Q&A with Dr. Arpita Mukherjee of think-tank ICRIER on whether India is over-reliant on services?

Q. There are arguments about India’s over-reliance on Services within its GDP. What is your view? Is there an ideal range in the context of current globalization trends?

A. In the modern world with service-ification of manufacturing and the development of sophisticated supply chain networks using technology, the contribution of Services to a country’s GDP is going to be high, especially in the case of developed countries. One cannot generalize the contribution of different sectors to the GDP. It ultimately depends on several factors, like the stage of economic growth in the country at that point, its resource endowment, the climate of government policy, openness to trade, etc.

Q. Some of India’s ITES/BPO outsourcing services have got offshored to Sri Lanka/The Philippines. Can this be managed into a services value-chain framework so that India does not lose totally? Is India doing enough to adjust to new skills/business models in order to compensate for this gap?

A. Yes, it can be managed. For example, Chatbots have reduced the requirement for voice-based services. There are talent gaps in India. Our research studies have shown that India needs skills in Artificial Intelligence, Machine Learning, Big Data, Natural Language Processing, etc. Yes, eventually the skills will also have to adjust to the new business models. If DevOps is implemented, then the banks may not need certain skills like testing, which can be automated. People currently working in such areas will then have to be retrained and redeployed in other work areas.

Q. In education services, we have seen a rapid increase in the quantity of universities, but most of them are factories churning of graduates without focusing on the quality of education? What is your advice to policymakers so that the quality of higher education improves?

A. There is a wide variation in the quality of our education. Unless we focus on quality, our people will lose their employability as we move into higher value services and manufacturing. We have to adopt modern curriculum, have a provision for more practical-oriented experiences and allow the students to try out innovative models during their courses. It should also have more industry interactions and “earn as you learn” kind of learning models. We have to ensure that the academic education is merged with industry experiences and that the educational system does meet the industry requirements as well.

Q. Growing awareness of sustainability is creating new commercial opportunities in agriculture. Do you think its share in the economy will increase due to this?

A. The share of agriculture in the economic pie may not rise, but the overall productivity and efficiency of the agriculture sector may resultantly improve. Even developed countries are focusing on improving their agriculture productivity.

Q. Imports are great if a nation imports for productive asset-creation or where it has no competency to produce. The problem occurs when it starts producing import-substitution products or imports for consumption. Do you agree with this? What is your advice to policymakers about imports?

A. I am a believer in free trade and I support the government’s incentives to make the industry strong and competitive. But import substitution is not really making industry competitive. I do not think that piece-meal policy can help. I am a believer of lower taxes, lower compliance cost and ensuring the ease of doing business in the country.

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