India can expand its exports by diversifying into high value-added activities and improving the quality of goods and services, says an International Monetary Fund (IMF) paper.

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"India should capitalise further on its comparative advantage in exports of high-value services. At the same time, it should also increase the quality, sophistication, and diversification of manufacturing," the working paper titled 'Make in India: Which Exports Can Drive the Next Wave of Growth', said.

According to the paper, the expansion of India's exports of services between 1990 and 2013 has been nothing short of spectacular, putting India on a par with the world's high-income economies in terms of service-product sophistication and as a share of total exports.

"This has created unique opportunities for continued growth," it said.

The paper, however, pointed out that by contrast, when it comes to exports of manufactured goods, India has lagged behind its emerging-markets peers, both in quality and as a percentage of the total export basket, leaving substantial room for improvement.

According to the paper, India owes its rapid growth in service exports to the emergence of modern services, defined as products that can be stored and traded digitally.

The paper argued that India should expand exports to new markets, especially South Asian neighbours.

It said the income and employment potential of Indian exports could further benefit from increasing the value and quality of high- and medium-tech manufactured exports.

The working paper noted that new technology and cultural inventions from India would shape the wave of economic growth.