India has found problems with the current method under which OECD ranks countries based on their services trade policies, indicating the outcomes are biased and counter-intuitive.

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  • Launched in 2014, the Services Trade Restrictiveness Index (STRI), computed by the OECD, is now available for 2018 for a total of 45 economies (36 OECD and the rest non-OECD) and 22 sectors. These countries and sectors represent over 80% of global trade in services.
  • The STRI toolkit can support policymakers to scope out reform options, benchmark them relative to global best practice, and assess their likely effects; for trade negotiators to clarify restrictions that most impede trade, and for businesses to shed light on the requirements that traders must comply with when entering foreign markets.
  • But a study commissioned by the Commerce Ministry found problems associated with OCED index, including some significant design issues that render it impractical for use. The data seems to have been generated by rather arbitrary procedures and reflects a developed country bias
  • For example, the index seems to show the Indian services sector as one of the most restrictive, particularly in policy areas like foreign entry while India has adopted liberalisation in 1991 and has maximum foreign investment in service.
  • Although India has approached several developing countries including China, Brazil, Indonesia, Turkey, and South Africa, during the recently-concluded World Trade Organization talks in New Delhi to try to build consensus around the new method of measuring trade restrictiveness in the services sector.
  • Services trade is usually regulated by domestic regulations and not border tariffs so it would be difficult to find whether a country’s policies were restrictive or not. In contrast, manufacturing trade has a well-documented system of classification of commodities through which one can tell exactly what the commodity is and also what the applied tariffs and effective tariffs are, and, hence, see how restrictive any country’s policies are.
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