Analysis of India's Software Export Divergence
Overview
The Reserve Bank of India's (RBI) balance of payments (BoP) data highlights a significant divergence in software exports between official figures and those reported by listed information technology (IT) companies.
Key Statistics
- RBI Data: Software services exports grew by 12.7% to $180.6 billion in FY25.
- Listed IT Companies: Combined forex revenues of 64 listed companies increased by only 3.8% to $69.6 billion.
- Growth Trends:
- India's software services exports have a CAGR of 14.2% over the past five years.
- Exports doubled from $93.1 billion in FY20 to $180.6 billion in FY25.
- Listed companies' forex revenues grew at a CAGR of 7.1% in the same period.
- Market Share: Listed IT companies' share in software services exports dropped to 38.5% in FY25 from 55% in FY19.
Historical Context
Between FY05 and FY19, listed IT companies expanded forex revenues at a CAGR of 16.3%, surpassing the overall software exports' CAGR of 11.7%.
Reasons for Divergence
- Unlisted IT Firms and GCCs:
- Unlisted IT companies and Global Capability Centres (GCCs) have shown faster growth than listed companies.
- Combined forex revenues of these entities grew at a CAGR of 15.9% from FY21 to FY24.
- Methodological Differences: Discrepancies in BoP (cash-flow based) and company revenue (accrual basis) reporting.
Expert Insight
Madan Sabnavis of Bank of Baroda notes the rise of unlisted firms and freelancers in offering services, contributing to the divergence. Dhananjay Sinha from Systematix Institutional Equity emphasizes differences in reporting practices.
