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Service Sector in India

February, 2013

Indian Services Sector: Brief Overview

Indian economy's orientation is changing from a manufacturing/ agriculture dominated to a knowledge-based one, wherein modern technologies and high value-added services are significantly contributing to the country's gross domestic product (GDP). Services sector accounts for about 60 per cent of India - Asia's third largest economy. Some of India's top services exports are software, back-office support and banking services.

'Services' is a huge basket that comprises numerous sub-industry-segments like financial, educational, telecom, digital (including internet), travel & tourism, construction, consultation, IT et al. Certain recent developments, investments and government initiatives pertaining to some of such sub-segments are discussed hereafter.

Key Statistics

  • Indian service sector enjoyed foreign direct investment (FDI) inflows amounting to US$ 3.64 billion during April-November 2012, according to the recent statistics released by the Department of Industrial Policy and Promotion (DIPP).
    Foreign investment in the services sector, which contributes over 50 per cent in India's GDP, grew to US$ 5.21 billion in 2011-12 from US$ 3.29 billion in 2010-11.
  • Activity in India's service sector expanded at the fastest pace in a year in January 2013. The HSBC Markit services Purchasing Managers' Index (PMI), which gauges business activity from a survey of over 400 companies ranging from banks to hospitals, jumped to 57.5 in January 2013 from 55.6 in the previous month.

Recent Investments/ Developments

  • In a bid to enhance its presence in APAC and Middle-East regions, India's premier express courier company DTDC Courier and Cargo Ltd. has entered Australia and Kuwait through joint ventures (JV). The Australian venture, in which DTDC holds 34 per cent, will be handled jointly by DTDC and Fast World Express Pty Ltd., while the Kuwait venture will be handled by Kuwait Bayarek General Trading and Contracting Co. W.I.I. (who is the Master franchise). With this DTDC's global footprint has gone up to 16 countries providing services to over 240 international locations
  • Accor, a European hotel operator, had first launched its property, Hotel Formule 1, in Gujarat. Now, the company is contemplating to have another property in the city. The group owns brands like Sofitel, Pullman, MGallery, Novotel, Suite Novotel, Mercure, Adagio, ibis, and Formule 1, which range from budget to luxury hotels, and the upcoming property could be any one of them
    Accor has 19 hotels with 3780 rooms and two convention centers in India. Formule 1 is its low-cost brand. After opening a Formule1 in Greater Noida recently, it opened the second Formule 1 in Ahmedabad. It is all prepared to launch a third one in Pune and intends to have 15 Formule 1 hotels in India over the next few years
  • Reliance Infra, or rather RInfra has introduced online chat service for Mumbai's 2.8 million electricity consumers. The facility will provide a service to consumers through which they would be able to resolve their issues on real-time basis by having an online chat with the company representatives. The consumers would also be provided with the guidance regarding application status, bill-related queries, payment options and other procedural information. Information regarding change of name requests, e-bills, SMS alerts, billing and payments, web-based services, etc, will also be made available
  • Private telecom services provider Vodafone India has recently launched 'post-to-pre talk time transfer' service that enables its post-paid customer to immediately transfer talk-time (balance) to a pre-paid Vodafone customer. The first-of-its-kind service will be of special benefit for those post-paid customers who have family members, personal friends or office colleagues using a pre-paid connection and are in need of talk time (balance)
  • Reliance Communications Ltd. has granted a US$ 1 billion-contract to Ericsson AB, the world's largest manufacturer of wireless networks, to manage the systems of the Indian phone operator. The contract is beneficial for Ericsson, as the company is trying to sell more services such as network management and maintenance and this contract will help it expand its services business in Asia. Reliance, which awarded a US$ 1 billion services contract to French phone-equipment maker Alcatel-Lucent SA also, is signing such deals to reduce the cost of running its networks.