India’s services exports has outperformed its more popular cousin (read: merchandise exports) over the last few years. Truth however is, despite the relative brilliance, growth in India's services exports has been lacklustre. Limited trade agreements, absence of defined supply cycles, and a lack of diversification makes one wonder if this sector can fill the vacuum in earnings caused by a slowdown in merchandise exports.
Sairaj Iyer | November 2016 Issue | The Dollar Business
India's services sector has matured considerably over the last couple of decades. It has transformed the country into a services-driven economy (from an agrarian economy in 1980s), known for consistent delivery of high-quality services the world over. In fact, services exports has been a dynamic element of India’s foreign trade ever since the Indian economy opened its door to the world in 1991. For, given the country's colonial past, a large portion of India's population is fairly conversant with the English language. And this translates to an edge in key service areas like outsourcing, banking and finance, hospitality, consultancy, etc. Further, the information technology boom has created new avenues for the global services sector. Even consumerisation of technology has had a continuous ripple effect on trade in services. And, not to say, one of the biggest beneficiaries has been India, thanks to the country's young demographic profile (about 65% of India's population is below the age of 35 years) combined with rising literacy rate.
Little wonder that India’s export pie is no longer dominated by agricultural produce and associated products. Services exports form a formidable part of the pie. Interestingly, export performance of the services sector owes almost nothing to the government. In fact, many small and medium services exporters are not even aware of the Services Exports from India Scheme (SEIS) that was introduced in the Foreign Trade Policy (FTP) 2015-2020 to give a fillip to exports from the services sector. [Chances that they would've known about the earlier form of SEIS – i.e. SFIS – are slimmer.]
Routine innovations (value addition) have helped script the success story of this sector, which today contributes to about 66% of India's gross value added growth. In fact, the growth in services exports from India has without doubt been impressive, from just $17.38 billion in CY2001 to $155.84 billion in CY2015. And, not to say, the growth of this sector has had a large role to play in India consistently clocking an annual GDP growth rate of nearly 7.5%. What's more? Despite the slowdown in the post-crisis period (2010-14), India showed the fastest service sector growth in the world with a CAGR of 8.6% (followed by who else but China, at 8.4%). 
Interestingly, the Commerce Ministry (GoI) targets exports of goods and services worth $900 billion by FY2020, and to achieve that, India's exports will have to grow at a compound annual growth rate (CAGR) of over 20% for the next four years. Given the lacklustre performance of global merchandise trade over the last few years (with India being no exception), services exports need to come to the rescue of the oracles.
But can India's services exports, which still lags merchandise exports (in terms of value) pick up steam and catapult India into a new era of prosperity?
"India's exports of services grew almost ninefold between CY2001 and CY2015"
Services today constitute nearly 30% of global trade. Considering that the sector was a late starter, that's an impressive number. What's more impressive is that according to a report by the United Nations Conference on Trade and Development (UNCTAD), it's the digital economy that is empowering over half of the gamut of global services trade.
A discussion on the global order of services sector cannot escape a cardinal fact that data is the new oil. This explains why the ICT (Information and Communications) sector has pioneered a slew of new innovations. Incidentally, in the process, it has outshone traditional manufacturing and trade domains – a phenomenon that has been occurring over the last 15 years.
For the uninitiated, international trade in services really took off in the first half of 1995, when World Trade Organisation (WTO) formalised an international treaty on services through the General Agreement on Trade in Services (GATS). GATS paved way for trade in services such as project exports, tourism, medical facilitation, telecommunication, banking and finance, consultancy, manpower exchange, and IT services among others. Today, there are several services trade agreements in force across the globe, including the ones signed by economic blocks such as EU, BRICS, MERCOSUR, NAFTA and ASEAN.
Interestingly, the definition of services trade under GATS is four-pronged, depending on the territorial presence of supplier and consumer at the time of transaction. GATS covers services supplied from the territory of one member into the territory of any other member (Mode 1 – cross-border trade); in the territory of one member to the service consumer of any other member (Mode 2 – consumption abroad); by a service supplier of one member, through commercial presence, in the territory of any other member (Mode 3 – commercial presence); and by a service supplier of one member, through the presence of natural persons of a member in the territory of any other member (Mode 4 – presence of natural persons). While the classifications were good guidelines for services trade, this is where trade barriers entered the fray.
The emergence of regional trading blocs, fall of manufacturing, fluctuating dollar, a steep rise in manpower costs, and the global recession are events that impacted the global trade in services. Since 1995, the role of regional trading blocs has been debated. Although the function of these blocs were to remove barriers for better trade, many of these blocs have been perceived as covertly and overtly creating barriers. In fact, most blocs have been doing business within the group, rather than diverting and enabling trade. With technology enabling services to evolve to trade with few physical barriers, countries and trade blocs started regulating the trade by creating non-tariff as well as tariff barriers.
Notwithstanding barriers, back home, we've got a happy-than-thou tale to share. India's services sector has been one of the most vibrant sectors in terms of contribution to national and state incomes, trade flows, FDI inflows, and employment. According to the Ministry of Commerce (GoI), services sector contributes 60% to the country's GDP, 35% towards employment and 40% to exports. While services constitute 20% of our imports, the sector's share in FDI inflows into India has consistently been above 50% over the last few years.
Despite these impressive numbers, we are still behind US, UK, China and Germany, and rank 8th globally in terms of services exports. Having said that, India's services exports has witnessed a phenomenal growth over the last few years – while services exports from USA has increased by 90% in the last 10 years (from $373 billion in CY2005 to $710 billion in CY2015), exports of services from India has jumped 198% (from $52 billion in CY2005 to $155 billion in CY2015). Even a WTO report states that “India has far-exceeded the world average” in terms of rise in service exports.
Interestingly, India’s stance towards GATS has changed radically after it internally recognised the scope of the services sector. India’s inherent advantage with Mode 1 and Mode 4 delivery of services naturally translates to an edge as far as trade-talks are concerned. However, these talks have not materialised into typical service-only kind of agreements. Most agreements that India is a partner to, points out to services as either an after-thought, or a “me-too” rather than being a services-only kind of agreement like the Trade in Services Agreement (TiSA – a proposed treaty aimed at free trade in services such as banking, healthcare and transport, between 23 parties, including EU and US, excluding India). Stating the obvious, Dr. Amitendu Palit, Senior Research Fellow, ISAS, National University of Singapore, states, "Most of India’s FTAs, except the more recent ones with Singapore, Malaysia, Japan and Korea, are also limited to goods and hardly include services and investments."
