India's surge in modern services exports: Empirics for policy

India's exports of modern services have grown consistently over the last three decades and more so since 1991. Sustaining modern services exports (MSEs), which in India enjoy comparative advantage, is important for sustaining service-led growth and maintaining stability on the external sector. In this context, we examine key drivers of India's surge in MSEs which have important implications for policy. The results reveal that endowment factors such as human capital, tele-density, financial development, physical infrastructure and institutions are the key drivers of India's MSEs along with the world demand, exchange rate and foreign direct investment. Therefore, India needs to focus on and speed up the ongoing reforms to improve supply side factors such as education, infrastructure, financial sector deepening, governance and broad-band tele-density to improve competitiveness of India's modern services exports.