Service Sector: The Snitch of Globalization Game

Abstract

In the context of the GATS negotiations, this paper emphasizes the key roles that services play domestically in terms of accounting for rising shares of domestic output and employment as well as cross-border trade. There is substantial evidence indicating that services liberalization and regulatory reform may result in increased economic growth and greater efficiency in the use of labor and capital, increased product innovation, and increased consumer welfare. Taking this as clue Indian policy makers have resorted to the processes of autonomous liberalization of services to maximize their contribution to the whole economy in the decade of 90s as a part of the new economic policy, so as to increase their participation in international trade in services. However to benefit from domestic liberalization of markets and capitalize on trading opportunities there are a number of preconditions that would need to be fulfilled, including an optimal process of reforms and sequencing, building supply capacity, adaptation of the regulatory environment, and development of supportive physical, institutional and human infrastructure. Thus the paper analyses Indian services economy in the context of GATS by a review of selected economic data on the trade and macroeconomic structure and the projections. The implications of regulatory reform and services liberalization are analyzed in some depth, after which there is a focus on strategies to tap the potentialities of the service sector for the development.