The Ministry of Commerce (GoI) states that on the services front, India has already signed comprehensive bilateral agreements with the governments of Singapore, South Korea, Japan and Malaysia. The Ministry also highlights that issues related to the implementation or review of these bilateral agreements are being monitored continually by the respective sub-groups. Pertinent issues are continually discussed by the joint committees of trading partners. Besides, the department is also engaged in the bilateral FTA negotiations including trade in services with Canada, Israel, Thailand, European Free Trade Association (EFTA), Australia and New Zealand. The Ministry is also keen to engage in bilateral trade dialogues with US (under the India-US Trade Policy Forum), Australia (India-Australia Joint Ministerial Commission), China (India-China Working-Group on Services) and Brazil (India-Brazil Trade Monitoring Mechanism). The recently signed FTA in services and investment with ASEAN and ongoing plurilateral negotiations under RCEP are evidence of India’s changing stance and of the fact that the country is now looking at leveraging FTAs to further enhance its service-trade prospects.
Although India was not a signatory or an advocate of GATS during the early years, it accepted the adoption of trade in services in the post-liberalisation era. Prabir De, a professor at Research and Information System for Developing Countries (RIS), a New Delhi-based autonomous think-tank under the Ministry of External Affairs, GoI, points out that service trade facilitation reform is a key factor affecting services export from India. Post the global crisis of 2008, India has been facing problems exporting services to the developed world, due to matters related to visas and professional qualifications of service providers like legal, medical and financial services facilitators. FTAs in services will help relax such barriers, and inculcate better visa regulation by developed trading partners for mobility of IT professional and software developers across borders.
An OECD report (titled Competition and Barriers to Entry) points to the complexities of markets by stating that firms today must be able to enter a market first rather than compete in it. The report recognises the many impediments that make it difficult for firms to enter. Barriers to trade include tax agreements, defining free trade in the age of Internet where everything is available online, defining copyrights and protecting intellectual property, data residency laws and legal sanctities for individual sectors.
Speaking of barriers, one cannot rule out the role of the uncategorised nature of the services trade across services value chains and a lack of overall categorisation, which is an impediment for regulators and policymakers. In case of commodities, the ITC HS code classification has succeeded to a level of satisfaction, but value-additions within services are challenging to define, and difficult to categorise. For example, within IT consultancy services, the categorisation could lead from a primitive legacy and hardware outsourcing to research costs, implementing new software and integrating functionalities of new softwares with older ones, including repair and maintenance. But despite a lack of proper categorisation, India's performance in certain services has been commendable.
Tourism is a major engine of economic growth, an important source of foreign exchange earnings and a generator of employment of diverse kinds in many countries. And India is no exception. The country offers a diverse portfolio of niche tourism products including cruises, adventure, medical, wellness, sports, MICE, eco-tourism, film, rural and religious tourism. In fact, India’s tourism and travel sector is ranked 11th among 184 countries on the basis of GDP contribution, with over 105 million passenger arrivals in FY2016. What's more? The sector is anticipated to contribute over $275 billion to India's GDP by 2025, with tourist arrivals recording a growth of 7.2% per annum. Increasing tourist arrivals will mean good business in the areas of hospitality and ancillary services such as logistics, hotels, tour operators, etc. India’s 30 world heritage sites, 25 bio-geographic zones, massive medical tourism sector, and the success of 'Make in India' programme leading to frequent MICE travel are top factors that are scripting a definitive growth story for this services sub-sector.
States such as Madhya Pradesh, Maharashtra, Gujarat, Karnataka and Kerala have already taken the lead in tourism. Campaigns such as Atithi Devo Bhava and the Ministry of Tourism's constant endeavour to promote India as an exotic destination has borne fruit. India today ranks 8th on the count of tourist arrivals in a country, with well over 8 million foreign tourist arrivals in CY2015, a growth of 4.4% over preceding year. Visitor exports (money spent by international travellers) too accounts for 4.8% of the overall exports in the case of India, higher than the world average of 4.2% (as per the World Travel and Tourism Council).
No doubt, the future of India's tourism and hospitality sector looks bright. But then, there are a few impediments on its path. For instance, we are yet to build a conference venue of international acclaim. Though our airports feature among the top ten busiest airports, most of them are not near to being labelled an 'international benchmark'. This is despite the fact that India is poised to become the third largest aviation market by 2020. The aviation sector, the largest benefactor of the booming tourism market, has recently witnessed a new dynamism, thanks to the new National Civil Aviation Policy. Under the new regime of subsidised fares for connecting underserved airports, the potential for attracting international travellers on short trips also increases manifold. In fact, the future is already looking bright with foreign tourist arrivals growing 13.4% in September 2016 over the corresponding period in 2015.
Another sector that holds tremendous potential is education services. According to estimates, the education sector will reach $144 billion by 2020, from the current $100 billion. However, investments have only increased from $40 million to $260 million between 2011 to 2014. Exports in this sector include offering academic courses in humanities, engineering, off-shore services in teaching and teacher exchange programmes.
India has a distinctive role to play when it comes to trade in higher education. The rise in number of knowledge-centric organisations across the globe has resulted in an imminent need of better education for all. And thanks to a large pool of English proficient academicians, India is well-positioned to fully capitalise on this opportunity. We can take a leaf out of the US play book here. Students from Asia form the largest population of foreign students on campus in most US universities, and this despite the obnoxiously high tuition fees. Hence, India has the opportunity to position itself as a high quality and affordable education hub, under various modes of supply of services.
India can position itself well as a quality supplier of cross-border education services through distance education, e-education or virtual education by universities in India to students abroad (Mode 1 services). For instance, Indira Gandhi National Open University (IGNOU) has gained a good reputation abroad in marketing education programmes at extremely cost competitive rates compared to similar courses from developed countries. IGNOU is already a recognised distance education provider in the gulf region – Dubai, Abu Dhabi, Sharjah, Doha, Muscat and Kuwait, and is slowly entering newer markets. Not to say the model can be easily replicated by other universities, both government and private, in India.
Though Indian institutions have been quite conservative in setting up their operations abroad (Mode 3 services), there lies a great opportunity too for Indian institutions in Africa and Middle East region. Policymakers should give a serious thought to encourage Indian players to access foreign markets to provide education services and boost India's services exports. Further, while perceived barriers like tight immigration policy and the issue of recognition of qualifications of third world professionals exist under Mode 4 services, the fact that many professionals from India are already visiting several foreign universities as faculty members is a serious bright spot.
