New Delhi [India], Jan. 31 : With the Union Budget 2017 to be announced on February 1, the services sector is looking forward to the announcement of policies that would support higher productivity and create an enabling environment to facilitate increase in output.
India's services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction.
The service sector grew at approximately eight percent per annum and contributed to about 64 percent of India's GDP in 2015-16.
According to the Department of Industrial Policy and Promotion (DIPP), this sector has attracted the highest amount of FDI equity inflows in the period April 2000-March 2016, amounting to about USD 50.79 billion, which is about 18 percent of the total foreign inflows.
"India is a service-driven economy and today 60 percent of the GDP is driven by this sector. The government created enough impetus for manufacturing sector with initiatives like 'Make in India'. We request for a similar focus and push for scalability of the service sector is fast and its impact is global," said Sumit Peer, CEO and founder, Aurelius Corporate Solutions.
"The need of the hour is a friendly repatriation mechanism to be made available for investors and a possible 'tax holiday', say for three to five years on such cash outs or repatriations," Peer added.
In the 2016 Union Budget, it was recognised that retail trade is the largest service sector employer in the country and can enhance employment if regulations are eased.
Last year's budget helped in setting up over 1,500 multi-skill training institutes to be established across the country.
With this in place, the retail sector could employ skilled labour, thus increasing productivity and output.
With this year's budget date inching closer, the services sector's expectation is focused on a desire for an ease in the FDI regulations as well as simpler procedures to obtain a license.
These can help small startups and entrepreneurs secure their position in the market and work towards increasing their output.
In addition to this, the inclusion of the new Goods and Services Tax (GST) Bill could change the way taxes are levied in the country.
The income tax payers are looking to an increase in threshold limits and reduction of indirect taxes. The Information Technology (IT) sector has shown significant progress in the last year, with total revenue of 143 USD.
This sector comprises of approximately 3.7 billion employees, being the largest private sector employer.
With demonetisation being implemented, there has been a shift to digital payment. The export sector is at a cash disadvantage, says Chairman of CII National Committee, Sanjay Budhia. "Given India's infrastructural bottlenecks and interest rates of eight to ten percent, the export sector requires a minimum of four percent handholding for exports," said Budhia.
He added that with the inclusion of GST, the export sector is expecting some exemption on indirect taxes from the Union Budget 2017.
"In most other countries, the tax rate is almost negligible. Even if tax refunds are available, it has become difficult for exporters to bridge the cost gap until the refunds are credited," Budhia said to ANI.