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India’s Services Surplus Slows as AI Reshapes Export Model
India earns a lot of money by selling software and other services to customers in other countries.
This money helps balance the money India spends importing goods such as oil, electronics and machinery.
In July 2026, India’s net services exports grew much more slowly than before.
Experts say artificial intelligence may be changing some older technology jobs and contracts.
Companies are being asked to use more automation and produce better results with fewer resources.
But AI is also creating new work in areas such as consulting, engineering and technology transformation.
TCS, Infosys and HCLTech all reported growing AI-related business.
India also receives large amounts of money from Indians working abroad, which provides another financial cushion.
The main question is whether new AI business will grow quickly enough to replace older services revenue.
Net services exports fell 5% month-on-month to $16.95 billion in July 2026, with annual growth slowing to 3%.
India’s services exports reached $421.3 billion in FY2025-26, helping total merchandise and services exports hit a record $863.1 billion.
Emkay Global warned that weaker services-export growth could increase risks to India’s current-account deficit as the merchandise gap widens.
Major technology companies reported subdued dollar growth, while customers increasingly demanded automation, productivity and measurable outcomes.
AI is also creating new business: TCS, Infosys and HCLTech reported substantial growth in AI-related revenues, while remittances reached $155.1 billion in FY26.
- Who
- India, its services-export industry, Emkay Global economists and major technology companies including Tata Consultancy Services, Infosys and HCLTech.
- What
- Net services-export growth slowed in July 2026 as India’s merchandise trade deficit widened, raising questions about AI’s effect on the services sector.
- Where
- India and the international markets served by its technology and business-services companies.
- When
- July 2026; the article also cites FY2025-26 and the first four months of FY27.
- Why
- AI is increasing automation and changing customer demand, while India is importing more goods; however, AI-related services and overseas-worker remittances may provide new sources of foreign exchange.
AI Pressure and External-Risk View
AI Opportunity and Adaptation View
Effect on traditional services exports
AI Pressure and External-Risk View
AI-driven automation, slower customer spending and demand for higher productivity could weaken traditional outsourcing revenue and hiring, slowing India’s services surplus.
AI Opportunity and Adaptation View
AI may help Indian companies move from conventional outsourcing into higher-value transformation, consulting, engineering, research and development, cybersecurity and data services.
Near-term economic impact
AI Pressure and External-Risk View
If the existing services business slows before new AI work scales up, India’s widening merchandise deficit could face less support, increasing current-account risks.
AI Opportunity and Adaptation View
India still has large services exports, growing AI businesses and strong remittances that can cushion the transition while companies develop new revenue streams.
Long-term outlook
AI Pressure and External-Risk View
Productivity could rise faster than revenues, and older contracts may shrink faster than new AI businesses grow, making services exports less dependable.
AI Opportunity and Adaptation View
The Economic Survey found that AI-exposed services grew faster than less AI-exposed categories after generative AI spread, suggesting AI could ultimately strengthen India’s export sector.
Key facts
- July net services exports
- $16.95 billion, down 5% month-on-month and up 3% year-on-year.
- FY2025-26 services exports
- $421.3 billion.
- FY2025-26 combined exports
- Merchandise and services exports totaled a record $863.1 billion.
- July merchandise trade deficit
- Approximately $32 billion, with merchandise imports at $76.2 billion.
- FY26 remittances
- $155.1 billion, up 14.5% year-on-year and equivalent to around 4% of GDP.
- Current-account forecast
- Emkay Global expects a FY27 current-account deficit of 1.3% of GDP, assuming Brent crude averages $85 per barrel.
- AI-related company figures
- TCS reported annualised AI revenue of $2.6 billion; Infosys said AI represented 8.2% of quarterly revenue; HCLTech’s Advanced AI revenue rose 62.1% year-on-year to $171 million.
Sources
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