Introduction

NITI Aayog released a comprehensive report titled "India's Services Sector: Insights on Regulatory Regime in Professional Services" that critically evaluates the regulatory architecture governing knowledge-intensive professional services in India.

Macro Significance of India's Services Sector

  • Contribution to Economy: Services contributed ~55% of India's GDP and Gross Value Added (GVA) in FY24
  • Growth Rate: Sector growing at CAGR of ~7% (2011-12 to 2023-24)
  • Employment: Accounts for ~30% of total employment
  • FDI: Remains India's top FDI-recipient sector
  • Export Performance: Professional and management consulting services contributed ~20% of India's total services exports in 2024-25
  • Export Growth: CAGR of 18% (FY15–FY25) on exports and 8% on imports
  • Revealed Comparative Advantage (RCA): Rose from 0.95 (2005) to 3.0 (2024) — RCA above 1 signals clear competitive edge
  • Global Position: World's 7th largest services exporter with 4.3% share of global services exports (2024), up from 2% in 2005

OECD's Services Trade Restrictiveness Index (STRI)

The STRI measures regulatory barriers to services trade across 22 sectors and 51 countries, helping countries benchmark regulations and assess reform impacts.

India's Sectoral Rankings:

  • Architectural Services: 2nd most restrictive
  • Legal Services: 3rd most restrictive
  • Accounting Services: 4th most restrictive
  • Engineering Services: 38th most restrictive (comparatively liberal)

GATS and Global Trade Rules Context

Under the General Agreement on Trade in Services (GATS) (in force since 1995), services trade takes place through four modes:

  1. Mode 1: Cross-border supply
  2. Mode 2: Consumption abroad
  3. Mode 3: Commercial presence
  4. Mode 4: Presence of natural persons

Key Points:

  • India has made no GATS commitments in legal and architectural services
  • In engineering services, India has limited commitments with Mode 3 foreign equity capped at 51%
  • India is not a signatory to the WTO's 2017 Joint Initiative on Services Domestic Regulation (JI-SDR)

Challenges in India's Professional Services Sector

Legal Services

  • Advocates Act, 1961 primarily recognises advocates, leaving in-house counsels and LPO professionals outside regulatory framework
  • No MRAs with foreign bar bodies
  • Bar Council of India–BCI MoU with England and Wales does not provide mutual recognition
  • No Multi-Disciplinary Practices (MDPs) allowed, limiting integrated service offerings

Accounting and Auditing

  • Dual oversight from ICAI and NFRA creates jurisdictional concerns
  • Foreign accountants cannot practise independently in India
  • Limited MRAs restrict international professional mobility
  • Bookkeeping lacks dedicated regulatory framework

Architectural and Engineering Services

  • Architecture regulated under Architects Act, 1972; civil engineering lacks comprehensive statutory framework
  • Proposed Engineers Bill still pending in Parliament
  • Registered architects can only practise as sole proprietors or partnerships — no LLPs or companies (unlike UK, New Zealand, Singapore)
  • Overlapping compliance requirements (CoA + state-level registration)
  • No MRAs for architects

Healthcare Services

  • Jurisdictional overlaps in AYUSH domain (Ministry of AYUSH, NCISM, state bodies)
  • Barrier to interstate mobility — NOCs required for registration transfer
  • Delayed implementation of National Exit Test (NExT)
  • Partial operationalization of NCAHP Act, 2021

Recommendations: Four-Pronged Strategy

1. Continuous Professional Development (CPD)

  • Institute uniform, enforceable CPD-hour regime across all professions
  • Keep pace with technological and regulatory change
  • Standardise service quality

2. Adoption of Best Global Regulatory Practices

  • Improve transparency and Good Regulatory Practices (GRPs)
  • Publicly accessible qualification/licensing criteria
  • Appeal mechanisms and defined processing timelines
  • Models to follow: Malaysia's Unified Public Consultation portal, Australia's DFAT Professional Services and Mutual Recognition Unit

3. Elevate Professional Services within Global Value Chain (GVC)

  • Shift from cost-based delivery to high-value, knowledge-intensive work
  • Focus on R&D, strategic technology, engineering design, complex advisory
  • Leverage India's ~1,700 Global Capability Centres (GCCs) employing over 1.9 million professionals

4. Advance Emerging Trends

  • AI/Automation: Build institutional readiness per WEF Future of Jobs Report 2025
  • Green Transition: Carbon accounting, climate-risk advisory, sustainable finance
  • Geopolitical Fragmentation: Supply-chain restructuring and compliance advisory

Historical Evolution (Prelims Nugget)

  • Ancient: Dharmaśāstra, Arthashastra, Caraka Saṃhitā, Suśruta Saṃhitā, guild system (Śreṇīs)
  • Colonial: Common-law courts, western-style licensing, Mayor's Court (1726), Supreme Court (1773), High Courts (1862)
  • Post-Independence: Advocates Act, 1961, Bhore Committee (1946), Law Commissions

Conclusion

NITI Aayog's report provides a factual diagnostic of India's fragmented professional services regulatory framework. Regulatory harmonisation, wider MRAs, modern business structures, and CPD can help India leverage its rising RCA in professional services and support the Viksit Bharat @2047 vision.