Recent reforms give some hope of India’s index improving. These reforms include privatisation of Air India. India also eliminated pricing guidelines for transfers of shares between residents and non-residents and lowered barriers to services trade in several sectors. There was introduction of regulation on non-discriminatory interconnection rates in the telecommunications sector.

H A C Prasad, international trade and services consultant and former finance ministry’s senior economic advisor said while some reforms are sector-specific, some are horizontal in nature covering all sectors. The Telecom Bill 2023, once it becomes an Act could further help in making India’s STRI of Telecom sector less restrictive particularly in the transparency area. He also pointed out that services trade restrictions unlike merchandise trade restrictions are not tariff related, though there are some tariff or tariff equivalent issues in services trade as well.

OECD, gives sector-wise break-up, total STRI values in 2022 are very high in India for Rail Freight transport (1.000), Legal Services (0.899) and Accounting (0.793) and very low in Computer (0.199), Construction (0.263), Sound Recording (0.232), Road Freight Transport (0.228), Logistics Freight Forwarding (0.282) and Engineering (0.195). In 2017 also STRI values were very high for Rail Freight Transport (1.0), Legal Services (0.906) and Accountancy (0.886) and very low in Sound Recording (0.267), Road Freight Transport (0.285), Logistics Freight Forwarding (0.290) and Engineering (0.290). In terms of numbers, in 2022 the highest restrictions are in Legal (87), Rail freight transport (84), Air transport and accounting (82 each). In 2017, the highest restrictions were found in Air Transport (89), Insurance (80), Legal and Accounting Services (74) and Rail Freight Transport (73).

Air Transport has now come out of the top list in STRI due to privatisation of Air India in January 2022. In 2022, in terms of numbers, the restrictions are very low in Computer (14), Sound Recording (19), Engineering (17), Construction (22), Road Freight transport (21), Logistics freight forwarding (24), Logistics Customs Brokerage (26) and Courier (26). In 2017 also the restrictions were low in Computer and Engineering services (22), Sound Recording (23), Logistics Freight Forwarding (24), Road Freight Transport (25) and Logistics Customs Brokerage (26).

Among the 50 countries in the OECD database, India has the highest STRI value in Architecture and along with some other countries has the highest STRI value in Rail Freight Transport indicating that these are the highly restricted sectors. Rail freight transport is the most restricted services sector in India as this sector is completely closed because Indian Railways and its subsidiaries functioning under the Ministry of Railways are the only train operators in India.

The segregation of Horizontal Restrictions from total restrictions shows that in terms of both value and numbers in all the sectors, the major contribution to STRI is due to horizontal restrictions. It is very high in some sectors which implies that in these sectors, the STRIs are mainly due to horizontal restrictions. In terms of numbers also, the major restrictions are horizontal restrictions.

Prasad however argues that “we cannot take these STRIs of OECD at face value as there are methodological issues and issues due to differing perceptions of the importance of the restrictions. Prasad has also done a study on this issue in collaboration with Exim Bank. He feels there is merit in demanding removal of lacunae in the OECDs STRI methodology. At the same time there is a case for reducing the restrictions in India’s services sector.

He said the main problem is horizontal restrictions, which get reflected in total restrictions of each of the sector. The presence of some of the Policy Measures like foreign equity restrictions automatically leads to STRI scores in some other related Policy Measures even if there are no restrictions in these other Policy Measures. While this is also due to the lacunae in the STRI methodology, these need to be examined first and addressed as the STRI values of many sectors will automatically fall If some of the horizontal restrictions are removed or relaxed.

India has many horizontal measures related to Foreign Entry, which are comparatively restrictive. These are given higher weightage in the STRI by OECD. These get reflected in the STRIs of the sectors, thus resulting in a higher STRI for India, Prasad said adding the higher weightage for some parameters related to foreign entry and the high number of parameters of a similar nature in some policy measures for different services have resulted in India’s STRI values being higher in many sectors.

There are some measures which are just formalities and not really restrictive and need not be included under STRI unless they are really restrictive. These are related to visa processing time, cost to obtain a business visa, etc., which are also found in other countries and are more in the form of Ease of Doing Business Issues.

There are some restrictions which can be streamlined by India, which can help in lowering the STRI score of many sectors and in turn in the total STRI of India Prasad said adding these include the legal obligation to communicate regulations to the public within a reasonable time prior to entry into force; adequate public comment procedure open to interested persons; and the cost to obtain a business visa.

Nationals of most countries require a visa to India. Fees vary depending on reciprocity as well as the country they apply from. The fees applicable for a US citizen for up to 10 Years Single or Multiple Entry visa is US$160. Most of the countries Visa is around US$ 100. This can be lowered for India which can help in facilitating business visitors. The fees could also be made uniform.

Tourism sector has not been included by OECD in STRI. Based on industry sources, analysis indicates that tourism has few restrictions in India and is quite open. Many of the restrictions are horizontal in nature and some are procedural conditions like Ease of Doing Business issues which needs to be addressed.

Restrictions in services sectors are varied though there are the common horizontal restrictions related to foreign investment, cross-border M&As, acquisition of shares and its transfers, real estate ownership by foreigners, regulations on cross-border data transfers, employment visa, public procurement, taxes and subsidies, regulations, mechanism for redressing, procedural regulations related to Ease of Doing Business, Prasad said. (IPA Service)