India’s Planning Commission has suggested greater private sector participation in developing the services sector, which official data says accounts for more than half of the country’s national income.
“Human capital is critical to development of the services sector. I feel private sector participation in education and skill development will go a long way addressing this issue,” said Anwarul Hoda, member of the Planning Commission and chairman of its high-level group on the services sector.
A report by the group was released on Wednesday by Montek Singh Ahluwalia, deputy chairman of the Planning Commission.
Employees at a Convergys call centre in Gurgaon. The Plan panel report suggests leveraging India’s advantage in business process outsourcing through value-added, knowledge-based services (Photo by: Madhu Kapparath / Mint)
The report recommends deregulating higher education and allowing private institutions to operate for profit.
Currently, norms by regulatory agencies University Grants Commission and All India Council for Technical Education do not allow for this.
Education experts agree that private sector participation will help develop the required human capital to cash on the potential of the services sector.
However, some don’t agree that educational institutions at higher levels should be opened for profit.
“There are issues of equity and quality. While different models such as IITs, IIMs or community colleges can be made use of, we have to keep in mind that education is a critical social good and, therefore, higher education needs to be regulated,” said Devi Singh, director of Indian Institute of Management, Lucknow.
The plan panel report also suggests creating private sector-led development councils that would promote running of courses, training and devising curriculum for vocational education.
It has also suggested leveraging India’s advantage in business process outsourcing (BPO) through value-added, knowledge-based services, which currently account for only 15% of total BPO operations, the report said.
Besides expanding private sector presence in education and skills development, the report proposes further opening up of financial services and retail, relaxing regulatory norms to promote tourism, and providing fiscal concessions to boost shipping services.
The report has questioned the tax regime in shipping. “Data suggest that while trade through sea has increased several times, the share of Indian ships which carry Indian cargo has come down drastically from 31.5% in 1999-2000 to nearly 14% in 2005-06,” said Hoda. He added this was largely due to high taxes.
The report has also suggested revising norms relating to coastal regulation zone (CRZ) to make India’s beach tourism more attractive. The regulation says that no building can be constructed close to the sea, citing environmental issues.
“We have 7,600km of coastal land which can be cashed on but, because of regulations like CRZ, we are losing out to much smaller countries such as Thailand and Malaysia where hotels and spas are constructed on the sea with stilts,” said S.S.H. Rehman, executive director of ITC Ltd and a member of the group.
The services group has also suggested reforming the ownership and management of public sector banks and allowing pension and provident funds to diversify their investments portfolios.
These changes can, however, be brought about only if Parliament passes the banking regulation and pension bills.