Indian companies exporting services to the US and the UK may soon see their bottomlines swelling as the government is considering a strategic partnership in services sector with these two prime export destinations.

In a working paper, the finance ministry has suggested that such an alliance with the US and the UK would result in a ‘quantum jump’ in India’s services exports and help India reap the advantages of foreign direct investment the in the sector. Moreover, such tie-ups would remove different market access barriers for Indian exporters, the paper said.

Referring to the importance of FDI in services, the paper pointed out that the US trade in services with the foreign affiliates of its companies alone was 8.5% in 2002. A strategic tie-up with the US would, therefore, result in more investment from the US companies in India.

The idea of strategic tie-up assumes significance in the background of strengthening economic and political ties of India with the US and the UK. These two countries too have been keen to participate in an economy growing at over 9%.

The report pointed out that among the Asian nations; India was the second major source of imports?after Hong Kong?of ‘other commercial services’ (including business services, royalties, licence fees and financial services) for the US in 2003.

India?s services exports to the US increased 35.4% to $1.4 billion in over pervious year, whereas the share of services export by Hong Kong to the US fell during the same period.

While India has a huge potential of exporting shipping service to the US, it supplied only 0.5% of the total imports of such services by the US, whereas China’s share stood at 3.6%, the paper states.

The ministry paper suggests major lowering of taxes in the shipping sector to make these services competitive vis-?-vis other countries.

Also, in destination-wise exports of ‘other commercial services’ of the US, India has a minuscule 0.5% share, while China and other major South East Asian countries are much ahead of India, the study said. However, in the case of UK’s imports of total services in 2003, India had a share of 0.9%, which was the highest among Asian countries. Similarly, in the case of UK’s imports of travel services, India has a 1.2% share.