NITI Aayog Report on India’s Services Sector

NITI Aayog has released a report titled “India’s Services Sector: Insights on Regulatory Regime in Professional Services.” The report examines the regulatory barriers and institutional challenges affecting professional services in India. It proposes reforms aimed at strengthening domestic competitiveness, improving the global mobility of Indian professionals and expanding India’s services exports.

Key Findings of the Report

¨     Service-led Growth: In FY 2023-24, services contributed approximately 55% to India's GDP/Gross Value Added (GVA) and accounted for about 30% of total employment. The services sector grew at a Compound Annual Growth Rate (CAGR) of approximately 7% between 2011-12 and 2023-24.

¨   Strong Global Position: India became the world's 7th largest services exporter in 2024. India's share in global services exports rose to 4.3%, up from approximately 2% in 2005.

¨   Expansion of Professional Services: Professional services accounted for 19.7% of India's services exports in 2023. They recorded a CAGR of 18% between FY 2014-15 and FY 2024-25, reflecting their growing role in India's services trade.

¨   Growth in Comparative Advantage: India's Revealed Comparative Advantage (RCA) in professional and management consulting services increased from 0.95 in 2005 to 3.0 in 2024. This indicates India's rising competitiveness on the global stage.

¨  Engineering Services: Exports of engineering services rose from US$ 1.77 billion in FY 2014-15 to US$ 13.77 billion in FY 2024-25, reflecting a CAGR of 22.8%.

Key Regulatory Challenges

¨  Legal Services: Limited recognition for legal professionals other than advocates; restrictions on advertising and business establishment models; and limited mechanisms for professional mobility and mutual recognition hinder global integration.

¨     Accounting and Bookkeeping: Limited mutual recognition arrangements, restrictions on practice by foreign professionals, and the absence of uniform qualification and ethical standards for bookkeepers create regulatory gaps. Architecture and Engineering: There are restrictions on the permissible business structures for architects and limited mechanisms for recognizing foreign qualifications. Meanwhile, India lacks a comprehensive statutory framework regulating engineering as a profession.

¨   Healthcare and Allied Healthcare: Multi-layered regulation, limited inter-state license portability, and the incomplete implementation of the National Commission for Allied and Healthcare Professions Act, 2021, create barriers to professional mobility and uniform regulation. By 2025, only 26 states/Union Territories had constituted State Allied and Healthcare Councils.

¨     High Regulatory Restrictiveness: The OECD’s Services Trade Restrictiveness Index classifies India among the more restrictive economies regarding architecture, legal, and accounting services. This indicates significant scope for regulatory reform.

Significance for India’s Services Sector

¨     Boosting Export Competitiveness: A more predictable regulatory environment can reduce regulatory hurdles and strengthen the ability of Indian professional service firms to compete in global markets.

¨  Facilitating Professional Mobility: Better recognition of qualifications and greater license portability can expand opportunities for Indian professionals across states and in international markets.

¨ Promoting High-Value Services: Regulatory reforms can help India transition from a primarily cost-competitive service model toward knowledge-intensive and high-value activities. This would strengthen India's position in global value chains.

¨ Supporting Trade Negotiations: Identifying domestic regulatory gaps can support India’s bilateral and multilateral services trade negotiations and provide direction to discussions on reciprocal market access.

¨   Fostering Service-Led Growth: Services already contribute approximately 55% to India’s GDP/Gross Value Added. Improving the regulatory ecosystem for professional services can further boost India's service-led growth and support the overarching goal of a developed India by 2047 (Viksit Bharat@2047).