Services Exports: On a High Growth Trajectory

Services remain the fastest growing sector of the Indian economy with immense potential. Despite the pandemic it is the only sector which has showed resilience and experienced a negative growth of only 3 percent from 213 billion USD in 2019-20 to 206 billion USD in 2020-21. Infact the Services sector has shown a rebound in 2021. In the first seven months of 2021 alone services exports have touched 133 billion USD with a growth rate of nearly 20 percent. In the month of October 2021, Services exports stood at 19.86 billion USD, exhibiting a positive growth of 19.78 per cent vis-à-vis October 2020 (16.59 billion USD). 

Under the existing Foreign Trade Policy (FTP), the only specific incentive to Services Sector is SEIS. Government of India had introduced the Service Exports from India Scheme (SEIS) under the Foreign Trade Policy (FTP) - 2015-20, replacing the earlier scheme 'Served from India Scheme’ (SFIS) under Foreign Trade Policy, 2009-15. SEIS is important because it not only makes Indian services exports globally competitive in terms of price but also in the present scenario, SEIS would help the sector recover better post the pandemic and secure retention of work force. SEIS has helped firms to expand their businesses and thereby creating more job opportunities. It must be noted that Government has already announced slew of schemes like RODTEP and PLI for manufacturing sector whereas Services sector exporters are still uncertain about any specific schemes. 

Given the performance and resilience of the sector during the pandemic and in the first 7 months of 2021-22, the need of the hour is level playing field with manufacturing and incentives and support to tide over the pandemic. It is high time that a change in perception towards services being equally important as manufacturing gains ground. Infact, services are a major source of employment along with manufacturing. Services exports lead directly to employment of approximately 2.6 crore people in India. 

For instance, the government gives several export incentives to the manufacturing sector including MEIS (which was found to be not compliant with WTO) and replaced with Remission of Duties and Taxes on Exported Products (RODTEP) from 1st January 2021 and also the Production Linked Incentive Scheme (PLI) for several manufacturing sectors. RoDTEP is a combination of the current Merchandise Export from India Scheme (MEIS) and Rebate of State and Central Taxes and Levies (RoSCTL). However, there is only one incentive scheme SEIS for service exporters which the Government is planning to scrap and replace it with an alternative. SEPC has already proposed the alternative schemes to SEIS called DRESS (Duty Remission on Export of Services Scheme). Unless the government focuses on the services sector in the forthcoming Foreign Trade Policy (FTP) by announcing scheme-based export incentives and provides interim relief by continuing with the existing schemes in the short run, the sector will take a long time to revive. 

Way forward 

Current FY is already seeing the highest services exports ever despite restrictions on many services sectors such as tourism, medical value travel, education and aviation, etc. Once these restrictions are further eased, services exports from India have huge untapped potential. Services sectors contribute almost half of country’s GDP which clearly indicates that services may have 50 percent share in exports from India which stands at 41 percent today (2020-21). 

Recognising the importance of services exports in overall economy of the country, the Ministry of Commerce has set a target of $ 1trillion of services exports by 2030. To enable achieve this target and give the same level of importance to services sector, Department of Commerce has set up a dedicated EP(Services) division. Few meetings have already taken place to chalk out a plan of action for services sector. We are working with our members and seeking their active participation, inputs and necessary feedbacks to work on our target at mission mode.