Report

T RADE IN SERVICES AND SOUTH ASIA: AN OVERVIEW 97
mere 38% in 1980 to around 62% in 2006 (RBI
Bulletin 2007). What is special about India is that its
services sector has made a unique and unusual
contribution to the country’s growth. Unusually for an
emerging economy with low per capita incomes, its
services sector has leap-frogged the manufacturing
sector and become one of the economy’s main drivers.
Others also suggest that the sectoral composition
of output in India has come to resemble that of a
middle-income country, even though its per capita
income remains that of a low-income country (Gordon
and Gupta 2003). And the main driver of the Indian
economy is the services sector, which contributed twothirds
of average real GDP growth for the period 2002-
07 (RBI Bulletin 2007). In India, services account for
around two-thirds of the total FDI inflows. In 2006-
07, information technology, financial and non-financial
services and telecommunications alone accounted for
half of FDI received by India (Ministry of Commerce
& Industry 2007). However, it is a matter of concern
that while this sector is contributing over 60% to India’s
GDP, it provides employment to only a little over-third
of the employed labour force (Report to the National
Commission on Farmers 2004). In order to generate
more employment India should pay adequate attention
to services like tourism and construction which have
immense potential to provide employment to people
at various skill levels.
Slowly but steadily India has become a very active
negotiating country on services. On the face of it, it
looked as if India had a clear advantage only in Mode
4 and later in computer and related services. However,
as the negotiations have progressed India has found
various other services and other modes too of some
critical importance. In just over a decade India has
jumped from being the 34th largest services exporting
country in 1995 to the 10th largest one in 2006. During
the same period its services exports grew eleven times
in value terms with exports reaching almost $74 billion
in 2006 (WTO 2007).
India is the only South Asian country that has
submitted its revised offer during the ongoing services
negotiations at WTO. Broadly speaking, the Indian
revised offer covers almost all services sectors such as
business, communication, construction, distribution,
education, environmental financial, health, tourism and
transport services. India has also offered commitments
in the five identified services sectors – construction,
education, tourism, telecommunications – as part of
communication services and health services, making it
the most liberal country at the regional level. While in
education, tourism, telecommunication and health
services, India has clear export interests; in construction
it may have some import interests as well. Although a
liberal trade regime in India is in its own interest, it has
very positive implications for all other SAFTA member
countries because all are likely to benefit from it. Particularly,
India’s Mode 4 commitments are noteworthy
in this regard, which offer an opportunity to all other
South Asian countries to export skilled labour to India.
Pakistan
Like India, the importance of the services sector to
Pakistan’s economy has substantially increased over the
last three and a half decades whereby the share of
services in GDP has gone up from 45% in 1969-70 to
almost 58% in 2005-06 (Burki and Hussain 2007). The
fastest growing services sectors in Pakistan are finance
and insurance; wholesale and retail trade and transport
and communications. Nevertheless, the available
statistics indicate that Pakistan being a small global
services provider, its imports are growing faster than
its exports. While in 2005 and 2006 Pakistan exported
services worth only $2.043 billion and $2.246 billion,
respectively, at the same time it imported services of
relatively huge value of $7.208 billion and $8.089
billion, respectively (WTO 2007). Another interesting
feature of the Pakistani services sector is that even
though the share of services sector in the GDP has
increased overtime, the services share in employment
has not increased. This shows that poverty alleviation
potential of services sector growth. This may be
explained by the fact that growth has mostly occurred
in knowledge-based sub-sectors. In this regard, a
relatively higher growth in employment-generating
services sectors such as tourism and construction
services could play a significant role.
Unilateral liberalisation of the services sector
appears to be the hallmark of Pakistan’s policy. Significant
progress has already been made towards liberalisation
of key infrastructural or backbone sectors. These
reforms provide a window of opportunity to Pakistan
to gain concessions from its negotiating partners by
locking-in at its current level of commitments in
multilateral negotiations. Pakistan has received several
requests from its trading partners in the Doha Round
of negotiations for improved market access and national
treatment of service providers. Among others these
requests relate to construction and related engineering
services; architectural, engineering, and integrated
engineering services. Likewise, Pakistan has also tabled