Service Sector in India:
The service sector attracted not only India’s core GDP but also significant foreign investment flows, contributing significantly to exports and providing massive employment. India’s service sector covers a wide range of functions, including business, hotels and restaurants, transport, storage and communications, finance, insurance, real estate, business services, community, social and personal services, and construction-related services.
The services sector is the key driver of economic growth in India. The sector has contributed 54.17% of India’s gross value added to the current price in 2018-19. Net exports of services amounted to US $60.25 billion in April-December 2018.
The service purchase manager index (PMI) of Nikkei India stood at 52.7 in May 2019. The expansion of service activity was driven by an increase in capacity and demand along with favorable public policies.
Some of the developments and the main investments of companies in the service sector in the recent past are as follows:
(1) Expenditure on leisure and business travel and tourism is expected to increase to US $ 234.4 million and US $ 12.9 billion in 2018, respectively.
(2) India’s earnings from medical tourism could exceed US $ 9 billion by 2020.
(3) Indian health companies are entering into mergers and acquisitions with national and foreign companies to boost growth and win new markets.
The Government of India (GOI) recognizes the importance of promoting growth in the service sectors and offers several incentives in a wide variety of sectors, such as health care and tourism, Education, Engineering, Communications, Transportation, Information technology, banking, finance, management, etc.
The Government of India has taken some initiatives in the recent past. Some of these are as follows:
(1) In the framework of the mid-term review of foreign trade policy (2015-20). The central government increased the incentives provided under the Services Exports from India Scheme (SEIS) by 2%.
(2) The Government of India is working to eliminate many trade barriers to services and submitted a draft legal text on Trade Facilitation of Services to the WTO in 2017.
The following are the achievements of the government in the last four years:
(1) The rank of India jumped to 24 in 2018 from 137 in 2014 at the World Bank’s ease of doing business
(2) Five times more traffic growth in the main ports between 2014-18, compared to 2010-14
(3) Six-fold increase in government spending on telecommunications infrastructure and services in the country, from Rs 9,900 crore (US $ 1.41 billion) during 2009-14 to Rs 60,000 crore (US $ 8.55 billion) (actual and planned) during 2014-19)
(4) A total of 11 projects worth Rs 824.80 crore (US $ 127.98 million) were sanctioned under the Darshan scheme of Swadesh.
(5) Indian IT companies generated the highest revenues to date at US $ 167 billion in 2017-18.
The growth of the services sector is governed by both national and global factors. India’s facility management market is expected to grow at a compound annual rate of 17% between 2015 and 2020 and exceed the US $ 19 billion mark backed by the rise of the real estate, retail and hotel sectors.
The implementation of the Goods and Services Tax (GST) has created a common national market and reduced the overall tax burden on the goods. It is expected to reduce long-term costs due to the availability of GST entry credit, which will result in reduced service prices.
The service sector is the largest in India and provides more than half of the gross value added (GVA). The GVA of the services sector at current basic prices has grown at a compound annual rate of 6.25 percent between the fiscal year 2012 and fiscal year 2019 * to reach US $ 1.294.41 billion.
The sector also provides employment for a large part of the Indian population. As of 2018, 34.49 percent of India’s employed population worked in the services sector.
In addition, service exports comprise an important part of India’s total exports. India’s net service exports were US $ 38.95 billion in HI 2018-19 (P). India ranked as the eighth largest exporter of commercial services worldwide in 2017.
In addition, the sector is the largest recipient of FDI in India with entries of US $ 74.14 billion between April 2000 and March 2019.
The sector has continuously registered strong growth. The Nikkei India Service Purchasing Managers Index (PMI) stood at 52.7 in May 2019, indicating an expansion.
The sub-sectors that perform well within the services sector are:
(1) Aviation-India air passenger traffic doubled to 117.18 million in 2017 from 59.87 million in 2011. It stood at 344.70 million during April 2018-March 2019.
(2) Information technology business process management (IT-BPM) The revenues of the IT-BPM industry grew 8.38 percent year-on-year to US $ 181 billion in the 1919 fiscal year from US $ 167 billion in the fiscal year 2018.
The Government has taken several steps to boost the growth of the services sector. The government introduced the Services Exports from India Scheme (SEIS) aimed at promoting the export of services from India by providing tax scrip credit for eligible exports. Under this scheme, a reward of 3 to 5 percent of the net currencies earned for Mode 1 and Mode 2 services is granted. In addition, in the mid-term review of the Foreign Trade Policy 2015-2020, the SIX incentives to notified services increased by 2%. In addition, The Government of India has identified 12 sectors under the Champion Services Sectors Initiative, which aims to formulate cross-cutting action plans to promote its growth.
Also read: Services, Concept of Production Management, Features of Service, Goods vs Services, Overcome The Challenges of Service Marketing, Concept of Entrepreneurship, Process of Entrepreneurship, Need of Entrepreneurs