Yes, the country is already attracting students from neighbouring countries and Africa, but to attract the flock from developed economies, we will need to invest in infrastructure both physical and academic. India Foreign Education Providers Bill has remained suspended for long, and without that there is little hope of attracting FDI into the sector. Though there have been talks about allowing educational institutions to function within SEZs, there has been little development on the ground.
The undisputed poster-boy of India’s service exports, the IT & ITeS sector, has been using intellect, process-centric approaches, six sigma, researched methodologies and love for coding while scripting a new export story. In fact, India’s technology and business services industry is one of the most dynamic in the world. From offering basic IT services when it began in the 1990s, the industry has moved ahead rapidly to offering enterprise resource planning and productivity software in the early 2000s, to exporting further complicated business solutions in recent years, and has become a crucial component of the India's services exports. The Indian IT-BPM industry today consists of IT services, which constitute the largest segment with a share of about 52%, followed by Business Process Management (BPM) with share of about 20%, and software products, engineering research and development (ER&D) and product development, which together account for about 19% share in India's overall services exports.
Well, the real impact that Indian MNCs have had on global processing can be gauged from the fact that Indian IT behemoths Infosys and TCS together cater to over three-fourths of the demand for core-banking software system by European banks. In layman language, nearly 75% of European banks run on Indian software. Further, outsourcing to Indian BPOs have helped create a new sector from scratch.
Nevertheless, the industry is not out of the 'danger zone'. A lack of innovation and productisation in services means that next-gen and new-age concepts such as big data, mobility and analytics do not even crop up as potential products in our services export basket. Further, unavailability of categorisation of services means that very few have an idea that they are exporting or even constitute their services as exports.
This is a sector where India has established a stronghold, but the need of the hour is to consolidate by moving up the value chain and diversify into newer markets. And with competition from Philippines, the larger players are already moving in that direction.
"India is loosing out on potential export revenues in transportation services"
While IT and ITeS companies from India continue to carve a space for themselves, transportation services exports hasn't really been able to find a place for itself on the global services exports map. Transportation services exports has recorded a fall of 17% in H1, FY2016 as against a growth of 0.6% in FY2015 and 7.6% in H1, FY2015.
Though transport service exports constitute about 9% of India's total service exports, it owes almost nothing to its road infrastructure. About 95% of India’s trade by volume and 68% in terms of value is transported by sea. So, what's more worrying is that there has also been a sharp decline in the share of Indian ships in the carriage of India's overseas trade from about 40% in the late 1980s to 7.45% in FY2015 (Economic Survey for 2015-16).
The existing Indian fleet is also ageing, with the average age increasing from 15 years in 1999 to 18 years as on December 31, 2015 (42.42% of the fleet is over 20 years old and 12.43% in the 15-19 age group). Therefore, there is an urgent need to increase India’s shipping fleet. With asset prices being serendipitously low, today seems the right time to acquire new generation ships and replace ageing ones.
Meanwhile, India continues to be a leading shipbreaking destination. It was ranked third on the list of ship recycling countries in 2015 (January to June) with a world share of 18.3% (Institute of Shipping Economics and Logistics’s Shipping Statistics and Market Review data). Having said that, apart from Alang (a centre for ship breaking in Bhavnagar district of Gujarat), Indian shipbreaking services industry has no worthy mention in global markets. Even Alang falls under the most critically polluted zones, and hence, no new industrial development can be undertaken.
On the project exports front, there is not much to write about. For instance, we do have a company like Hindustan Construction Company (HCC) that's been bagging orders from developed as well as underdeveloped markets of late (a recent hydro-project development in Bangladesh helped it amass Rs.550 crore), and another such as GMR Infrastructure that can offer project-based services in emerging and least developed economies, the real truth isn't hard to miss. Many of these opportunities are not exploited commercially; they come in the guise of economic assistance to countries such as Afghanistan. Can players like HCC envisage such projects in Europe, US and China? Not soon, we gather.
While India has made services its stronghold, exporting services still remains a big challenge. On the regulatory front, entry barriers have been created by various governments. For example, regulation in China limits the growth of technology companies as large as Facebook, Google and Twitter. It can be argued that China’s defense of Baidu restricts alternatives, and has a compounding effect on competition.
In the services sectors, licensing procedures, territorial restrictions, safety standards and other legal requirements are deterring, and delaying the expansion of trade. China has political reasons to create regulatory exceptions. But it is not alone. A case in point could be the European Union.
The bloc, which was formed to create borderless trade, has also created non-tariff barriers to safeguard its members' interests.
For the uninitiated, EU is India’s largest trading partner. While merchandise trade between the two has been on a decline since CY2011, services has been an area where trade numbers have largely remained consistent. The Indo-EU bilateral trade, as per the EU Directorate General for Trade, stood at €77.8 billion in CY2015 as compared to €80.5 billion in CY2011, representing a decline of 3.4%. On the other hand, trade in services between the two has however almost tripled in the past decade, increasing from €5.2 billion in CY2002 to €14 billion in CY2015.
Though India and EU have been negotiating an FTA to arrest the fall in bilateral trade, the deal has been on the table for a while now and is stuck because of several issues at many levels, particularly with regards to services trade. While India is demanding data secure status for the country, liberalised visa norms for its professionals and market access in services, EU wants India to liberalise its professional services sector, particularly accountancy and legal services."The Indian service sector could be a winner if the agreements would relax barriers of Indian trading partners against so-called Mode 4 supply of services that allows Indian residents to move to the trading partners to offer services," says Rolf Langhammer, Senior Researcher, Kiel Institute. But then, that's not happening anytime soon.
Incidentally, UK had evolved as the strongest EU member in Indo-EU trade. And now with UK opting out of the bloc, EU-India trade is bound to undergo a major transformation. Brexit would definitely impact India's interests, since most international services-oriented organisations have their EU base in UK. Indian corporate diaspora too has an established base in UK for operating in EU, and post-Brexit, profit reassessments and the need to open new offices within EU will be a cause of worry to many Indian service providers.
