Finance Minister Arun Jaitley has hinted at opening professional services such as law, accountancy and architecture to foreign players. Inaugurating a Service Conclave organised by the Commerce Ministry and CII, he said: “I think there is huge space to grow.”
Jaitley stated that even if the Government puts in place a protective regime, there is no way to guard against those who bend rules. “… people are now devising means of defying and bypassing bans. So, where direct entry is not allowed, indirect ways are being found to set up office. Therefore, an artificial defensive mechanism doesn’t give protection to our potential,” he said.
Currently, the services sector includes Financial, Banking, Insurance, Non-Financial/Business, Outsourcing, Research & Development (R&D), Courier, Technology Testing and Analysis. Foreign direct investment is permitted in sectors such as banking, insurance, and the courier business, but not in professional services such as law.
Domestic law firms and the Bar Council of India are opposed to opening up of the sector to foreign players.
According to figures released by the Department of Industrial Policy and Promotion (DIPP), the services sector received FDI of $6.5 billion during the April-August period of the current fiscal year. This is the highest among all sectors, accounting for 18 per cent of the total FDI the country got in that period.
On services exports, Jaitley said they need to grow faster and offset the deficit in merchandise trade. He said that within the services sector “we should focus on low-lying fruits such as tourism, research & development, and education, where it is easier to achieve results.”
He said that the services sector, which contributes close to 60 per cent of GDP, could be the driving force not only for exports but for employment generation.
In this regard, he said that the manufacturing sector’s contribution to GDP has shrunk to 15 per cent. “Our effort is to increase its share to 25 per cent to provide sustainable employment to the people,” he added.
Referring to the WTO negotiations, which are at a standstill, the Finance Minister underscored that the definition of globalisation has changed over the years. “It is now consumer-driven and no amount of patriotism and jingoism can drive consumers to buy products. They go for quality and price competitiveness,” he added.
The positions taken by various developed countries against Business Process Outsourcing (BPO) in the case of IT and IT enabled services have fallen flat because consumers wanted to have the best products at affordable prices, he said.