Case Study 1 - Export of Services

Introduction

Services are important for the developed as well as for developing country economies. The rapidly expanding services sector is contributing more to economic growth and job-creation worldwide than any other sector. India's services trade currently constitutes about 32 per cent of the country's total trade.

Due to such rapid growth in services exports, India has succeeded in raising its penetration in global markets more rapidly for services than for goods. In 2006, its share in world services trade was around 2.52 per cent compared with a 0.9 per cent share in world merchandise trade. Today, the services sector is the single largest sector in India, accounting for more than 50 per cent of domestic production, 32 per cent of international trade, and some 33 per cent of employment in the organized sector (2006).

Yet, a large part of India's services sector is untapped and rarely explored in the international market. The expansion of India's services sector has been attributed to demand as well as supply factors. Demand for many services has become highly income elastic; that is, as people grow richer, their consumption of services such as education and health expands more rapidly than their demand for manufactures and agricultural products.

To a certain degree, the growing share of services in gross domestic product (GDP) and the rising services trade also reflect the dynamism of the Indian economy, where an efficient services sector is not only crucial to the country's economic growth but also crucial to its competitiveness in the current era of globalization. Therefore, the liberalization of the services trade is quite appealing as it is likely to exert an economy-wide influence in providing strong inputs to all other economic activities, including poverty reduction. India is one of the leading exporters of services in the world.

At present, India ranks 9th in the world for overall services exports. Currently, India ranks 2nd in the world for computer and information services exports. The trend towards globalization has resulted in steady growth of trade in services. Probably the fastest growing sector of world trade is trade in services. Services include travel and entertainment, education, business services such as engineering, accounting and legal services.

Questions

Elaborate the different initiatives taken by the government of India in order to encourage export of services.