"FTAs NEED TO BE NEGOTIATED KEEPING IN MIND OUR STRENGTHS IN SERVICES"
The other trade bloc that Indian service providers have not been able to leverage is BRICS. At the recently held 8th BRICS Summit in Goa in India, BRICS leaders called for facilitating better trade within the group. [It's worth noting that BRICS nations account for nearly 45% of global population, 20% of global GDP and 18% of global trade.] But shockingly, trade within BRICS hasn’t kept pace with the members' trade with rest of the world. Interestingly, trade among BRICS is less than 5% of their global trade!
Considering that India has a stronger voice in BRICS than in WTO, one would expect a fairly non-cumbersome trading terrain with members of the bloc. This is however not the case. Many Indian MSMEs feel that there are cumbersome documentation and Customs clearance processes when it comes to exporting goods to even BRICS partners like Russia and China. And, in any case, India's services exports to other BRICS countries is very limited in scope and value.
Having said that, the services sector is one area where BRICS members could potentially engage more with each other through investments, trade and collaborative ventures, and also learn from each other's experiences. With the growing importance of services in the economies of all BRICS members (services today account for over 50% of GDPs in Brazil, India, Russia and South Africa), this sector is likely to play an increasingly important role for fostering cooperation and commercial relations within the bloc. Further, "given the demographic complementarity among BRICS members, there are also opportunities for these countries to benefit from each other's human resources, with ramifications for cooperation in labour-intensive and knowledge-based services," states a WTO report titled, BRICS: Trade Policies, Institutions and Areas of Deepening Cooperation. Thus, there are many such possible areas for synergies among these countries in the services sector.
China comes to mind here. Interestingly, India's government (Ministry of Commerce, GoI) is trying hard to promote trade in services with China. Although historically, Indo-Chinese services trade has been marginal, the red carpet to Chinese service providers should only be accorded on a reciprocal basis. But would India have the power to make a choice as such in the near future? Highly unlikely.
Economists world over argue that there is a need to refine GATS to reflect the current times. In fact, many of them label it as an unfinished business of the Uruguay Round. Although GATS envisioned frameworks for liberalising services and defining the different modes of service delivery, it largely lacked the resolve to curb protectionist approaches of developed countries.
GATS was expected to open up sizable market potential, but it is yet to get its act together on issues pertaining to market access, standards, categorisations, a clear demarcation and definition of tariffs in services, etc. In fact, no new segments in services have been opened up since the inception of GATS. A 2011 WTO ministerial conference though gave impetus for negotiations in services, but that again hinted on reaching provisional solutions rather than a final undertaking.
Then was born Trade in Services Agreement (TiSA).
TiSA, originating from the ‘Really Good Friends of Services’ (RGFS) group concept between US and Australia, is today largely a think-tank of 23 countries. Following exploratory talks in 2012, the RGFS group agreed with EU's proposal that the outcome of the negotiations should become an integral part of the WTO system, and be made open to all its members. The negotiations are presently being conducted among 23 WTO partners, mostly developed countries, which together account for over 70% of global trade in services. Apart from EU representing its 28 member states, the RGFS group includes Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Korea, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, Switzerland, Turkey and US.
Notably, very few emerging economies are participating in the talks. Membership in the group is open to any interested country that shows equivalent level of ambition in services liberalisation. However, China’s request to join the negotiations, made in 2013, has been vetoed by US. One of the most contentious issues over China’s involvement in the talks concerns its possible divergent interest on the chapter dealing with State-owned enterprises. Again, India is not a part of the group citing its hesitance in pursuing trade liberalisation in a plurilateral format outside the WTO purview. The opposition stemmed from India's fundamental resistance to any initiative negating the ‘single undertaking’ rule.
A hybrid approach, which is a combination of negative and positive lists on commitments, has been agreed upon by TiSA signatories. This is a significant step forward from the GATS framework. ["In order to list the commitments, the partners use the so-called 'hybrid approach', by which market access commitments are subject to a positive list (only the sectors defined will be opened for foreign competition) and national treatment to a negative list," states an October 2015 analysis on TiSA by the Directorate General for External Policies of EU (titled, 'TISA: An end to negotiations in sight?')
History is proof that India, which was and has been largely perceived as being largely opposed to liberalisation in services trade, went on to become a major proponent in the Uruguay Round. Today, it is among the largest players in services trade. We can only hope that history repeats itself with India's participation in TiSA.
Many economists, including sector heads, point out that India should adopt a pragmatic approach to its entry into TiSA. And that it should keep domestic realities upfront. Joining TiSA would mean India would not be able to reverse any liberalisation. It would also mean any trade preference that India gives to a trade partner in the future would automatically get extended to all TiSA members. Evidently, India isn't ready for this.
Interestingly, India on its part has unilaterally offered to give preferential market access to service providers from the poorest of WTO nations. [India's offer includes instant Mode 4 access in sectors such as engineering, computer and related services. India has also offered access to project management services other than for construction, hotel and other lodging services, travel agency and tour operator services.] While it's easy to mistake this show as one of magnanimity, in real terms, it's really a strategy to put pressure on WTO members for a multilateral agreement on services.
But a multilateral agreement on services sans reservations? India really isn't ready yet.
While both US presidential candidates- Hillary Clinton and Donald Trump are promising new in-roads to tackling recession and bringing about a development agenda, Indian policymakers and corporates are keeping a close-watch on the show in US. Needless to say, Trump’s protectionist rhetoric has left the Indian service providers jittery. Although his vociferous jibes have made him quite (un)popular amongst voters, on the business front, such remarks have damaged the confidence of many foreign companies operating in US, many of which are India-headquartered. [As per a news report, visas and immigration policies might get an update under Trump.]
But for many of India's service exporters, the passage of the Goods and Services Tax (GST) bill and the Finance Ministry’s keenness on adopting a low base-rate come as big breathers; albeit for the short-to-mid term. It would certainly help in reducing the large taxes that are perhaps exported. Dr. Arpita Mukherjee, Professor at The Indian Council for Research on International Economic Relations (ICRIER), who has been researching on the topic of foreign trade in services for long, shares, “Multi-layered and high taxes in some services sector are impacting our global competitiveness. This can be addressed under GST regime. India can become a services hub if corporate tax is lowered to around 25% and the number of cess is minimised. Today, we (with a rate of 33%) are uncompetitive vis-à-vis competitors like Singapore (17%) or even UK (around 20%) in terms of corporate tax.
