The Organization for Economic Cooperation and Development (OECD)’sServicesTrade Restrictiveness Index (STRI) placed India in 47th place for the year 2022, which reflects the country’s significant market barriers. But there was a one-position improvement over the ranking from the previous year. The privatization of Air India, the elimination of pricing guidelines for share transfers between residents and non-residents, and the limitations on foreign participation in specific service sectors were all highlighted in the report.
OECD
The Organization for Economic Co-operation and Development (OECD) is an intergovernmental organization with 38 member nations. It is a forum whose member nations affirm their commitment to democracy and the market economy, seeking solutions to common issues, identifying best practices, and coordinating its members’ domestic and international policies.
How does OECD rank countries in STRI?
Government policies that influence the ease of trading in various industries and sectors are considered by the STRI indices. STRI indices give each nation a value between zero and one based on these variables. The zero and one index values indicate the least and no restrictions, respectively. A Most Favoured Nation basis is also used in the database to store information. The index covers industries like air travel, covered by government regulations, and roads.
Favourable sectors to trade in India
Per the report, sectors like engineering services, computer services, road freight transport, and sound recording are easier to trade with and work in. The trade-in of these industries in India is least constrained. According to the report, the composition of the scores indicates barriers relating to regulatory transparency having an impact compared to the most liberal countries in that sector, with restrictions on foreign entry, restrictions on people’s freedom of movement, and other factors.
The low score in the sector resulted from elements such as the requirement for board members to reside in the area and the relatively short stays for intra-corporate transfers, contractual services suppliers, and independent services suppliers. According to the report, one of the most challenging industries to do business in India is rail freight transport, which is also among the most challenging industries to do business in. These industries are also among the most regulated ones.
Issues
Due to its structural bias and other flaws, India has objected to the OECD’s STRI rankings in recent years. According to Indian Express, the Union Commerce Ministry voiced concerns in 2019 about the OECD’s methodology for determining STRI. The Ministry claimed that, before its policy change in 1991, the index, at the time, indicated that India was one of the nations with the highest trading restrictions, which is no longer the case. It also referred to the theoretical and empirical inconsistencies in the OECD methodology and emphasized using arbitrary measurements that give the rankings a developed country bias.
For the STRI indices, government policies in various industries and sectors that determine how easy it is to trade in those sectors and industries are considered.
