In keeping with the plan to take the share of manufacturing in GDP from 15% to 25%, the government on Wednesday said it will soon address issues, including labour law reforms, costly capital, trade facilitation and infrastructure problems.
The government indicated more incentives for services in the forthcoming foreign trade policy to boost exports from the sector so that it helps cover up the deficit in merchandise trade.
“.. These (issues related to labour, capital, trade facilitation and infrastructure) still have to be assisted in order to bring down the prices of our manufactured products. And as part of ‘Make in India’ campaign these are special areas which we will have to address and address very soon. The real job creation is in the manufacturing sector,” finance minister Arun Jaitley said at the second edition of the Services Conclave.
Turning to services sector, he said it accounts for around 60% of GDP, adding that he has a vested interest in services exports doing well because it helps cover up the merchandise trade deficit, and in turn ensures that the government’s accounts are in a more presentable shape.
Noting that a majority of the people in the country are engaged in the agriculture sector, which contributes only around 16% of GDP, Jaitley said the Centre needs to help more people migrate from agriculture to manufacturing and services sectors.
Meanwhile, commerce secretary Rajeev Kher said the government is trying to make the served from India scheme (SFIS) more effective and attractive in the forthcoming foreign trade policy by expanding its scope to boost services exports.
Under SFIS, service providers are entitled to duty credit scrips at 10% of free foreign exchange earned in a fiscal, and the entitlement is calculated on the basis of net free forex earned (i.e., after deducting forex spent from the total forex earned in the fiscal).
“There is a need for us to become more competitive, widen our scope and identify areas where new technologies and new processes of delivering services are promoted,” Kher said. He said the country’s share in the global services exports is still below 3.5% against European Union’s 42% and China’s over 4%.
“We need to look at what kind of domestic reforms are required to make us competitive in the international market… huge amount of domestic reforms are required… reforms which are required range from very small rule amendments to significant changes,” he said.