Ajitava Raychaudhuri and Prabir De delve into the causes of why there isn't enough emphasis placed on the export of services and make suggestions to tap this potential.
his book picks on a very interesting subject that has not been analysed in this manner before. We all know the services sector has grown to become the mainstay of our economy. Yet, we do not see the same emphasis on services when it comes to exports. Ajitava Raychaudhuri and Prabir De delve into the causes for the same and make suggestions to tap this potential. They do believe that, going by theory, we should be outsourcing services to countries where production costs are lower. But surprisingly things do not work that way and there are barriers, especially in the developed world, to ensure that their domestic concerns gain precedence. Also with the sophistication of services that are more technology-oriented, traditional low-skill services would have to play a secondary role.
his book picks on a very interesting subject that has not been analysed in this manner before. We all know the services sector has grown to become the mainstay of our economy. Yet, we do not see the same emphasis on services when it comes to exports. Ajitava Raychaudhuri and Prabir De delve into the causes for the same and make suggestions to tap this potential. They do believe that, going by theory, we should be outsourcing services to countries where production costs are lower. But surprisingly things do not work that way and there are barriers, especially in the developed world, to ensure that their domestic concerns gain precedence. Also with the sophistication of services that are more technology-oriented, traditional low-skill services would have to play a secondary role.
The authors say three sectors have shown considerable advance in this context: communications, banking and insurance and IT services. These are also services where adequate support has been shown by foreign investors. But we have lost out in traditional areas such as transport, travel and tourism. There is, hence, some change that has taken place from labour-intensive to technology — and knowledge-intensive services, which, in a way, is positive.
Getting a bit theoretical, a luxury afforded to economists, the authors perform an econometric analysis to link trade in services with internal barriers. They conclude that the per capita income of the importing country is critical for services exports from India. Favourable exchange rates help unlock unrealised trade potential and, as a corollary, a more favourable exchange rate policy is needed to facilitate trade in services.
The authors link growth of trade in services to overall growth. As the services sector is already dominant, we need to harness it well as all these services affect other sectors and, while growing them through trade, we can create strong inter-linkages that improve productivity of enterprises. Liberalisation in trade and transportation services helps in global integration through higher trade and FDI, which ultimately reduces income disparities across countries.
At a broader level, the authors argue that as production and consumption of services is simultaneous, there is a significant transfer of know-how and technology across countries and emerging markets can get these skills fast and inexpensively through trade. Financial services and information and communication services are examples. This provides backward linkages to creating job opportunities in the skilled segment, which is needed for a growing economy like ours as traditional services such as transport or travel would be in the realm of unskilled labour. So, though data does not show that such export of services reduces poverty, the authors feel the link is strong and will emerge in future.
International Trade In Services In India: Implications For Growth And Inequality In A Globalising World ;By Ajitava Raychaudhuri & Prabir De;OUP
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