New Delhi: The services sector is all set to lead India’s export growth in a big way.
India ranked No. 10 in services exports in 2006 and its share in world commercial services exports rose to 2.7%. Compared to this, India’s merchandise exports amounted to 1% and it ranked 28 in the world, according to a working paper brought out by the finance ministry.
India’s services exports, at $81.3 billion (Rs3.2 trillion) in 2006-07, are fast catching up with the country’s merchandise exports of $127.1 billion. The services export growth rate in 2006-07 was 32.5% compared to 21% in merchandise export. Within the services sector, while software services rose by 32.7%, non-software miscellaneous services (mainly led by business services such as management, architectural and engineering consultancy) grew by 39.3%.
With high growth in the services sector, H.A.C. Prasad, senior economic adviser in the finance ministry, has made a case for a clear strategy for the services sector, as well as trying to negotiate better market access to India’s services in the context of World Trade Organization (WTO) talks.
A paper, authored by Prasad, also talks about the need for greater synergy, not only between trade strategies and trade negotiations, but also between growth and development strategy, and trade negotiations. Prasad wrote that services trade has been acting as a cushion for India’s current account and in covering its trade deficit.
The paper also says if services trade, which has been increasing steadily for India, is also considered, total trade as a percentage of GDP shows a remarkable increase from 17.5% in 1990-91 to 52.7% in 2006-07.
According to the latest trade data from the Reserve Bank of India (RBI), invisible receipts rose by 27.5% in the first quarter of 2007-08, up from 23.7% in year-ago quarter. “This was mainly due to momentum maintained in the growth of software services, travel earnings, other professional and business services, along with the steady inflow of remittances from overseas Indians,” RBI had said in September.
According to Biswajit Dhar, professor and head, Centre for WTO Studies at the Indian Institute of Foreign Trade, the problem is in areas where India has comparative advantages, such as movement of professionals. “Access to Indian professionals is restricted in several countries,” he said. “While there is prevalence of federal and sub federal laws in the US, in the EU, Indian professionals have to first meet the requirements of the Union and then of individual nations.” Dhar recommends that India should launch a sustained campaign for getting access to its professionals just as other countries do when they ask India for better access to their merchandise.