Soon, Services Industry Will Hit Target Of $240 Billion: SEPC Chairman
Despite challenges, the industry has shown rebound and is bullish on its expansion plans
Amidst pandemic, the services sector has shown a rebound in 2021. The services exports touched nearly $25 billion in December 2021, taking the total to $235 billion in the calendar year 2021 from $203 billion in 2020, registering an annual growth of 16 per cent. "If services exports continue to grow at the same pace, India would not just achieve the services export target of $240 billion for the FY 2021-22 but it would also be the highest ever exports from the country in a financial year," said Sunil H Talati, chairman, Services Export Promotion Council (SEPC).
The sector registered a negative growth of only 3 per cent from $213 billion in FY 2019-20 to $206 billion in FY 2020-21, the chairman added.
The industry is one of the largest recipients of foreign direct investment (FDI). As per data released by the department for promotion of industry and internal trade (DPIIT), India's services sector is the largest recipient of FDI with 53 per cent of total FDI inflow during 2000-2021. The sector attracted FDI worth $283 billion between April 2000 and March 2021.
"Most of this FDI has come specifically in the IT sector which has experienced exponential growth during the pandemic," the chairman added.
The sector contributes to 32 per cent of the country's employment. According to ILO estimates reported by the World Bank, the services sector is highly labor intensive and generates the second highest level of employment in the country after agriculture. The agriculture sector in India generated 42 per cent employment in 2019 followed by the services sector which contributed 32 per cent.
"Despite all these contributions, the services sector faces a strong data crunch. We need state and district level trade data, among others. Some efforts are being made at international level with the introduction of trade in services data by mode of supply (TISMOS) but it is still at the experimental stage."
The strong growth of the industry is deterred by problems such as lack of access to international markets, global recognition, compliance with international standards, credit costs, high power costs, infrastructure bottlenecks and general regulatory bottlenecks, etc.
"The government needs to negotiate MRAs and market access agreements with important countries for wider scope of trade and exchange and address cash flow issues for the exporters and have stringent norms for speedy issuance of licenses, timely issuance of clarifications and a robust appeal mechanism. Focus on these critical issues is essential for the continued growth and development of the services sector," said Talati.
India was the least affected services exporting country after Ireland and China with a negative growth of only 5 per cent.
The industry is bullish on its expansion plans in the year 2022. SEPC is planning to organize its major flagship events in a physical mode to promote services exporters' interaction and business across sectors with the international clients. In the initial months post March 2022, the focus will be on organizing flagship events such as India Heals(healthcare services B2B), enttech (a major B2B event in audio-visual and entertainment services) and will also focus on the global exhibition on services. "We are also planning to organize a travel and tourism conclave this year with the name Athithi. We will be continuing with our master class series to train our exporters on matters related to international trade and business issues and policies, conduct capacity building programmes across different cities under market access initiative (MAI) scheme etc."