Govt yet to decide what it will spend funds on

While the government has allocated a ~50-billion package for the services sector, it is yet to decide as to what the money will be spent on.

The Union Cabinet declared the financial package last week to jumpstart growth in 12 sub-sectors of the services sector. However, senior officials have confirmed that the spending pattern has not been decided upon, and is not expected anytime soon either.

The 12 sub-sectors, including information technology and IT-enabled services, tourism, medical value travel, transport, and logistics services, have been identified based on their potential to create jobs and stimulate exports.

Reforms in the services sector, which contributes significantly to the national GDP, had been ordered by the Prime Minister’s Office, but sectoral action plans were yet to be identified by the commerce ministry and other departments concerned, an official said.

Among the possible uses of the funds, export promotion and further tariff measures to boost specific exports top the list.

Last week, Commerce and Industry Minister Suresh Prabhu had announced that the government would also reform the regulatory landscape. Regulatory bodies such as the 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. Setting up technical standards across sectors and promoting targeted skill development would require money to be spent, and the ~50 billion had been announced taking into account overall requirements of the sector, one of the officials quoted above said.

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. IT, the largest component of the services sector at 45 per cent, had raked in a revenue of $143 billion in 2016-17, and industry body Nasscom expects the figure to go up to $154 billion in 2017-18. “Of this, $140 billion is expected to be from exports and the outlook has considerably brightened in recent months,” a Nasscom functionary said.

Till the global financial crisis of 2008, India’s services exports had been registering a good growth rate for almost a decade, and the compounded annual growth rate for the sector stood at 21.6 per cent between 1994-95 and 2004-05.