Report

10 Trade in Services and South Asia:
An Overview
INTRODUCTION
The services sector in South Asia has grown substantially
in the past decade. In 2006, services contributed
54% of total GDP in South Asia as a whole. In almost
all SAARC countries, except for Nepal and Bhutan,
services contribute more than 50% to GDP. It is interesting
to note that in the context of South Asia, agriculture
was initially the predominant sector, and still is in terms
of employment, but this region was characterised by
relatively early development of the services sector and
by poor development of industry (Ahluwalia and
Williamson 2003: 3).This occurred despite the stress
on industrialisation as the core strategy of development
pursued for many years. Though the services sector has
grown substantially in South Asia, in terms of its contribution
to total trade it still lags behind the other sectors
in most of the countries in the region, except for India
and the land-locked countries where tourism remains
the main form of trade. India, on the other hand, has
witnessed a steady growth in proportion of trade in
services to trade in merchandise which can be attributed
solely to its trade in IT and ITES.
In terms of composition of overall trade in services
in South Asia, we find that imports of services were
higher than exports of services for the SAARC region
till 2004, but thereafter total exports have become
higher than the total imports of services in the region
(UNCTAD 2007, Handbook of Statistics) This is an
important change in the composition of trade in services
for the region; however this has been mainly led by
India. Interestingly, in 2006, India had higher imports
of services as compared to its exports across countries;
we find that export is highest in computer and
information services from India, followed by Sri Lanka
and Pakistan. In terms of imports, we find that India is
the only country that has substantial imports of computer
and information services. Travel services are found
to be an important service in terms of exports, as almost
all South Asian countries have positive net exports apart
from Bangladesh and Pakistan. For countries like Nepal
and Maldives travel services have the major share in
their total exports of services. With respect to transport
services, we find that all the South Asian countries are
net importers of transport services, with India being
the biggest importer followed by Pakistan. India and
Pakistan are also net importers of insurance, financial
and other business services. 1 Almost all South Asian
countries are net exporters of communication services.
One of the reasons for the changing composition
of trade in services for the region is the fact that trade
liberalisation in services is increasingly taking place in
many of the SAARC countries. Sectors like higher
education, health and banking and insurance, which
were mainly under state monopolies in most of these
countries, are gradually liberalising. Increased tradability
of services due to technological advancement is also
an important factor in increasing the trade volumes of
the region.
Trade liberalising policies with respect to services
in the SAARC countries provide a more favourable
environment for regional integration in services
compared with that for goods. Moreover, it has been
suggested that members of SAARC are more homogeneous
than those of the ASEAN (Panchamukhi 1988,
1993). This indicates that the process of overall
integration of the South Asian region should be less
troublesome when compared particularly with ASEAN.
Historically speaking, the case for inclusion of services
as part of the SAFTA has been a strong one. In this
context, the 14th SAARC Summit held in New Delhi
has been a landmark summit as it underlined the
1
According to WTO’s International Trade Statistics 2007:139, India’s exports of financial services were valued at $1.468
billion and imports at $1.227 billion.