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OCED index for Services trade

Prelims – Economics, Mains – GS2- International Relations

What is the OCED index for Service trade?

1. Organization for Economic Cooperation and Development (OECD) ranks countries based on their services trade policies.

2. Launched in 2014, the Services Trade Restrictiveness Index (STRI) is computed by the OECD.

3. Now it is available for 2018 for a total of 45 economies (36 OECD and the rest non-OECD) and 22 sectors.

Why is STRI a faulty index?

1. The index has a large number of problems associated with it, including some significant design issues that render it impractical for use.

2. The data have been generated by arbitrary procedures and reflects a developed country bias.

3. For example, the index seems to show the Indian services sector as one of the most restrictive, particularly in policy areas like foreign entry. In reality, since 1991, the one area that has seen maximum liberalization in India is FDI.

Who found the fault in the index?

1.  A study commissioned by the Commerce Ministry of India, has found problems with the current method of the index.

2. In order to rectify this the Indian team of econometricians designed a new way of measuring restrictiveness in the services trade that would be more robust and would not have a bias either for developed or developing countries.

3. India has also approached several developing countries to build consensus around the new method of measuring trade restrictiveness in the services sector.

Source: The Hindu