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Services

August, 2012

Brief Overview

India has transformed from being an agriculture-based economy to being a knowledge-based one in the recent decade. The services sector has played a vital role to bring in this change. Ranging from complicated services such as information technology (IT) and healthcare to as simple as educational services, the country has mapped growth in every segment of the services industry. Covering wide range of activities like trading, transportation, communication, financial, real estate and business services, Indian services sector contributes more than 50 per cent to the national gross domestic product (GDP).

Market Dynamics

Education and healthcare services are two of the largest and most challenging sectors tha have the onus to drive the country's progress. Apart from them, IT, IT enabled Services (ITeS), financial services and retail form key pillars of the services landscape.

While India's life insurance service segment may see a quantum jump of 13-14 per cent by 2015 and contribute 10 per cent to the total global premium, according to a report by McKinsey, Kotak Institutional Equities predict that the country's huge consumption market would grow from current Rs 43 trillion (US$ 773.04 billion) to Rs 110 trillion (US$ 2 trillion) by 2025.

With global BFSI (banking, financial services, insurance) clients accounting for over 40 per cent of Indian IT vendors' revenues, the industry is poised to go beyond US$ 100 billion mark in 2012. Moreover, industry body Nasscom predicts that the ITeS industry will earn around US$ 225 billion by 2020, wherein 80 per cent of the growth would come from the presently untapped sectors and regions.

Similarly, IDC Manufacturing Insight predicts that IT spend by Indian manufacturers would grow at an average rate of 14.5 per cent between 2012 and 2016 to reach US$ 8.78 billion, which would be the double of manufacturing IT expenditure inculcated in 2011.

Recent Investments/ Developments

Service providers across various segments remained optimistic regarding activities over the coming year on the back of new orders and positive employment outlook. This was reflected in HSBC's purchasing managers index (PMI) which stood at 54.2 for the month of July 2012.

  • Japan's Nippon Life is planning to initiate a trend of post-sale services on the Indian insurance landscape with its strategic partner Reliance Life. The company counts customer service activities as an important element of its insurance business in Japan and intends to replicate the same practices in India.

    Nippon Life holds 26 per cent stake in Reliance Life Insurance.
  • HMEL, a joint venture (JV) between Hindustan Petroleum Corporation Ltd (HPCL) and Mittal Energy Investment Pte Ltd., Singapore, has installed a new IBM analytics-based software to manage its financial and operations information in a better way. The new service solution has been designed to help HMEL analyse important business processes including planned versus actual investments, production, key performance indicators, among others and give an integrated view of data.
  • Toyota Motor Corporation's wholly-owned Toyota Enterprises has ventured into Indian hospitality service segment through its JV with Hyagreeva Hotels and Resorts. This is the first international venture by Toyota Enterprises which also has business interests in services like construction, real estate, education, insurance and travel.
  • Genpact, India's leading business processing outsourcing (BPO) firm, has inked an agreement with Indian Institute of Management, Udaipur (IIMU), to create a 'knowledge partnership' under which the two entities would jointly build a center for asset-based lending and financing. They would also develop an analytics laboratory which would facilitate real-time problem solving by students along with an exposure to leading software tools and technology that would give them a first-hand industry experience.