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Contents
Source: The post is based on the article “Ride Globalisation, Again” published in The Times of India on 12th April 2023.
Syllabus: GS 3 – Indian Economy
Relevance: About services exports and manufacturing sector
News: Services exports in India have risen remarkably. This has made India recover from the pandemic loss and focus on other aspects of the economy.
What are some of the findings on services exports?
After the pandemic, net services exports have risen to $9 billion per month in the last financial year, 2021-2022. This financial year there has been a steep rise and it has gone up to $16 billion per month.
India’s net exports in services have been positive while its net exports in goods are negative. In the two years since the pandemic, India’s net export in services has boomed.
What has caused a boom in the services exports?
The big IT firms of India have played a major role in services exports.
It has also risen due to the Global Capability Centres (GCC). GCC refers to offices set up by large multinational firms that provide IT, research, and analytical support to the parent companies.
India currently hosts 40% of the world’s GCCs and this number is expected to rise.
Moreover, there is more potential in India to increase its services exports in the sectors such as finance, medicine, education and law. These sectors have not yet been utilized in services exports.
These sectors along with IT exports and a strong privacy and data protection law will position India at the centre of new wave of globalization of services.
However, this doesn’t mean India should abandon manufacturing.
Must Read: Services Sector in India – Explained
How can India create job in its manufacturing sector?
India has a strong presence in skilled manufacturing such as two-wheelers and pharmaceuticals.
However, India has not been successful in creating low skilled jobs in manufacturing and there is a need to create more jobs in the manufacturing sector.
Moreover, jobs cannot be created by selectively focusing on industries through industrial policy, protecting some areas with tariffs and subsidising others with the production-linked incentive scheme.
This is because these schemes typically benefit large firms in capital intensive industries and not act as a mass job creator.
For instance, according to government data, with 15% of the proposed investment in PLI schemes, only 3% of the proposed jobs have been created.
Therefore, there is a need for building infrastructure, producing a better educated and healthier workforce, and promoting easing doing business to create jobs.
Moreover, well-paying jobs created through skilled service exports will create other associated low-skilled service jobs.
What can be the way ahead?
India should work to persuade the world to open up to the possibilities of services exports in sectors that are traditionally regarded as non-tradable, such as health, education, legal and accounting services.
For example, an Indian doctor cannot diagnose patients in the UK because their Indian qualifications are not recognised.
Hence, India’s G20 presidency is an opportunity for India to push for lowering barriers to the globalisation of services.
