Key Details
UNCTAD’s Measuring Servicification and Impacts of Services Trade and Policy examines how services contribute to production and trade, why conventional statistics miss part of this contribution, and how developing countries can use existing national data more effectively.
Area | Principal finding |
|---|---|
Economic contribution | Services account for more than half of economic activity in developing economies and approximately 30–35% of value added in industry. |
Hidden export value | Services embedded in goods represent around one-third of the value of global goods trade. |
Digital growth | Digitally delivered services grew by approximately 7% a year during 2015–2024, compared with about 4% for goods trade. |
India’s manufacturing evidence | Firm-level studies associate more intensive use of services with higher manufacturing export intensity and, in the case of financial services, wider product portfolios. |
West Bengal evidence | VAT records for 180,000 firms revealed substantial separation between registered and unregistered trading networks. |
Measurement priority | Linking tax, customs, payroll and business-register records can reveal effects on firms and workers that aggregate international statistics cannot capture. |
Services Are Embedded Across the Productive Economy
Manufacturing increasingly relies on finance, logistics, telecommunications, software, engineering, research, testing, design and marketing. These services may be purchased externally, performed within the firm or bundled with physical products.
This growing integration of services into manufacturing, agriculture and other sectors is known as servicification. It means the contribution of services to production and trade is larger than direct services-export figures suggest: an exported medicine or electronic device, for example, also embodies research, finance, testing, software and transport.
Across economies covered by OECD trade-in-value-added estimates, services account for around 30–35% of industrial value added and about 20% of agricultural value added. They also represent more than 75% of outward FDI among countries with relevant OECD data.
Services Policy Can Shape Manufacturing Competitiveness
The cost and quality of services inputs affect manufacturers’ ability to raise productivity, adopt technology and compete internationally. Restrictions on imported or domestic services can therefore affect firms well beyond the services sector.
The report associates such restrictions with:
higher production and transaction costs;
weaker access to specialised skills and technology;
lower downstream productivity; and
reduced import and export activity.
Services regulation is therefore also an industrial competitiveness issue. Rules governing finance, transport, telecommunications or professional services can affect manufacturing performance even when formally classified as services policy.
Indian Evidence Links Services with Exports and Diversification
Several India-focused studies illustrate these connections.
Research on firms in chemicals, pharmaceuticals, electrical goods and electronics during 2001–2016 found a positive association between services-input intensity and export intensity, even after accounting for productivity, firm size, exporter status and foreign ownership.
Analysis of Indian manufacturing during 2000–2019 also found rising services-input intensity, with export participation and export share becoming significant factors associated with firms’ services use in later years.
A separate study found that financial-services liberalisation helped manufacturing firms diversify their product portfolios by easing credit constraints, identifying one channel through which services reform can affect industrial capabilities.
These findings show an important relationship between services and manufacturing performance, but do not establish that greater services use alone caused stronger exports.
Tax Data Reveal Divisions Within Indian Supply Chains
Analysis of VAT records covering 180,000 firms in West Bengal found that registered firms traded predominantly with other registered firms, while unregistered businesses remained concentrated in informal networks.
Formalisation was therefore associated not only with tax compliance but also with firms’ position within supply chains. Separation between formal and informal networks can affect access to larger buyers, finance and more productive markets.
Administrative tax records provide detailed evidence on formal transactions but capture informal enterprises and workers less effectively. Enterprise, labour-force and household surveys remain necessary to fill these gaps.
Linking Existing Data Could Reveal How Reforms Affect Firms
UNCTAD argues that much of the information needed to understand servicification already exists across tax filings, customs records, payroll data, foreign-investment registries, business registers and enterprise surveys.
Securely linking these sources could show which firms use and supply services, where they sit within supply chains, and how productivity, exports, employment and investment change following policy reforms.
A consistent business identifier is important for linking records reliably across databases. UNCTAD also stresses anonymisation and controlled access to protect confidential tax, employee and commercial information.
What Is Servicification?
Servicification is the growing role of services throughout the production process, including within firms classified as manufacturers. It can occur when a manufacturer:
purchases services such as transport, finance or cloud computing;
provides services internally through engineers, designers or software teams; or
bundles goods with maintenance, finance or digital support.
Policy Relevance
The report matters to India because it changes how policymakers can evaluate manufacturing competitiveness, services reform and formalisation.
Industrial policy depends on services performance: Manufacturing incentives and physical infrastructure may deliver weaker results when firms face expensive logistics, restricted finance, poor digital connectivity or limited access to testing and professional expertise.
Trade agreements have effects across sectors: Services provisions in India’s trade agreements can influence manufacturers that consume those services. Evaluation should examine whether changes improve the availability, price and quality of inputs for firms of different sizes—not only whether direct services exports increase.
Formalisation should be assessed through market access: The West Bengal study suggests that registration is associated with participation in different commercial networks. For MSMEs, the relevant outcome is whether formalisation produces access to larger buyers, finance and productive supply chains.
India has a significant but fragmented evidence base: GST, customs, corporate-tax, payroll and business-register systems potentially allow analysis by industry, location, firm size and exporter status. Using them together requires institutional coordination, compatible identifiers and a clear authority for secure linkage.
Administrative and survey data serve complementary purposes: Administrative records can provide detailed information about formal firms and transactions, while surveys are needed to capture informal enterprises and workers. Policy analysis based on only one source risks giving a partial account of the economy.
Confidentiality is part of statistical capacity: Greater use of firm-level records requires anonymisation, restricted research environments and clear accountability for data access. Effective data integration therefore depends on governance as much as technology.
Follow the Full Report Here: Measuring Servicification and Impacts of Services Trade and Policy