"Access to Tisa could mean instant access to MODE 4 services exports"
Can incentives take the edge off the high cost of business and taxes? While the long-term viability of incentives as a means for promoting trade has been much debated, their short-term value is surely much appreciated by exporters. The Foreign Trade Policy 2015-2020 replaced SFIS (Served From India Scheme), an earlier form of incentive structure for services exporters, with SEIS (Services Export Incentive Scheme). Under the erstwhile SFIS, suppliers who had a minimum earning in net foreign exchange of Rs.10 lakh in a financial year were eligible to claim the incentive. This was changed to a net foreign exchange earning of $15,000 under SEIS. For individual service providers the minimum eligibility was also raised from Rs.5 lakh net foreign exchange earnings to $10,000. While a change to a dollar denomination makes some sense when it comes to exports, at the same time with the devaluation of the Indian currency this would mean a higher eligibility criterion. The change in denomination also does not account for trade losses due to services exports to troubled markets across Africa and Latin America (where the local currencies have taken a big hit and dollars are scarce).
There were some significant, positive changes in the new FTP (like benefits being extended to all "services providers located in India", instead of restricting them to just “Indian service providers”; rewards issued as duty credit scrips made freely transferable and usable for the payment of customs duties, excise duties and service tax at the time of import or procurement of goods or services; etc.), but the bigger question remains – has the scheme played a role in boosting services exports from India?
Although there’s not enough data yet to arrive at a conclusive answer, one can say with reasonable confidence that the government’s move hasn’t really enthused services exporters enough to go one gear up. Proof? Services exports from India has remained more or less stagnant since the new scheme was launched in April 2015. Further, many service providers are unhappy with SEIS as it reduced the benefits from 10% (duty credit scrips) to a maximum of 5% of net foreign exchange earned. To add to that, many small service providers are still not aware of the changes in eligibility criterion and incentive rates. Hence, the need of the hour, probably, is for the government to not only educate more services exporters on how to benefit from transferability, but also help them monetise the same.
That said, India still has opportunities across various service-related industries and markets. There are many potential markets that have missed the policymakers' radar. The reasons could range from a lack of concerted effort between the ministries, to a lack of belief in the services sector altogether, or worse, a wait and watch approach.
A glaring example is the case of pharmaceutical and chemical research. Clinical trials, surrogacy, medical and pharmaceutical research is an emerging trend. This is especially because India is home to nearly 4,000 companies that have forever championed the cause of R&D. However, as a country we are perceived to be weak on global IPRs, patents and trademarks. This has impacted growth in this industry. While R&D activity has just about started in this arena, the potential for growth here is enormous. In the clinical trials industry too, there are obvious regulatory challenges due to lack of social and innovative will on the government's part. ["Clinical research industry in India is facing new challenges due to government’s desire to 'control and regulate' clinical trial operations. Many of the pharmaceutical companies have withdrawn their applications or suspended their trials prematurely or are planning to move to other countries... Regulations may have an adverse impact on the CT industry," states a recent working paper titled, 'Clinical Trials Industry in India: A Systematic Review', by researchers Mondal and Abrol of the Institute for Studies in Industrial Development.]
"India needs forward looking policies and schemes to boost Services exports"
The MSME sector has been the poster boy of the industrial exports story, but the sector has failed to sizzle in services except in the areas of ICT (information and communications technologies). The story is not very different when one speaks about the business of franchising. There are massive opportunities in the franchising sector, yet Indian franchisees in the world are very limited.
As the most recent Economic Survey puts it rightly, "a targetted policy of removing bottlenecks in major and potential services can result in large dividends in the form of higher services growth and services exports, which in turn can help in pulling up the economy to higher growth level." Despite the slowdown in global trade in the general sense, the prospects continue to be bright for many segments of the services sector.
If China has consolidated its export prowess in the manufacturing domain, it should be entirely possible for India to attain a position of strength in services exports. India has all the expertise, scale and potential. The right facilitation by way of incentives and appropriate policies can go a long way in achieving this very attainable milestone. For this to happen, however, India's MSMEs should be told what is the right way to achieving greatness in services exports. It's not going to be an overnight project. It will take years; perhaps many many many. But if they're convinced that 'Make in India' is as much about services as it is about manufacturing, and that services too can be exported, we think, half the job will have been done.
The rest of course will depend on how India's IP preparedness shapes up, whether out present and future FTAs carry the services trade clause, how heavy and wide do footprints of players like China and Philippines grow in services exports, what direction does the rupee head in, how demand for commercial services by emerging nations (like China, Russia, Brazil, Nigeria, etc.) rises, when India’s service suppliers will actually start reaping the benefits of preferential market access (which will never happen in the absence of mutual recognition agreements, MRAs), and on how serious the government is about scaling the Everestian target of $900 billion in services and merchandise exports by 2020.
Services exports from India cannot forever remain an unfinished agenda. And as long as our Foreign Trade Policy doesn't dedicate a couple of unique chapters to it, it is bound to remain that way. And the day that occurs... well, that'll be good for a start to make India a real services exports superpower!
TDB: How is the exports of software faring? What has been the impact of currency fluctuations?
R. Chandrashekhar (RC): The software industry has seen a lot of turbulence in the last few quarters. The fluctuation in exchange rate is one of the main contributors to this turbulence – fluctuation not in terms of the Indian rupee, but across all currencies. For instance, devaluation of sterling pound after Brexit, and, while it isn’t glaring, but euro and yen did see some instability too.
While devaluation of rupee helps exports, instability hurts. Information technology (IT) industry accounts for nearly half of all foreign remittances into India. Hence, any adverse impact on IT industry could significantly harm the stability of rupee.
TDB: With respect to software services industry, what new areas is India looking to diversify into?
RC: Today, many clients want business value from the industry, not mere IT solutions. This is because of the industry’s nature and evolution in technology, which is increasingly blurring the boundary between technology and business. The industry needs to acquire a better understanding of the customers’ businesses and the behavioural changes of the end-users.
We must look at exploring our consulting capability. Since consulting is about the interplay between the technology and business, it also requires a different set of skills. It would offer the industry an opportunity to expand its role, footprint and scope. We are beginning to see a diversification into IT services that allows manufacturers to increase their productivity.
TDB: According to US, India has a weak IPR regime. Does this perception affect our scope of expansion?
RC: Every country has the right to determine policies and laws that best suits their interest in conformity with international practices and standards. I believe that India doesn’t have a weak IPR (intellectual property rights) policy. Having said that, the Indian legal system has some weaknesses. We have to ensure protections, that are available in the law, are enforceable on a fast track. For instance, if a law is made more rigorous without the delivery machinery being made more efficient, then it can become a tool for the people to misuse the law.
