pointed out that since 2005, India's services exports have grown at a compound annual growth rate of nearly 11%, far exceeding the global growth rate, particularly in computers and professional consulting services. By 2023, India's share in global services exports will increase from less than 2% to 4.6%.

Among them, the rise of the Global Competence Center (GCC) has contributed significantly to the rapid growth of India's professional consulting exports, and GCC's revenue has quadrupled in 13 years.

Goldman Sachs pointed out that, relying on advantages such as continuous improvement of infrastructure, rich talent reserves, and an open business environment, India is becoming the core area of the global trade in services landscape and becoming a new “world service factory.” Its benchmark scenario predicts that by 2030, India's services exports will reach 11% of GDP, an increase of 1.3 percentage points over 2023.

Global computer services exports are growing rapidly, and India is one of the main players

With technological progress and the reduction of cross-border exchange costs, global trade in services has developed by leaps and bounds in recent years, and the growth rate has been ahead of traditional commodity trade for many years.

Since 2005, global services exports have tripled, reaching 7% of global GDP by 2023, and are growing faster than commodity exports.

In the process, computer and consulting services grew the most rapidly.

From 2005 to 2023, exports of computer services and consulting services increased 7 times and 4.7 times, respectively. By 2023, they accounted for 12% and 10% of global service exports, respectively, compared to 4.4% and 5.7% respectively in 2005.

Although the US and Germany have maintained their share in global services exports, the share of other large developed markets such as the UK, Japan, and France has declined, and emerging economies such as India, China, and the United Arab Emirates have risen to prominence, showing strong competitiveness in the field of services exports.

Thanks to huge demographic dividends, ever-improving digital infrastructure, and an increasingly open market environment, India, China, and the UAE increased their share of global services exports by 2.7, 1.5, and 2 percentage points, respectively, from 2005 to 2023, ranking among the highest increases among global economies.

The compound annual growth rate of India's services exports reached 11%, and GCC revenue surged fourfold in 13 years

According to a Goldman Sachs research report, exports of services have become the new engine driving India's economic growth.

From 2005 to 2023, India's services exports grew rapidly at a compound annual growth rate of 11%, reaching a scale of nearly 340 billion US dollars, which is almost twice as fast as the global level. In 2023, exports of services climbed to 9.7% of India's GDP, an increase of 3 percentage points over 2005.

Computer services are the main driver of India's services exports. With a strong IT talent pool and cost advantages, India has developed into an important carrier for global software and information technology services. In 2023, computer service exports accounted for nearly 50% of India's total service exports, ranking first among all segments.

Judging from the growth rate, the most prominent one is the export of professional consulting services. The share of exports of high-value-added services such as business consulting, management consulting, and financial consulting jumped from 7.2% in 2005 to 18.3% in 2023, and soared at a compound annual growth rate of 17% over 18 years.

This is mainly due to the establishment of Global Competence Centers (GCC) by many multinational companies in India to outsource core business such as R&D and design to India.

Goldman Sachs statistics show that as of fiscal year 2023, India's total GCC revenue surged fourfold from 13 years ago to reach 46 billion US dollars, providing 1.7 million jobs.

Goldman Sachs said that as more leading companies increase their investment layout in India, GCC is expected to become a “bridgehead” for India to build a modern service industry, injecting a steady stream of growth impetus into exports in related fields.

Future: Service exports are expected to reach 11% of India's GDP

According to the Goldman Sachs report, India's service exports continue to prosper, and the steady increase in global demand for services is undoubtedly the biggest driving force. As countries' economic focus shifts to the service industry at an accelerated pace, and the digital wave sweeps through all walks of life, “Indian Services” is expected to usher in a wider market space.

On the other hand, India's constantly improving business environment, increasingly upgraded infrastructure, and abundant talent reserves will also continue to support strong growth in service exports.

As a result, Goldman Sachs predicts that India's services exports will reach 11% of GDP by 2030 (9.7% in 2023).

Goldman Sachs pointed out that in recent years, services exports have become an important factor in cushioning India's external balance from external commodities/supply-side shocks. Growth in services exports will make India's external sector relatively resistant to shocks in the medium term and reduce the volatility of the Indian rupee.

Goldman Sachs expects the trend of exports of high-value services to continue, which will drive the growth of domestic demand for high-end optional consumption and real estate. The growth in services exports will also help stabilize India's external balance and improve the Indian economy's ability to withstand external shocks.

Assuming that commodity prices and commodity trade balances do not change significantly from 2024, India's current account deficit is likely to remain as low as 1% of GDP on average from 2024 to 2030.