IT & ITES, consultancy services, accounting and fin serv won't be affected due to Omicron: Sunil Talati

Sunil Talati, the chairman of India’s apex trade body under ministry of commerce, has a daunting task of taking India’s exports to $1 trillion by 2030 from a few billions now but he is hopeful with the steps the ministry has been undertaking. Talati feels services will be in great demand in the US, UK, Australia once there is a bit of relief from the new Covid variant. Talati talks about the future course in an interview with DH’s Annapurna Singh

India’s merchandise exports are likely to reach the target for the first time ever. It is expected to hit $400 billion set for FY22. What about the services side?

Services exports are at an all time high in the first seven months of the FY 2021-22 for which the data has been released by RBI. In the first seven months of 2021 alone services exports have touched $133 billion with a growth rate of nearly 20%.

In the month of October 2021, Services exports stood at $19.86 billion, exhibiting a positive growth of 19.78% vis-à-vis October 2020 ($16.59 billion).

If services exports grows at the same rates till March 2022, we would easily achieve the target of $240 billion set for the FY 2021-22.

Services sector, the mainstay of India’s economy, had started to look up after the second wave of Covid 19 but Omicron hit almost at the same time. Do you see it as a big threat for next year?

Some of the important services sectors such as tourism, medical value travel, education services, aviation services, which are directly related with cross border movement of people, could not recover from the Covid-19. There is no doubt that Omicron has further broken travellers’ confidence and it would have an adverse impact on the already grieving sectors. Sectors which have more trade under Mode-1 (cross border supply) such as IT & ITES, Consultancy services, Accounting and Financial services, etc would not be affected much.

Which sectors of exports are still languishing and not able to perform till now?

Services sectors which are connected directly with international traveling such as travel & tourism, medical value travel, education, aviation etc are still struggling to recover as foreign tourists, patients, students and business delegates etc are still avoiding foreign travel due to travel restrictions on many important routes and strict protocols.

Do you see tourism sector, which massively contributes to services segment, gaining momentum here on?

With Omicron, the new variant of Covid-19 knocking on our doors, the revival of the tourism sector is going to be further delayed. The industry had started getting some business after mass vaccinations and slight ease of travel restrictions on some major routes and the industry was expecting higher inbound travellers in the coming months but with the outburst of new variants, it would be further delayed. With the suspension of regular international flight till 31st Jan 2022, we cannot expect any revival on inbound tourism. Five Lakhs e-VISA which Government proposed to infuse revival of inbound tourism will also have no impact till resumption of regular flights and decrease in prohibiting cost of air tickets. Industry experts believe that in view of the upsurge in Covid cases and partial lockdowns and restrictions, the travel and tourism sector cannot expect to fully revive to pre-Covid period and gain momentum in near future.

Does the target of $1 trillion services exports by 2030 set by the government look feasible now?

While SEPC is putting forth its strategies to achieve the target in synergy with EP(Services) division Department of Commerce and Industry, the services sectors will require schemes to incentive exports, schemes for capacity building for sustained growth in the long run and support measures like SEIS and relief packages in the short run.

SEPC is working on formulating and suggesting alternative schemes for incentivisation.

What are the incentives that services industry needs from the govt in the upcoming Budget to regain its strength, given, that services were the worst hit during the pandemic?

SEIS definitely for 2020-21 and 2021-22 for the business revival. While Government has conveyed on numerous occasions to discontinue SEIS on the premises that it has only been incentive the big firms. SEPC suggested capping so that the funds could be spread among all sectors and help Micro, Small and Medium Enterprises (MSME) in particular.

Their competitiveness with regards to pricing and gaining market access in global market is totally dependent on the SEIS schemes.

It should be continued for two years till new schemes are worked out. For many sectors the discontinuity will almost be akin to snapping oxygen to gasping sectors for revival.

What are your expectations from the upcoming Foreign Trade Policy?

SEPC has proposed an alternative scheme to SEIS called DRESS (Duty Remission on Export of Services Scheme).

The need of the hour is a level playing field with manufacturing with incentives and support to tide over the pandemic. It is high time that a change in perception towards services being equally important as manufacturing gains ground. Services exports lead directly to employment of approximately 2.6 crores people in India.

How about a PLI scheme for services sector? Have you demanded such scheme from the govt?

PLI kind of scheme for services sector can certainly help the sector grow. Capital intensive sectors like Education, Aviation, Healthcare, Research and Development will gain immensely. Emerging sectors like AVGC including film production can be encouraged through such kind of scheme. Similar models for other sectors like professional services, tourism and hospitality can be evolved. We would be interacting with industry on alternative models including something similar to PLI as well.

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