Assessing Barriers to Trade in Services in India

Abstract: International trade in services has become more important in recent years as advances in technology have permitted new means of providing services across borders. Services have emerged as crucial economic activities in India, more prominently since the last decade. Apart from providing the bulk of employment and income in India, the services sector also serves as vital input for producing other goods and services. While a large part of India’s services sector is untapped and rarely explored to the international market, a growing number of barriers at the same time have been slowing down India’s international market access in the services sector. There is little doubt that services trade is an essential ingredient to economic growth. It is widely accepted that it can only make such positive contribution if appropriately liberalised and facilitated across countries. In this study, we have performed an empirical analysis of the linkages between India’s services trade flow and its probable barriers. The results of the analysis show that the linkages between services export and services trade barriers are multiple and complex. One of the findings of this paper suggests that improved trade facilitation may help unlock the unrealized trade potential, and, therefore, more effective policy approaches toward improved services trade infrastructure would be needed to facilitate services export from India. The study finds that recreating favourable domestic policies that are responsible for services trade facilitation and reforming domestic regulations in trade and infrastructure sectors need utmost attention.
JEL codes: F13, F 18
Key words: India, services trade, trade facilitation, services trade facilitation index, domestic regulations, gravity model.