Needed: A Fresh Look at the Services Sector

Context: There is need to align the needs of the services sector with the Atmanirbhar Bharat package in order to grab the opportunities for the sector in a proximity resistant future. 

Concerns in Services Sector

• Declining trend: The services PMI for April and May stood and 5.4 and 12.6 respectively, one of the lowest in the World; the merchandise sector declined by 60% in April
• Immediate brunt: borne by many services like aviation, tourism, hospitality, logistics, distribution and construction due to Covid-19.
• Disconcerting lack of attention: as the service has been a growth driver and shock absorber for the Indian economy.

Opportunities in Services Sector: Due to Covid-19, the rise in the digital delivery of services acts as a catalyst

• Leverage strengths in Mode 1 (online supply of services): India can diversify and enhance its service exports through mode 1, building upon its global standing in IT-BPO services

• Reduced need for the overseas commercial presence of service providers will benefit micro, small and medium enterprises (MSMEs). 
• Tap opportunities in healthcare like in clinical trials and testing, diagnostics and health-related data analytics; leverage existing strengths in pharmaceuticals industry and R&D.

• In Mode 4(temporary movement of service providers) : The US and UK have already announced the easing of visa norms for overseas doctors.

• It will also help in augmenting domestic resource quality and capacity.
• Require bilateral agreements between governments to facilitate such movement of people.

• In Mode 3 (cross border investments) : Improved business climate and assured transparency and predictability could attract FDI (Mode 3 imports) with associated gains in standards, tech. and growth.

• Global recession also presents opportunity in the form of IT, BPO Mode 3 exports to other countries.

Tackling the challenges

• Technology disruption: Artificial intelligence and machine learning has reduced the need for outsourcing.

• Indian firms could provide customized services and leverage these opportunities to tap into new areas.

• Data protection regulation:   India’s privacy laws are considered inadequate by many countries.

• India could align its data privacy laws with the EU’s GDPR, the existing Personal Data Protection Bill should be passed incorporating desired changes.

Way Forward:

• Detailed examination of services: in light of fast-changing global environment to be conducted and supported through domestic initiatives like Champions Service or Startup India Schemes.
• Address quality and standards issues: which are long-lasting 
• Focus on niche services: during trade negotiations such as healthcare solutions, R&D, business services.
• Align with Atmanirbhar Package: Proposed financing mechanisms could be used to strengthen stressed startups and services in MSMEs.