Services sector - potential area for the growth of the country

New Delhi, Dec 11 (KNN)  Services sector in India has emerged as a prominent sector in terms of its contribution to national and states incomes, trade flows and FDI inflows.

Services sector is today the largest and fastest growing sector globally contributing more to the global output and employing more people than any other sector. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. In alignment with the global trends, Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times.

The activities under the purview of the service sector are quite diverse. Trading, transportation and communication, financial, real estate and business services, community, social and personal services come within the gambit of the service industry.  One of the key service industries in India would be health and education.  They are vital for the country’s economic stability.  A robust healthcare system helps to create a strong and diligent human capital, who in turn can contribute productively to the nation’s growth.

The Services sector has matured considerably during the last few years and India has a distinctive role to play in services sector especially among the fast growing developing countries.

It is interesting to note that India’s share of services exports in the world exports of services, which increased from 0.6 per cent in 1990 to 1.0 per cent in 2000 and further to 3.3 per cent in 2011, has been increasing faster than the share of merchandise exports in world exports. Services exports amounted to a meagre USD 8.9 billion in 1997, but over the years services exports have grown substantially rising to USD 110 billion in 2010. During April-July period of financial year 2013-14, the cumulative services receipt (exports) has amounted to USD 50.93 billion.

Some of the salient features of the Services sector in India are:

• Contributes around 60 per cent to the GDP of the country, 35 per cent to employment, 25 per cent to total trade, around 40 per cent to exports, 20 per cent to imports and accounts for more than 50 per cent of FDI into the country.

• The Services sector in India has in general grown at a rate higher than the overall GDP growth rate. For the period 2001-11, services sector in India grew at a Compound Annual Growth Rate (CAGR) of 9.2 per cent.

• The same story is reflected in the trade figures also. The export of services has been growing at a CAGR of 23.4 per cent during 2000-01 to 2010-11 compared to the merchandise exports which grew at a CAGR of 18.6 per cent during the same period.
In 2012, India was amongst the top ten exporters and importers of commercial services with 3.4 per cent share of world exports and 3.0 per cent share of world imports.

Despite such encouraging trends in India’s services exports, it is generally observed that the exports basket of India’s services sector is not well diversified, neither in terms of services categories nor the markets served.

It must be noted that India has export potential in many of the skill-based and labour-based services. Besides software, tourism and travel related services and transport services, the services which are particularly important for India are: professional services, R & D services, consultancy services, printing and publishing services, telecommunication services, construction services, educational services, some financial services and entertainment services. Besides, India has a great potential to be an outsourcing destination for many of the above services.