Issues & Challenges

Visa is a major issue for the IT sector. Immigration and visa issues, which have long plagued the information technology sector seem to have hurt Indian IT services companies recently with the US Government’s stance on the H-1B visa issue.

• Indian service companies gained scale over the last decade as the disrupters, creating the modern offshoring industry, but they are now the incumbents, challenged by a slew of specialized and niche start-ups bred in this new environment. The niche players are creating highly specialized solutions that address very specific use cases or problems for their clients.
• The recent tax reforms u in the US could impact outsourcing sector, and also there are some tax issues with other countries as well. The tax compliance can also be an important factor to negatively impact the services sector of India.
• Given the complexities involved in provision of services (GST related registrations and multi-level authority) from multiple locations to a single customer involving single invoice, contract, consideration, etc. and the fact that states are not agreeable to single registration, at least centralized assessment, audits and investigations could be undertaken either by one authority or a team consisting of both Central and State authorities
• The costs of operating a shipping company in India are higher than overseas and therefore foreign shipping companies do not prefer to flag their ships in India.
• The real estate sector is getting impacted with over 30-35 regulatory approvals required to be obtained by a developer to develop a real estate project in India, it takes anywhere between six to twelve months or even higher in obtaining various approvals. As a result, the whole process becomes cumbersome and also leads to delays, which inflates the project cost by 20–30 per cent.
• Rising non-performing assets (NPA), higher risk provisioning assigned to real estate sector by the RBI and dwindling profits in the real estate sector

Way Forward

The service sector in India has the highest employment elasticity among all sectors. Thus, it has the potential for huge growth as well as the capability to deliver highly productive jobs - leading to revenue generation.

• To address the challenge of job creation, the Skill India program me aims to achieve its target of skilling/ up - skilling 400 million people by 2022. It aims to do this mainly by fostering private sector initiatives in skill development programs, and by providing them with the necessary funding.
• While the government is helping marketing efforts in services by Market Access Initiative (MAI) scheme and by organizing Services Expo in India, there is a need for more promotional activities abroad including showcasing India as a major quality services provider at competitive rates.
• A “Services from India” initiative on the line of “Make in India” is needed to strengthen our services sector and also make it a major export sector.
• There is also a need to make Services Export Promotion Council (SEPC) more active. This council needs to network with the Indian missions abroad and the India Trade Promotion Organisation - ITPO.
• Similarly, the Make in India program - while attempting to bolster the manufacturing sector - will cause a multiplier effect in adding to the portfolio of the Service Sector.

Conclusion

Services sector growth is governed by both domestic and global factors. The Indian facilities management market is expected to grow at 17 per cent CAGR between 2015 and 2020 and surpass the US$19 billion mark supported by booming real estate, retail, and hospitality sectors. The implementation of the Goods and Services Tax (GST) has created a common national market and reduced the overall tax burden on goods. It is expected to reduce costs in the long run on account of availability of GST input credit, which will result in the reduction in prices of services.