Trade in Financial Services: India's Opportunities and Constraints

This paper analyzes the prospects for liberalizing financial services under the GATS, in view of India’s interests and concerns in this sector. The paper consists of seven sections. Section 2 discusses global trends in financial services and the internationalization of this sector. Section 3 discusses in detail the nature of India’s financial sector, its strengths and weaknesses, and its trade and investment prospects. Section 4 highlights the main external constraints to India’s trade and investment in financial services. Section 5 discusses the history of GATS negotiations on financial services, the resulting commitments with specific reference to the commitments made by India in this sector, and the latest developments in financial services under the request-offer process of the Doha Round negotiations in services (earlier known as the GATS 2000 negotiations). Section 6 highlights India’s negotiating strategy under the Doha Round, focusing on the offers India could make in financial services in keeping with its objective of modernizing and improving efficiency in this sector, while also safeguarding its interests on prudential and regulatory grounds. This section also discusses the scope for leveraging India’s offers in financial services to obtain more liberal commitments in other areas and modes that are of export interest to India. Section 7 discusses the domestic reform issues pertaining to India’s financial sector so as to make this sector globally competitive and efficient and to face the challenges and exploit the opportunities arising from multilateral liberalization.[Working Paper 152]