India’s services sector has emerged as a major growth driver, with strong export performance boosting external stability and significantly offsetting the widening merchandise trade deficit in FY26.

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• According to the Ministry of Finance, services exports grew by 7.9 percent in FY26, crossing 400 billion dollars and reaching 418.3 billion dollars for the first time.
• The share of services exports in India’s total exports increased to 48.6 percent in FY26 from 47 percent in FY25, reflecting a structural shift in export composition.
• The services sector generated a significant surplus of 213.9 billion dollars, highlighting its strength and contribution to maintaining external economic balance.
• This surplus offset approximately 64.2 percent of the merchandise trade deficit, acting as a stabilizing factor amid global economic uncertainties and trade disruptions.
• Despite strong services performance, India’s total trade deficit widened to 119.3 billion dollars in FY26 compared to 94.7 billion dollars in FY25.
• The growth in services exports is largely driven by sectors such as information technology, business services, and financial services with strong global demand.
• The report highlights that services exports act as a shock absorber, reducing vulnerability to global supply chain disruptions and geopolitical challenges.
• The rising importance of services exports indicates India’s transition towards a knowledge based and digitally driven economy in global trade.