0.3. Write a brief note on export potential of management and engineering consultant
Ans. India has been globally recognised for its fast paced development. The service sector been growing at a fast pace and now contributes more than 50% to the GDP.
Management consultancy includes services contracted for and provided to organisation specially trained and qualified persons, who assist in an objective and independent manner dient organization to identify management problems, analyse such problems, recommend solution to these problems, and help, when requested in the implementation of solutions.
Engineering consultancy is defined as application of physical laws and principles of engineering (the application of scientific principles to practical ends as the design, construction, and operation of efficient and economical structures, equipment and systems) to a broad range of activities in the areas of construction, manufacturing, mining, transportation and environment.
Types of Consultancy Organizations: Since the origin of consultancy, the firms have been characterized by diverse functional areas such as engineering, accounting, law, or banking. Consulting organizations are generally classified as management consultancy organizations, engineering consultancy organizations and others which include legal consultancy organizations, socio-economic consultancy organizations, and financial consultancy organizations.
Clients : Most consultancy assignments originate with the request from the client. A useful technique for identifying the real decision maker early in the project is to propose several reasonable outcomes for the client’s problem.
The response to these reasonable ideas indicates whether or not the consultant is dealing with the real dient, the decision maker. In consulting sector, the clients are broadly classified into different categories government institutions, funding agencies (bilateral agencies and multilateral agencies), corporate clients and others like non-government organizations.
Drivers for Consulting Services: The demand for consulting services tends to increase with the economic development of the country. The requirement for consultancy services stems from a diverse range of diets, largely governed by the large corporate sector and the government in various forms, viz, country, institutions, bilateral / multilateral agencies.
Indian Consultancy Industry : After independence, the Indian government had focused on vestment in core industrial sector and infrastructure. The investment in these sectors attracted various construction and engineering companies to explore the business opportunities and contribute their expertise in these sectors. Domain experts were required who could provide their gore still and competence in designing and building the core industry, dams, roads, buildings etc.
Over the years, as the Indian industry started maturing, the Indian consulting industry also started expanding, not only in terms of size but also in terms of the service offerings. Over the period specialist consulting advice was being sought by clients in India and this opened a number of specialist organizations to draw on their specialist knowledge base and resources to meet the demand for specialist consulting services.
Size of the Consultancy Sector in India : The development of consultancy capabilities and business is directly proportional to growth in economic and industrial development. Due to the nature of the industry, getting accurate estimates of its size is difficult. It is estimated that the consultant business in India engages about 100,000 persons in about 5000 consulting firms. According to estimates, the current size of the consulting industry in India is about 10,000 crores including exports and is expected to grow at a CAGR of approximate 25% in the next few years.
Spectral Coverage / Services : The nature of consultancy services varies in its content and extent The Reserve Bank of India classified management and engineering services under other business services as per WTO classification which is indicated in their publication ‘India’s invisibles: Given the recent spurt in contributions from the services sector, efforts are underway to provide accurate estimates of the services industry size, however such efforts may not offer the expected results, since the consulting industry by nature is very diverse and encompasses a wide array of services and sectors. Many of the services and sectors overlap and it is not possible for accurate estimation.
Export Performance of the Indian Consulting Industry : An analysis of the consultancy contracts secured by Indian project overseas has been carried out by Exam Bank of India. As per the analysis, the geographical dispersion of contracts secured during 1995-96 to 2000-01 indicates that consultancy contracts were secured largely in West Asia which accounted for 39% number wise and 46% value wise followed by South East Asia and Pacific and South Asia. South East Asia constituted 22% both by number and by value whereas South Asia was 18% number wise and 16% value wise. According to the 2002 data of the Federation of Indian Export Organizations (FIEO). India’s share in global trade in services was about 1.3%. India’s share of consultancy exports is about 0.5% of global trade in services.
Competitiveness of Indian Consultancy Exports: International firms are larger in size and operate across countries which give them market access to these countries and also the opportunity to tap the market for consulting business. However, Indian consulting organizations are growing with great pace to compete with international organizations.
Local presence in the countries benefits multinational organisations in liaisoning with clients in these countries with sustained business development resulting better prospecting record with large expenditure on business development when compared to Indian firms who largely depend on proactive business development in these countries at low business development cost.
Government Initiatives: In the recent period, the trade policy in India reflects the strategic importance of India’s comparative advantage of trade in services. The services sector has been identified as a thrust sector for trade policy. The Foreign Trade Policy, 2004 – 09 has announced the setting up of Services Export Promotion Council to map opportunities for key services in import markets and to develop strategic market access program.
Some of the key initiatives of the government in promoting exports of consultancy services are through Market Development Assistance (MDA), Market Access Initiative (MAI) scheme, proactive EXIM Policy, and EXIM Bank schemes.
The government also provides exemption on service tax for export of consultancy services. However, due to the lack of clarity in the provisions in the present notification, consultancy export may be affected.
Income tax exemption under section 80’O’need to be reinstated to enhance consultancy export.
Strengths and Weaknesses of Indian Consulting Industry: The major strengths of Indian consulting organizations include professional competence, low-cost structure, diverse capabilities, high adaptability and quick learning capability of Indian consultants.
The major weaknesses of Indian consulting organisations, which has hindered the export growth of consulting sector in the country, are low quality assurance, low local presence overseas, low equity base, lack of market intelligence, low level of R&D.