Then there are some issues that are currently being debated. For instance, software in India is not patentable unlike in US. However, it can be argued that what India needs is innovation for its technology to develop solutions, not patented software. While the matter is being deliberated at various levels, we need to find if there can be a balance between the current IPR regime and the US based regime.
TDB: Do you think the current policies need modification to enhance trade in the IT sector?
RC: The biggest challenge for Indian IT sector is to deal with issues that are related to other countries, which includes threats from protectionism and restriction on the movements of data that poses as major constraints.
Opportunities in countries such as China, Japan, Korea and Middle East are huge, but the prospect within the domestic market is undeniable. We must consider exploring our own market as this is where the challenges lie, specifically in the public sector, where we have big issues with regard to procurement. Many companies have burnt their fingers, and now, are reluctant to bid for projects.
Our own government also has serious procedural challenges in adopting innovative solutions from the industry. So, we need to rebuild the way RFPs (Request for Proposal) are structured and how innovation is sourced. We have made some suggestions to the government, but this is a big change that we are asking for and we anticipate a long gestation period.
TDB: Other than US and EU markets, what emerging markets can the industry look at?
RC: Japan is the second-largest market in the world, but it is an unexplored destination for India– we have only 2% market share in Japan. Many corporates, including Hitachi and Mitsubishi, are increasingly recognising the value of our services. We are working towards a lot of initiatives with Japan and China, where we are undertaking an ambitious project sponsored by the Ministry of Commerce and the Ministry of Electronics and Information Technology. Even within EU, there are still many unexplored markets, and a series of delegates from EU are visiting India to talk about the significant opportunities there, notwithstanding the slow economic growth. We have also taken a number of delegates to Australia – another visit is scheduled for this month. We are in talks with African countries and are looking at opportunities in the Middle East – we have also made some preliminary efforts in the Latin America.
TDB: What is your take on the protectionism as a deterrent to global trade?
RC: The global ICT industry heavily depends on short-term movement of skilled people, data and technology, so, introducing protectionism would create a barrier. Speaking from an Indian perspective, there are countries asking India to open its market for investment opportunities in all sectors. So, they cannot create barriers to close their markets to us while expecting we will open our markets to them!
Dr. Arpita Mukherjee, Professor, ICRIER
TDB: What should India focus on to keep exports from the services sector growing?
Dr. Arpita Mukherjee (AM): Indian services sector export will continue to grow, however, the growth rate will slow down if we do not diversify the services exports basket beyond IT, ITeS and business services. India should focus on exports of other services such as tourism, health and education.
Rational diversification in the services sector will not only enhance our exports and global competitiveness, but we can bargain for more market access in key export markets, in areas of our export interest such as Modes 1 and 4. Without domestic reforms, India will have a weak bargaining power to remove external barriers such as visa, work permits, etc. Also, the growth of services exports is linked with infrastructure development, which is key for exports of services like tourism.
TDB: In comparison to China, what is your qualitative and quantitative assessment of our service sector exports?
AM: According to WTO’s International Trade Statistics, India’s rank in services sector exports is lower than China. This is because China is a major exporter of infrastructure services like logistics services, which is linked to establishment of manufacturing value chains. We also need to move into these areas.
TDB: Do you have any suggestions for policymakers when dealing with EU?
AM: After US, EU is our second-most important exports destination. UK is our major exports destination within EU, and UK will move out once Brexit is formalised. So, going forward, any trade agreement with EU is uncertain. Further, EU would like us to open sectors like retail, legal services and insurance, where there are FDI restrictions. Therefore, to negotiate with EU, we need to remove FDI (market access) restrictions, and for that to happen we need to put in a strong regulatory regime.
And, since the EU market is undergoing changes, we need to do more research to understand what is on the negotiation table. EU has published a lot of research papers in its website on trade with India, whereas there is hardly any research paper in our Department of Commerce website. There should be detailed studies on what our concerns are in negotiating trade agreements with EU and then consultations with the industry chamber should be held to get industry feedback.
TDB: When we speak about service exports, what segments do you think are capable of sustaining growth?
AM: The services sector can move forward only by employing skilled workforce and deploying technology. And if we want to export services, we have to improve the quality of some of our services such as education, where there is potential for growth. And sectors such as tourism and logistics depend on growth of allied infrastructure like roads, ports, air transport and hotels.
TDB: Will a focus on growing the service sector have a negative impact on the manufacturing sector?
AM: Services are key factors for manufacturing, production and value chain. So it is not a matter of services or manufacturing growth, it is about how one can help the other grow. However, India does not have global competitiveness, in areas such as logistics which help in enhancing competitiveness in manufacturing. India needs to focus on such services sectors that will help exports from the manufacturing sector grow.
TDB: Do you think any regulation or policy related to services exports needs urgent attention?
AM: India should have a comprehensive services sector policy, highlighting what the country wants to do in the next 10-15 years. India continues to impose FDI restrictions on services sub-sectors, including retail, insurance, accountancy, legal services and e-commerce, which prevent the establishment of efficient services supply chains. These restrictions should be removed to attract the best global firms into the country and to support competition and modernisation.
Inadequate infrastructure facilities, for instance, the limited availability of uninterrupted power supply and good quality roads, also deter private and foreign investment. Although the private sector is keen to invest in infrastructure, projects have slowed down due to issues related to land acquisition.
In addition, regulations in a number of services sub-sectors are either outdated or non-existent. The government is trying to do away with outdated policies, but there is a pressing need to implement new regulations in areas such as e-commerce and cloud computing, to facilitate the growth of these sub-sectors. Regulatory and institutional reforms will help modernise the services sector in India.
There is also an urgent need to increase access to higher education and vocational training at affordable prices. We should work with educational institutes and the corporate sector under the ‘Skill India’ initiatives to promote skill development in sectors like retail and construction, which are largely in the unorganised sector. A trained workforce will enable the country to develop as a knowledge-based economy. Services-led growth in India can only be sustainable if the government focuses on modernising the sector, promoting skill improvement and facilitating private and foreign investments.
D. K. Sareen, Executive Director, ESC India
TDB: What China is to manufacturing, India aspires to be for the services sector. According to you, what are the real bottlenecks hurting the sector taking a big leap forward?
