Govt may scrap some norms to strengthen trade in services

Govt may scrap some norms to strengthen trade in services
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First Published: Wed, Jul 15 2009. 09 13 PM IST
Updated: Wed, Jul 15 2009. 09 13 PM IST
New Delhi: The finance ministry will soon propose a road map and timeline to do away with some domestic regulations to boost India’s international trade in services and encourage overseas investment in some sectors.
“We are actively working on a policy paper which will recommend a time-bound phase-out of certain domestic regulations that are proving to be hindrance in export of services,” a finance ministry official said. “We are also looking at sectors that can be opened up and will have much less regulations than what presently exist.”
The ministry will come out with the policy in 15 days, the official said on condition of anonymity. The bureaucrat did not specify the sectors of the economy that might be opened up for foreign direct investment.
The country’s exports of services include software, tourism, management, engineering, architectural consultancy, banking and insurance.
Even as the growth of global trade in services fell to 11% in 2008 from 18-19% earlier in the wake of a financial crisis, India improved its rank from 10th position in 2006 to 9th in 2007, and maintained it in 2008, according to international trade data published by the World trade Organization.
India, along with China, was among the top 10 exporters of commercial services in the world in 2008.
The Economic Survey 2008-09, released on 2 July, had also suggested that the country needs a policy to rationalize regulations.
“Streamlining many of our domestic regulations like licensing requirements and procedures, qualification requirements and procedures, technical standards and regulatory transparency can help in growth of export of services,” India’s annual report on the state of the economy said.
The ministry official said recommendations made in the forthcoming policy paper would be largely along the lines suggested by a working paper titled Strategy for India’s Services Sector: Broad Contours that was prepared in 2007 by H.A.C. Prasad, then senior economic adviser to the finance ministry.
The working paper recommended improving regulations in sectors such as banking, shipping, printing and publishing, port, retail, legal, educational and tourism services.
Arpita Mukherjee, a professor at Indian Council for Research on International Economic Relations (Icrier), a New Delhi-based think tank, said three things needed to be done in the services sector—open up certain sectors, streamline regulations and come up with innovative rules that are in line with global norms.
As examples, she cited post and express delivery in the country that is still governed by an archaic 1892 Act, direct marketing where foreign companies are allowed wholesale but not retail activities, and education where India does not have mutual recognition agreements with other nations.
“I don’t know what finance ministry officials have in mind but I would say there are several regulations imposed by both Centre and the states which prove to be an impediment in the inflow of foreign direct investment and need to be streamlined,” Mukherjee said, pointing out that if an entrepreneur were to open a retail operation, there are 47 different licences that are currently required.
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First Published: Wed, Jul 15 2009. 09 13 PM IST