India’s Professional Services Sector

NITI Aayog released a comprehensive report titled “India’s Services Sector: Insights on Regulatory Regime in Professional Services”. The report examines the regulatory framework governing knowledge-intensive professional services in India and identifies structural bottlenecks that affect professional mobility, services exports and global competitiveness.

Significance of the Services Sector

The services sector contributes around 55% of India’s GDP and GVA and accounts for nearly 30% of total employment. India is the world’s 7th-largest services exporter, with a 4.3% share of global services exports in 2024, compared with around 2% in 2005.

Within the sector, professional and management consulting services have emerged as an important area of strength. Their share in India’s total services exports reached around 20% in 2024–25, while their Revealed Comparative Advantage (RCA) increased from 0.95 in 2005 to 3.0 in 2024. An RCA value above 1 indicates a comparative advantage in international trade.

Regulatory Framework for Professional Services

Professional services operate within a combination of sector-specific regulations and cross-sectoral laws. Important cross-sectoral frameworks include the Companies Act, 2013, Limited Liability Partnership Act, 2008, Partnership Act, 1932, and FEMA and RBI regulations.

The report highlights that India’s regulatory system is often fragmented and uneven across professions and States, creating difficulties for professional mobility, business expansion and international recognition.

OECD Services Trade Restrictiveness Index

The OECD Services Trade Restrictiveness Index (STRI) measures regulatory barriers affecting services trade across 22 sectors and 51 countries. It helps countries compare regulatory restrictions and identify areas requiring reform.

India is among the most restrictive countries in architectural, legal and accounting services, while its engineering-services regime is comparatively more liberal.

Challenges in Professional Services

Legal Services

The Advocates Act, 1961 primarily regulates advocates and does not provide a clearly defined framework for several categories such as in-house counsels, Legal Process Outsourcing professionals and legal consultants.

India also has limited arrangements for international recognition and mobility of legal professionals. Restrictions on corporate structures and Multi-Disciplinary Practices (MDPs) further limit the ability of Indian law firms to scale and provide integrated professional services.

Accounting and Auditing Services

The accounting sector faces regulatory concerns arising from the roles of the Institute of Chartered Accountants of India (ICAI) and the National Financial Reporting Authority (NFRA).

Limited Mutual Recognition Agreements (MRAs) restrict international professional mobility. The report also highlights the absence of a dedicated regulatory framework for bookkeeping, particularly regarding qualifications, ethical standards and record-keeping.

Architectural and Engineering Services

Architecture is regulated under the Architects Act, 1972, whereas professional engineering practice does not have a comprehensive statutory framework.

The absence of a clear framework for engineering practice can create overlaps between architects and engineers and gaps in professional accountability. Architects also face restrictions on adopting modern business structures such as LLPs and companies, which can limit their scalability and global competitiveness.

Healthcare and Allied Healthcare Services

The healthcare sector faces jurisdictional overlaps, particularly within the AYUSH sector, involving the Ministry of AYUSH, the National Commission for Indian System of Medicine (NCISM) and State-level authorities.

Another major concern is interstate professional mobility, as medical professionals may need No Objection Certificates (NOCs) when transferring registration between State Medical Councils. Delays in implementing the National Exit Test (NExT) and partial operationalisation of the NCAHP Act, 2021 also affect standardisation of professional competency.

India and Global Services Trade

The General Agreement on Trade in Services (GATS) provides four modes of international services trade. Mode 1 refers to cross-border supply, Mode 2 to consumption abroad, Mode 3 to commercial presence and Mode 4 to the movement of natural persons.

India has made no GATS commitments in legal and architectural services. In engineering services, India has made limited commitments, including a 51% foreign-equity cap under Mode 3.

India is also not a signatory to the WTO’s 2017 Joint Initiative on Services Domestic Regulation, which seeks greater transparency and predictability in licensing and qualification requirements.

NITI Aayog’s Recommendations

Continuous Professional Development

NITI Aayog recommends establishing a uniform and enforceable Continuous Professional Development (CPD) system across professions. This would help professionals keep pace with technological, regulatory and market changes while improving service quality.

Regulatory Harmonisation

The report calls for greater regulatory harmonisation and adoption of Good Regulatory Practices (GRPs). Qualification and licensing requirements should be transparent, publicly accessible and supported by clear appeal mechanisms and defined processing timelines.

Mutual Recognition Agreements

India should expand Mutual Recognition Agreements (MRAs) with other countries to improve the international recognition and mobility of Indian professionals.

Modern Business Structures

Professional firms should be permitted to adopt modern corporate structures where appropriate. Greater flexibility through LLPs, companies and multidisciplinary practices can improve scalability and enable Indian professional firms to compete more effectively in global markets.

Moving Towards High-Value Services

India should move beyond cost-based service delivery towards high-value, knowledge-intensive professional services such as research and development, engineering design, strategic technology and complex advisory services.

India’s approximately 1,700 Global Capability Centres (GCCs), employing more than 1.9 million professionals, can play an important role in this transition.

Preparing for Emerging Trends

The professional-services ecosystem needs to prepare for AI and automation, the green transition and geopolitical fragmentation. Emerging opportunities include carbon accounting, climate-risk advisory, sustainable finance, supply-chain restructuring and regulatory-compliance services.

Historical Evolution of Professional Services in India

India has a long tradition of organised professional knowledge. Ancient texts such as Dharmaśāstra and Arthashastra provided principles for skilled professions, while the Caraka Saṃhitā and Suśruta Saṃhitā contributed to medical knowledge.

The Śreṇī or guild system during the Mauryan and Gupta periods functioned as an early form of professional organisation. During the colonial period, institutions such as the Mayor’s Court of 1726, Supreme Court of Judicature of 1773 and High Courts of 1862 contributed to the development of modern professional regulation.

After independence, legislation and institutions such as the Advocates Act, 1961, professional councils and various commissions shaped India’s contemporary regulatory architecture.

Conclusion

India has developed a strong comparative advantage in professional services, but regulatory fragmentation, limited professional mobility, inadequate MRAs and restrictions on business structures continue to constrain its global potential. Regulatory harmonisation, Continuous Professional Development, modern business structures, wider international recognition and adoption of emerging technologies can help India shift towards high-value professional services, strengthen services exports and high-skilled employment, and enhance its position in Global Value Chains.