Page 685 - ES 2020-21_Volume-1-2 [28-01-21]

312 Economic Survey 2020-21 Volume 2

9.11 With significant drop in foreign tourist arrivals owing to the mobility restrictions imposed
worldwide, travel receipts witnessed a decline of 73.49 per cent in H1 of 2020-21 as against
a growth of 8.21 per cent in corresponding period of the previous year. Slowdown in trade
activity and supply chain disruptions led to the decline in transportation receipts by 2.34 per
cent in H1 of FY2020-21 as against a growth of 10.77 per cent in H1 of FY2019-20. Software
exports, with a share of 49.3 per cent in total services exports, however, remained resilient with
higher demand for digital support, cloud services and infrastructure modernisation catering to
the new challenges posed by the pandemic. In fact, majority of software companies which had
reported negative revenue growth in Q1 of FY2020-21, have shown signs of rebound in Q2 with
positive sequential growth on account of the increased revenue from their financial, banking and
insurance, retail, life sciences and health care units.

9.12 As projected by Gartner (October 2020), although the global IT spending is expected
to decline by 5.4 per cent in 2020, it will rebound with the onset of recovery phase in 2021.
Among other major sectors, business services exports recorded a growth of 2.48 per cent in H1
of 2020-21.

9.13 India’s services imports exhibited sharper decline of 13.95 per cent in H1 of FY2020-
21 in comparison with services exports. Payments for all major services imports decreased on
YoY basis. Among the major sectors, payments for overseas travel fell by 55.09 per cent due to
restrictions on outbound travel from India. Payments for transport services (accounting for over
16 per cent share in total services imports) recorded a decline of 25.9 per cent in H1 of FY2020-
21 on a year-on-year basis. Payment for imports of business services, which accounted for 43.41
per cent of total services imports, increased by 4.22 per cent in H1 of 2020-21 (Table 5).
9.14 Sharper decline in services imports over exports led to an increase in net services receipts
by 2.1 per cent in Q1 of 2020-21 over the previous year. Sharp contraction in merchandise trade
deficit and a stable net services receipts led to a current account surplus of 3.9 per cent of GDP in
Q1 of 2020-21. According to the World Trade Organization (WTO), though the world services
trade declined by 4.3 per cent (YoY) in Q1 of 2020 (January-March), key sectors have started
2
showing signs of rebound. The provisional data on India’s trade in services in Q2 of 2020-21
is showing signs of revival with exports increasing by 8.4 per cent QoQ and imports increasing
by 13.2 per cent Q-o-Q; resulting in improvement of 2.3 per cent QoQ in net services exports.
Even though projections of world trade volume of goods and services are optimistic for 2021,
duration and containment of the pandemic and effectiveness of government policy responses to
revive the economy would be key factors in shaping India’s services trade.

MAJOR SERVICES: SUB-SECTOR WISE PERFORMANCE

AND RECENT POLICIES
9.15 In the wake of the Covid-19 pandemic, most of the sub-sectors of the services sector
witnessed a contraction in growth during 2020-21 (Table 6). Aviation and tourism declined
sharply in 2020. Only 2.46 million foreign tourist arrived in India during January-June 2020
as compared to 5.29 million during January-June last year. Consequently, foreign exchange
earnings from tourism declined to US$ 6.16 billion during the first six months of 2020 as

2 Services Trade Activity Index, World Trade Barometers, WTO, September 17, 2020.