Services sector package: Govt yet to decide what it will spend funds on

While the government has allocated a Rs 50 billion package for the services sector, it is yet to yet to decided as to what the money would be spent on.

Last week the Cabinet had declared the financial package to jumpstart growth in 12 sub sectors in the services sector. However, senior government officials have confirmed that the spending pattern of the fund hasn't been completely decided upon and is also not expected soon.

The 12 specific sub-sectors such as Information Technology and IT-enabled Services, Tourism, Medical Value Travel, Transport and Logistics Services, among others, have been identified due to their potential to create jobs and stimulate exports. Contributing heavily to the national GDP, reforms in the services sector had been ordered by the Prime Ministers office. However, sectoral action plans are yet to be identified by the Commerce Ministry along with other relevant government departments, a senior official said.

Among the possible uses of the money, export promotion and further tariff measures to boost specific exports top the list. But a senior official from the Services Export Promotion Council also said that no specific plans have been drawn up for the usage of the funds and it was unclear when disbursal would start.

Last week, Commerce and Industry Minster Suresh Prabhu had also announced that the government will also reform the regulatory landscape. The regulatory bodies such as Institute of Chartered Accountants of India may see a separation of their professional functions from their regulatory functions to remove conflict of interest. Also, new bodies such as the proposed Higher Education Empowerment Regulation Agency may replace the existing University Grants Commission.

The senior official said that setting up technical standard across sectors, promoting targeted skill development and upgrading technological upgradation across the sector will require money to be spent and the Rs 50 billion amount has been announced taking into account overall requirements for the sector.

The government aims to push up India's share in global services trade to 4.2 per cent from the current 3.3 per cent. The largest component of the services sector at 45 per cent - information technology - had raked in a revenue of $ 143 billion in 2016-17, and industry body Nasscom expects the figures to go up to $ 154 billion in 17-18. "Of this, $140 billion is expected to be from exports and outlook has considerably brightened in recent month", a senior Nasscom functionary said.

Till the global financial crisis of 2008, India's services exports was registering a good growth for almost a decade and the Compounded Annual Growth Rate for the sector stood at 21.6 per cent during 1994-95 to 2004-05. However, it later fell to an 11.9 per cent growth during 2005-06 to 2014-15, according to the India Brand Equity Foundation.

Post-2015, the government has banked on transportation and business services to nudge the sector into the growth charts and the sector grew by 5.7 per cent in 2016-17. In 2016-17, software services exports, which account for 45.2 per cent of total services, declined by 0.7 per cent due to a challenging global business environment and pricing pressure on traditional services. The services trade surplus has been financing more than half of India's merchandise trade.

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