D. K. Sareen (DKS): The global software market is worth $1.4 trillion, out of which, India’s share is $107 billion, a mere 7.6%. However, India accounts for 12% of global software exports and 0.5% in software products. So, while we prepare to lift our service sector to match China’s manufacturing performance, these figures indicate we need to focus on software products.
We have to make headway in all verticals of IT, be it software development, business outsourcing or software products. The first two need a deliberate effort on the part of stakeholders to move up in the value chain. We need careful nurturing of existing markets and forays into virgin markets. Development of software products also call for a radical overhaul of our computer hardware, electronics and telecom sectors.
To achieve a turnaround, we have to undo the past – say the ITA-1, which mandated zero import duty for telecom and electronic products and had crippled Indian hardware industries.
TDB: Why can’t India attract foreign investments like some of its competitors despite the flourishing services sector?
DKS: I think it’s because of the technology divide in India. We have a vibrant digital space in the tertiary segment, but not in the primary segment. Also, the digital space between micro, small, medium and large industries is divided. We need a platform that will catalogue the proficiencies and capabilities of our workforce. This will allow overseas customers and investors to have more confidence in doing business with us. Because ultimately this business is about technology and skills.
TDB: The sector grew from $52 billion in 2005 to $155 billion in 2015. How do you see the role of Service Exports from India Scheme (SEIS) in boosting exports?
DKS: Services sector has been an enabler force all along, but it must be remembered that not many countries have a services sector centric growth paradigm, like India does. Manufacturing is the growth driver in places like China, South Korea and other ASEAN countries. The services sector centric growth model is mostly found in the least developed or developing countries that are in the bottom of the pyramid. In India, the share of manufacturing and agriculture sectors has dwindled with the corresponding growth in the services sector.
While we catalyse the growth potential of services sector, inherent strengths in the manufacturing and agriculture sectors should be tapped as they can create a lot of demand for services. Setting up smart and heritage cities will increase the demand for IT services. And, particularly speaking of IT, it is estimated that 60% of the cost towards smart cities would be towards IT expenditure such as beefing up the security of installations, security devices aimed at civilian life, etc.
As for services export, we have two direct spin offs. One, the export earnings from the services sector have been mitigating the current account deficit (difference between mercantile exports and imports. Two, the brand India gets a boost. The impact of SEIS in export earnings needs to be evaluated.
TDB: What are your thoughts on copyrights, patents and IPRs that still hurt India's competitiveness, globally?
DKS: There may be some grey areas in implementation, but I feel copyright and trademark legislations of India are perceived to be very strong. In India, there have been many cases when large multinational corporations have charged exorbitant
prices for their products under the guise of IPR protection. Also, the definition between innovation and incremental innovation are blurred, and often, judiciary has to interpret their differences. But, then at least, we have a strong law to look into such aberrations. The government is also alive to the need for harmonising Indian IPR with that of the systems in the developed world.
TDB: Of WTO’s four modes of supplying services, Mode 4 (movement of natural persons) remains prone to much ambiguity and uncertainty. What’s your take?
DKS: It is high time that the WTO negotiations address the issues in Mode 4, i.e. movement of natural persons across counties. It is very difficult for professionals or technical persons to get visas to US and Europe to execute the projects there. This is a perennial issue that has to be sorted out within the comfort zones of each country. There is a need to address the concerns of stakeholders to reach an informed decision.
TDB: What is your view on the FTAs signed by India? And how does ESC see the Trans-Pacific Partnership (TPP)?
DKS: ESC believes that export of software, BPO and software products should be included in the ‘early harvest’ clause of the free trade agreements – back-loading such capabilities will adversely affect India’s interests. India is not presently a contracting party of the Trans-Pacific Partnership (TPP). As I understand, such initiatives are mostly loaded to take advantage of manufacturing and agricultural opportunities of the contracting parties. TPP is mostly driven by America, and if at all India joins the grouping we have to push for a favourable treatment for the software sector.
Ashank Desai, Founder & Non-Executive Director, Mastek LTD.
TDB: You have been a founding member of NASSCOM and have observed the IT sector closely for the past 3-4 decades. What are your observations?
Ashank Desai (AD): In the IT products and services sector, today, we don’t have to hard-sell India’s image. I don’t recollect a specific incident as such. But back in the 80s, while trying to sell our services, there was a time when we came across customers who had doubts on our capabilities. But today, India is a safe bet for outsourcing deals. Now, many of our prospects say that they don’t have to be convinced of India’s software reputation. Well, there is a sweet problem of too many options available in Indian IT industry for importers as Indian firms are omnipresent in IT services and products.
TDB: What is your qualitative and quantitative assessment of India's services exports?
AD: We have executed an export of $110 billion in FY2016. And as per NASSCOM, a 10-12% growth is expected. So, the growth has been steady and we are targeting $200-250 billion together for exports and domestic sales in the next 3-4 years.
TDB: What challenges does the services sector face when dealing with blocs like EU?
AD: We have to overcome three major challenges, the first being the non-tariff barriers affecting the movement of people. The second challenge is that there is always an element of a ‘barrier’ when implementing software either as a product or a service in non-English speaking countries such as China, Japan and Korea. For, every application or software for banking, insurance or manufacturing need to be developed and customised keeping in mind the local language. As for the third one, there is competition from domestic players within a specific country. I think there are always issues related to immigration at a broader level during an international election, for instance the election in US and they continue to impact IT industry.
TDB: How is trade impacted by the changing nature of intellectual properties and how strong is Indian copyright law?
AD: We have a good copyright act. Earlier, there were concerns from US regarding India not having a strong copyright act in software sector. But, today, our act covers and offers protection on most areas and is better compared to many other developed countries. Many of the software product companies like Microsoft, Google and HP are comfortable in operating in India, both from the perspective of implementation or even selling a software product.
TDB: There are reports that companies like TCS and Infosys, and even Cognizant, have seen a decline. Is there any global market force that stops our interests, especially in IT-enabled services in banking, retail or manufacturing sectors?
AD: I don’t think such a decline exists. Based on my interactions with people from banking and retail sectors, there is no need to worry. Contrary to the media reports, I can say that there are new technologies such as block-chains, IOT (internet of things), etc., which are in demand. Also, the market itself has been disrupted through technology, both in terms of products and services, and is constantly changing. And India is in a better position to offer solutions to the changing needs.
TDB: Does competition from countries like Philippines bother you?
