Set up nodal dept for services: FinMin advisors

Economic advisors in the finance ministry have pitched for setting up a nodal department to address issues faced by services, the biggest sector of the economy.

"Despite having a strong growth potential in various services sub-sectors, there is no single nodal department for services," says a working paper, 'Emerging Global Economic Situation: Opportunities and Policy Issues for Services Sector'.

The paper was authored by H A C Prasad, R Sathish and Salam Shyamsunder Singh.

The paper says there is an urgent need to have a proper institutional framework to tap the opportunities in the services sector in a coordinated way. It said even the inter-ministerial committee for services set up under the Department of Commerce has not made much headway.

The paper says the delay in business approval inhibits services sector growth. "In India, there is a lot of delay in getting clearances. On the other hand, the United States Delivery Centre of MindTree in Florida University could start functioning within three months."

The paper also addresses issues related to linkages of services with other sectors. The linkage effect is considered to be high in the services sector. According to estimates, 20 per cent of services' output goes to end-consumers; the rest is used by sectors like manufacturing in B2B mode. So, if manufacturing grows, services would automatically grow.

The absence of this linkage is being felt in the hardware sector, as major parts of electronics goods have nil import duty due to the Information Technology Agreement (ITA-1) entered into force in 1997. While many economies of southeast Asia had developed their semiconductor sector by then, India did not, and now, it is difficult to do so, says the paper. As a result, the benefit of a hardware-software combination linkage could not be reaped.

Besides, the paper says, there is a need for greater marketing of services and increasing its visibility abroad. "This could be done by setting up a portal for services, providing all information on the sector in one place, showcasing India's competence, including non-software services, having regular services-related exhibitions, symposia abroad and using dedicated brand ambassadors and experts in the area of services."

The paper raises the issue of a lack of good database for the sector. It refers to the expert committee to render technical advice for development of service price index, technical advisory committee to develop methodology for compilation of the index of services production, and an expert group on the strengthening of institutional mechanisms for regular collection and compilation of data on international trade in services.