How to boost ‘Make in India’? Open services trade with others, even if others don’t open up with you

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Updated: December 6, 2019 11:16:28 AM

Modernisation of India’s regulations affecting services trade would contribute to the success of the Make in India initiative despite restrictions in its exports in partner markets.

hotel, hospitality, service sector, services pmi, indian economy, oecdIndia would be the single largest beneficiary of a multilateral cut in services trade restrictions. (Bloomberg image)

High restrictions on services trade imposed by India and its trading partners are eventually hurting the country’s overall growth as services are the key inputs for other sectors as well. The restrictions have a negative impact, in particular on manufacturing and more widely on income, says the Organisation for Economic Co-operation and Development (OECD) report. It also says that India would be the single largest beneficiary of a multilateral cut in services trade restrictions. Findings in the report suggest that modernisation of India’s regulations affecting services trade would contribute to the success of the Make in India initiative despite restrictions in its exports in partner markets.

Though India’s rank in Ease of Doing Business is improving over recent years, various bottlenecks still exist on the ground. It has recommended that the efforts to improve the quality and reliability of electricity provision, roads and ports should continue as addressing domestic structural bottlenecks is key to supporting India’s competitiveness. The move is also poised to extend the developments from confined areas such as special economic zones to the rest of the country which would enhance India’s competitiveness and attract investors.

Also Read: OECD says India needs to step up reform efforts to increase quality jobs, incomes

Raising more tax revenue by removing the tax expenditures, freezing nominal personal income tax brackets and improving compliance, improving transparency on off-budget transactions and contingent liabilities, reducing the spread between administered rates on small savings and market rates to improve monetary policy transmission, and harmonising legislation on public procurement across the government are among the other recommendations from the OECD.

Also Read: Services output expands for first time in 3 months: PMI

Meanwhile, India’s services sector activity returned to growth in November, after two months of decline. The growth was largely driven by new business orders, faster job creation and strengthening business confidence. However, the signs of fragility were significantly visible. The IHS Markit India Services Business Activity Index improved to 52.7 in November from 49.2 in October.

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