Failure of Doha round to impact India in services sector: Study

Failure of Doha round to impact India in services sector: Study

New Delhi: India will lose out in services sector in case the WTO’s Doha round of trade negotiations fails, according to a paper brought out by Finance Ministry.

The country could be a major beneficiary from greater market access in services unlike other developing nations, said the working paper authored by H A C Prasad, Senior Economic Advisor in the ministry.

India is Asia’s third largest economy with a size of nearly one trillion dollars. Services contribute about 61% of GDP and the sector is growing at double-digit rates.

The paper, titled ‘Strategy for India’s Services Sector: Broad Contours’, said a clear plan for services highlighting the potential gains for India in terms of growth, employment and exports can possibly give a new direction to the country’s strategy in WTO negotiations.

“Our future strategies should depend on our assessment of the export potential in the near and medium term in different services, the likely increase in market access in different services as a result of WTO negotiations which can benefit India and the likely impact on India’s growth," it said.

The paper pointed out that future negotiations would need realistic strategic alliances which can fetch good dividends. Citing an example, it said while India and Brazil have become very close coalition partners, the economic interests of the two are not necessarily the same.

“We have to be more forthcoming in future negotiations and set our own agenda and make others to react instead of we reacting as has been the case till now," said the paper, which is the first such document brought out by the Department of Economic Affairs.

This reversal of roles would depend on intensive study of different issues based on India’s export potential, besides its trade, growth and development strategies, the paper said.

On market access for services, the paper said there are actual visible and invisible trade barriers as well as trade barriers which continue to exist under the WTO bindings of different countries.

In the case of IT, software, and business services related to IT, there are many new restrictions as some US states are passing laws to limit business outsourcing.

“The New Jersey law is one such example. This phenomenon has not only spread to other states of US, but also to the federal level. This along with restrictions on H1B visas are the new market access barriers in US for these services," the paper said.

These restrictions deny non-US competitors market access to a very sizable pool of US business and trade, while providing protection for domestic economies. In the civil aviation sector, the huge subsidies to aircraft in both US and EU act as indirect market access barriers, the paper said.

The paper also pointed toward such trade barriers in legal, communication, business services, financial services, transport and travel, audio-visual and port services.

Pointing out that India has a large staff in its mission at Geneva and also in the WTO wing of the Commerce Ministry, the paper said there is a need for direct involvement of trade specialists in this team during negotiations.