The information technology (IT) sector, which has a 45 per cent share in India’s service sector exports, is facing “tough” competition from lower middle-income countries such as Vietnam and the Philippines.
Sudhanshu Pandey, Joint Secretary, Ministry of Commerce and Industry, gave a presentation at a meeting on the “promotion of services sectors”, wherein he stated that the services sector is “running out of steam” as “others (countries) are catching up” and advanced “technology is making many BPOs (business process outsourcing companies) redundant”. “High-technology services require better ICT (information and communication technology) infrastructure and skills,” she said while addressing the senior officials of various state governments on December 22, 2017.
The Indian Express has reviewed the record of this meeting’s discussion as well as Pandey’s presentation. The record of discussion for December 22 meeting stated: “He (Pandey) stated that IT/ITes (IT-enabled services) which has 45 per cent share in service industry are facing tough competition from the Philippines, Vietnam, etc, and advocated states/UTs (Union territories) to focus on various sectors like tourism and education.”
The services sector contributes about 62 per cent of gross domestic product (GDP) and it grew 7.7 per cent in 2016-17. The state officials were informed by Pandey that the services sector has been growing at more than 10 per cent in 16 states with Chhattisgarh clocking the highest growth.
According to the presentation, lack of proper data on the services sector is the first challenge that needs to be dealt with. It stated that state-level data on various indicators such as sector-wise employment and service exports is not available currently. The commerce department has written to the Niti Aayog for assistance in bridging the data gap. The presentation stated that the sector is also facing the challenge of jurisdictional issues. It stated that many services such as education, tourism, legal and medical lie in the concurrent list, “causing lack of policy clarity and goal convergence”.
On February 28, the Union Cabinet approved the commerce department’s proposal to give “focused attention” to 12 identified “champion” services sectors to promote their development and realise their potential. These include IT and ITeS, tourism and hospitality services, medical value travel, transport and logistics services, accounting and finance services.
It also includes audio visual services, legal services, communication services, construction and related engineering services, environmental services, financial services and education services. The Central government has allocated Rs 5,000 crore to these 12 “champion” services sectors.