As India is aiming to scale up exports to Russia to address the enormous trade deficit of $58.9 billion, it will be somewhat challenging for Indian service companies with exposure to the US and European Union to tap the Russian markets. Thus, India is trying to focus primarily on the non-service exports, said a commerce ministry source.
“Most services companies in India have exposure to the US. There will be people who would just focus on the Russian market. They will be able to do it. But those who are diversified, exposed to the US market, European market, they will think twice before doing it,” said the source. Moreover, for service sector exports, language continues to be a major hurdle, said the source.
Although the Indian government doesn’t make the data of service exports publicly available, as per the data collated by Indian Brand and Equity Foundation (IBEF) in December, software exports account for 49% of the total service exports.
Also, Department for Promotion of Industry and Internal Trade (DPIIT) data shows that the services sector emerged as the top destination for FDI equity, accounting for 16% of total inflows and the US accounts for 10% of the total FDI including both services and manufacturing.
However, Indian officials aware of the matter said that there is a strong opportunity for Indian goods exporters. Indian exporters can aim for goods like motor cars, normal non-defence engineering goods, electronic goods, mobile, consumer goods, said the official. They also believe that there is a scope for labour mobility in both non-services and service sectors, though language barriers may impede labour mobility in the services sector to some extent.
India and Russia are aiming to bring down the trade deficit through the India–Eurasian Economic Union (EAEU) Free Trade Agreement negotiations. One of the biggest hurdles faced by Indian exporters to tap the Russian market was the non-tariff barrier (NTB). The Commerce Ministry assured that several NTBs have already been addressed and India’s export will further pick up from this quarter.