India ranks 47th in OECD’s services trade restrictiveness index

Due to Russia-Ukraine war, Russia slipped to 48th position in the index. The report highlighted the privatisation of Air India, elimination of pricing guidelines for transfers of shares between residents and non residents, and restriction of foreign participation in certain services sectors.

How does OECD rank countries in STRI?

The STRI indices takes into consideration the government policies in several sectors that define the ease of trading in those sectors and industries. Based on these factors, STRI indices assign value to countries between zero and one. As per the index, zero shows least restriction and one shows no restriction. The database also records details based on a Most Favoured Nation basis.

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A total of 38 OECD member countries and 12 non OECD members including Brazil, China, India, Indonesia, Kazakhstan, Malaysia, Peru, Russia, Singapore, South Africa, Thailand and Vietnam. The index include sectors like air transport, road freight cover, government regulations, etc.

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Favourable sectors to trade in India

According to the report, it easier to trade and work in sectors like engineering services, computer services, road freight transport, and sound recording. These sectors are the least restrictive for trade in India.”The composition of the scores indicates that restrictions on foreign entry, restrictions to the movement of people and barriers related to regulatory transparency have had an impact compared to the most liberal countries in this sector,” says report.

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The low score in the sector was the result factors like residency requirement for board members and a relatively short duration of stay for intra-corporate transferees, contractual services suppliers, as well as independent services suppliers.

Most difficult sectors to trade in India

According to the report, rail freight transport, architecture service, legal services, and accounting services are one of the most difficult sectors to trade in India due to their restrictive nature.

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Dominance of the Indian government in the railway sector makes it highly restrictive. Indian Railways and its subsidiaries functioning under the Ministry of Railways are the only train operators in India. There are some exceptions in container rail transportation, etc.

Problem with OECD’s STRI rankings

In past few years, India has raised objection to the OECD’s STRI rankings due to its structural bias and other loop holes. In 2019, the Union Commerce Ministry had raised objections with the method of finding out STRI by the OECD, reported Indian Express. The Ministry stated that the index at that time showed India to be one of the most restrictive countries for trading, which is not the case post its change in policy in 1991. The ministry also mentioned theoretical and empirical inconsistencies in the OECD methodology and pointed out on the use of arbitrary measures that create a developed country bias in the rankings.