Subhash Goyal, Chairman (Services), FIEO In an exclusive interaction with The Dollar Business, Subhash Goyal, Chairman (Services), FIEO, and President, Indian Association of Tour Operators (IATO), reveals what’s wrong with India’s Services exports.

Purba Das | @TheDollarBiz 

TDB: The last foreign trade policy did not have much on offer for the services sector. For instance, an incentive scheme such as the Focus Market Scheme had the services sector excluded in toto. Are we really incentivising the services sector?

SG: No, we are not incentivising the services sector! And this is not a personal issue for me or FIEO. It is an issue for the 300 million people living below the poverty line. Until now, our foreign trade policy was being dictated by lobbyists. What was happening was that Indian goods were being discouraged and foreign goods were being encouraged. We did not have a nationalist foreign trade policy and it only served vested interests. Our policies have been encouraging people to become importers instead of manufacturers and exporters.

TDB: The government has been trying to promote ‘Served From India’ (Scheme) both as a brand and a policy. Do you think enough is being done in this regard, especially with the SFIS Duty Credit Scrip being made non-transferable?

SG: Let me answer this with an example. Let us talk about physical exporters of items such as gems and jewellery, carpets and garments. We are the largest exporters of these items. I will start with gems and jewellery. To export $1,000 worth of gems and jewellery, we import $900 or $950 worth of gold and precious stones from abroad. So, the value addition for the country is anywhere between $10 and $100. But the service tax exemption based on the foreign earnings is on that $1,000. Similarly, for every $1,000 worth carpets that we export, nearly 50% of the wool is imported from New Zealand and Australia. This means that the value addition to the country is only 30% to 40% but the carpet exporter also gets service exemption on $1,000 foreign earnings. Same is the case is with garments. But in tourism, out of $1,000 that is earned, $999 is spent in India. The rest 1% is the expenditure that an industry player has to make. But tourism is not given exemption from service tax. So with all services sector schemes, including SFIS, the government is only giving lip service to the services sector. If they really want services sector to compete then they should exempt us from service tax.

TDB: What incentives do you think the government should offer the services sector then?

SG: My only suggestion is – don’t kill the goose that lays golden eggs. Don’t tax the services sector. Give them a tax holiday for up to five years. And if the government needs to tax them, then service providers should be charged a tax of 4% to 5% only.

TDB: Across which markets can India’s services exports be promoted?

SG: Our main markets are USA, UK, Germany and Sri Lanka. But I believe, we should also focus on the Middle East and China too. Today, if we build on China alone, then we can get huge business from the market. Tourists from China are keen to visit India, but lack of Chinese-speaking guides is a deterrent.