New Delhi: India may soon allow law firms to have more than 20 partners and lift a prohibition on legal advertising as part of initial efforts to improve the competitiveness of Indian services and boost exports. It may subsequently allow foreign lawyers to practice in the country in a limited manner and on a reciprocal basis.

This is part of the government’s efforts to improve competitiveness and boost services exports by making the necessary executive and legislative changes to domestic regulations of services sectors such as legal, education, healthcare and logistics. The absence of clear-cut domestic regulations is thought to be one reason India has failed to exploit the booming global services market, including with those countries with whom it has trade in services agreements such as South Korea, Japan and Malaysia.

While services contribute 57% of India’s nearly $2 trillion gross domestic product, net services exports were a meagre $73 billion in 2013-14, in which software exports alone accounted for $69 billion. India has a share of 3.4% of the global services trade while China has a 4.6% share.

A committee of secretaries may meet as early as this month to clear the proposal on legal services, which will be subsequently placed before the cabinet for a final decision, commerce secretary Rajeev Kher said in an interview.

“Legal services are not allowed to have more than 20 partners. If I want a large legal practice, I need to break this. Because if you don’t have a large legal practice, your capacity is limited. Our lawyers cannot advertise. These kinds of controls need to be removed," he said. “So in the first stage, this is the kind of change that is being proposed, because this will make our lawyers become more competitive."

Subsequently, India needs to negotiate mutual recognition agreements with foreign countries for qualification and licensing arrangements, Kher said. “Then, we need to allow foreign lawyers to come in some limited areas such as arbitration. This will give our lawyers opportunities of employment and young professionals will get experience in modern legal practices. That is the way, one after the other, you open up," he added.

Lalit Kumar, a partner at J Sagar Associates, said the Companies Act, 2013, has facilitated relaxing the limit of 20 partners and hence the latest move by the government may help bring more focus on implementation of the provision. “As regards advertisements, it remains to be seen what form of advertisements will be allowed. But any form of relaxation in advertisements will be helpful in better selling the credentials of a firm," he added.

The proposal to allow foreign lawyers to practice arbitration laws has been in the pipeline for quite some time now, said a partner at another law firm. “This was supposed to happen in phases. The first phase is non-contentious consultants. Based on the experience thereafter, foreign lawyers and firms could be brought in for other phases, including participation in arbitration, which was supposed to be Phase 3," he said, requesting anonymity. “The important thing is to have reciprocal arrangements with the countries of these law firms, so that Indian firms can also practice there."

An inter-ministerial group is studying the laws and regulations of a host of services sectors and recommending necessary changes. “We will go on doing this sector by sector. It is not a process which will take six months, it is a much longer process, but we will initiate this process sector by sector," Kher said.

The government seems to be targeting the low-hanging fruits in services sector reforms, said Arpita Mukerjee, a professor at the Indian Council for Research on International Economic Relations. “But simply domestic reforms will not allow us to negotiate trade agreements without opening up the services sectors for foreign players. Opening up the retail sector remains the biggest services sector reforms at present," she added.

Education is another area the inter-ministerial committee is currently working on. Kher said Indian and foreign universities should be in a position to offer courses in each other’s countries by opening branches through a commercial presence. “These are the ways in which I can unleash the potential of both sides. This does not happen because we don’t have a law to that effect. The higher education bill which is pending before the Parliament. Those are the kinds of changes we need to bring in," he added.

Keeping in mind the huge potential in services exports, the commerce ministry is organizing a global exhibition of services from 23-25 April to showcase India’s services offerings. More than 40 countries are expected to participate in the fair, which will be inaugurated by Prime Minister Narendra Modi. From next year onwards, a services conclave will be held alongside the services exhibition in February.

The focus sectors of the Global Exhibition on Services are information technology, telecom, tourism, media and entertainment, healthcare, logistics, professional services, education, research and development, space, and small and medium enterprises.

Shreeja Sen contributed to this story.

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