The other half

With Prime Minister Narendra Modi set to inaugurate India’s very first trade expo aimed at the services sector on Thursday, this crucial part of the economy may well get the policy focus that it has been denied. Although the services sector accounts for more than half the GDP of the country, and services exports have consistently maintained a significant surplus (unlike goods trade, where India runs a large trade deficit), there has been little policy attention paid to it as a whole. While individual sub-sectors, such as IT-enabled services, have received some attention, the overall trade policy focus has remained largely on merchandise exports. In fact, till the trade policy was revised earlier this month, many of the incentives given to services exporters, in the form of credit scrips which could be set off against imports, went largely unutilised, since most services exporters had little or no import requirement! The Centre’s decision to hold the first Global Exhibition on Services in Delhi, as well as Modi’s presence, could mark a turning point in the way the sector is treated by policymakers.

Currently, India is ranked eighth in service exports with exports of $154 billion, but this accounts for just 3.2 per cent of the world total. Although this is double the share of merchandise exports (which has a 1.7 per cent share of world trade in goods), the potential exists to substantially enhance this. While some of the larger sectors, such astravel and tourism, IT and telecom and, to an extent, healthcare, have managed to grow, the potential in fields like media and entertainment, scientific research and development, logistics, education, professional services, space and even government services, remain largely untapped. India’s Election Commission, for instance, has robust technology and systems for conducting elections, which can find ready takers in other democracies. There is significant scope to grow exports of such services, especially in the Saarc region, as well as South-East and Central Asia, and Africa, where they are either underprovided or largely missing.

While the recent trade policy has made a beginning, more can be done, especially to push Mode 2 (consumption abroad) and Mode 3 (commercial presence abroad) exports. Industry will also have to get its act together. Services trade is dogged by non-tariff barriers which are accentuated by a ‘tit-for-tat’ mentality in many of the autonomous governing self-regulatory bodies of professions such as accountancy, law and medicine. Indian lawyers can consult, but not sign anything in Singapore, for instance; that country does not recognise Indian qualifications because India refuses to recognise theirs! This is where an overarching policy guideline from the Centre can help, paving the way for quicker mutual recognition of standards, processes and qualifications, which will enable India’s services talents to compete better globally. Above all, policymakers will also have to recognise that globalisation has rendered the ‘made-here-sold-there’ approach redundant, and focus on improving India’s presence in global value chains.

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