AD: If you take in account the IT segment, India is far ahead – our share in world trade outsourcing is about 50-60%. Well, China is making forays into Korea and Japan, but that is solely because of a script advantage. And Manila did take away some of the business, but the competition isn’t much because of our sheer size and diversity of industry offerings.
Dr. Somesh K. Mathur, Professor of Economics, IIT-Kanpur
TDB: What are the challenges in services trade?
Somesh K. Mathur (SKM): Trade in services is discussed under the GATS (General Agreement on Trade in Services) provision of WTO, where domestic and foreign suppliers need to be given equal treatment based on the national treatment principle of the WTO. More importantly, our challenge is Mode 4 of the GATS, which talks about movement of skilled personnel across countries being regulated by concerns such as qualification and licensing requirements. We need to have mutual recognition of each other’s standard, an important parameter to promote trade in services.
In my opinion, trade in services, whether under an RTA or otherwise, can be promoted better among countries that have equal incomes and technology because of the same standards they share. Because of difference in standards, developed countries may employ protectionism. This makes it all the more important for us to continue to raise our standards.
TDB: What are your thoughts about RCEP, TPP and BRICS?
SKM: As far as services and investment regulations are concerned, there are talks about promoting trade in services and FDI with ASEAN, RCEP and TPP blocs – India and China are not a part in TPP. And if we plan to become a part of such powerful blocs, first we need to figure out our gains in terms of trade in goods & services and foreign investments.
As for BRICS, most trade between India and China takes place outside BRICS. Also, why would India want to trade with Brazil, a country that is already exporting agriculture goods to Latin American partners? BRICS could seem relevant from an economic perspective of bringing better investments through Chinese FDI, but politically this poses a problem. There needs to be a broader spectrum of services trade far beyond IT services that could be promoted through BRICS. For example, liberalising trade in services like aviation, telecommunication, analytics, legal, accounting, medical, education, BPO and rail freight can bring in more gains to India.
We have conducted a research on how to evaluate an FTA and whether India should align more with EU or Mercosur, US or GCC or Russia, or even with CIS republics. We have realised that India would benefit more if it aligns with RCEP, and not TPP – this is purely in context of liberalising trade in merchandise. In fact, we should stay away from TPP and make them pursue us to be a part of the block.
TDB: Why has Indo-EU relationship remained a contentious one, opening up a can of non-tariff barriers?
SKM: There are non-tariff barriers that lead to obstruction in several sectors. Some of them could be regulatory, and some solely because of our own inefficiency to lift our standards to international level – or perhaps EU is demanding a standard that we cannot fulfil. For example, tomorrow, if EU asks us to relook our PhD degrees, it would be foolish on our part to agree to that. There is a need for mutual recognition, equivalence, harmonisation and complying with international standards. These cannot be easily discussed in one sitting, because there will be multiple opinions, each of which will have a direct impact on
our international trade.
TDB: What do you think would be the impact of Brexit?
SKM: UK is geographically well-positioned to get access into EU, so a damaged EU and UK relationship will have a negative impact on India. We have recently worked on a paper titled ‘Brexit from an India-EU Trade Agreement Angle’ and found that the FTA between India and EU will lose its relevance if UK isn’t a member of EU.
TDB: You spoke about sector-wise restrictiveness index. Is there any key take-away for services from this?
SKM: Well, it would be nice to understand the trade restrictiveness index. Our restrictiveness in sectors like legal services, accounting services and air transport is the highest – China has a lot of restrictions in broadcasting, courier services, etc. However, opening up such sectors in both the countries would be politically very difficult. So, whether just raising standards and efficiency to compete with other liberal countries will work is something only time will tell.
TDB: MRO services received a boost in Union Budget 2016. What are the opportunities for growth in the sector?
Pulak Sen (PS): MRO (maintenance, repair and overhaul) used to fall under the nomenclature of ground-handling services (categorised under other services), but after our continuous lobbying the industry is now categorised as a standalone service. The industry today receives multiple benefits from the government and Indian MRO players have many successful overseas stories to share, even though the volume is still small.
The industry has the expertise and bandwidth to handle all kinds of MRO activities such as full aircraft maintenance, repairs and overhaul, and also components servicing. And besides third party MRO players such as GMR and Airworks, now there are in-house players such as Air India, which is spread across six Indian cities – Delhi, Bombay, Nagpur, Hyderabad, Trivandrum and Kolkata. But despite a good network, many aircraft are sent out of India for MRO, which accounts as a potential opportunity loss for Indian MROs.
TDB: What, according to you, are the new avenues opening up in the MRO sector?
PS: Besides private and corporate sectors, the armed forces are also outsourcing non-core activities to civil MROs. However, a DGCA certification is essential to carry out armed forces related activities. But, since there isn’t much difference between the services on offer, our association is pressing for a common certification because we believe that a joint certification would enable civil MROs to work with the armed forces. In addition, after the disintegration of the USSR, Indian Air and Navy forces are facing difficulties when it comes to servicing Russian equipment. Thus, the armed forces are now willing to work with Indian entrepreneurs and operators to become self-sufficient and cut maintenance costs.
TDB: What are some of the biggest challenges facing the Indian MRO industry?
PS: Starting 2011, things have changed positively for the MRO sector. In 2014, the government had offered Customs exemptions on spare parts and aircraft tyres. However, the Budget came with a rider that restricted us from holding stocks for more than six months, which was later abolished last year.
For the last 10 years, there was no defined stance on civil aviation until the new government introduced a policy. It took into consultation and consideration all stakeholders of the industry such as airports, ground handling, MRO, fuel tankage, etc. And whatever grouses we had were debated and sorted with the participation of the concerned parties to a large extent.
Having said that, high service tax is a problem for us. We pay 15% service tax on MROs, which when compared with our neighbours is quite high. For instance, Singapore pays 7% GST, while Sri Lanka pays nothing – countries like US, Malaysia and Middle-East also don’t pay such taxes. Thus, we are requesting the government to either abolish or give us an abetment like it did for the Indian IT industry. this will helpus service foreign carriers at competitive prices.
On the positive side the government has started to impose tax on the airlines that are going out of the country for MRO services, giving domestic MRO players an advantage. Now more airlines are signing up with Indian MROs and the government is also giving MRO contracts to domestic players. Of the MRO services that were going out from the country, 30% have returned and we are hoping more would come back soon.
TDB: Is there anything more the government can do for you?
PS: The policymakers cannot do anything more! The MRO companies have to market themselves better in order to reach an efficient volume to be competitive.
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