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Service Sector in India

May, 2013

Indian Services Sector: Brief Overview

The Indian service sector accounts for a large part of the Indian economy – be it in terms of employment potential or its contribution to the national income. Making-up for almost 60 per cent of Asia’s third largest economy, the industry spans from sophisticated fields like telecommunications, satellite mapping, and computer software to simple services like those performed by the barber, the carpenter, and the plumber; highly capital-intensive activities like civil aviation and shipping to employment-oriented activities like tourism, real estate, and housing; infrastructure-related activities like railways, roadways, and ports to social sector related activities like health and education. Thus, there is no ‘concrete and definite’ definition of services.

Key Statistics

  • The share of services in India’s gross domestic product (GDP) at factor cost (at current prices) has expanded from 33.3 per cent in 1950-51 to 56.5 per cent in 2012-13 as per Advance Estimates (AE). Including construction, the contribution would increase to 64.8 per cent for 2012-13. Trade, hotels and restaurants as a group is the largest contributor (18 per cent) among the various services sub-sectors, followed by financing, insurance, real estate, and business services with a 16.6 per cent share
  • The HSBC Markit services Purchasing Managers' Index (PMI), which gauges business activity from a survey of over 400 companies ranging from banks to hospitals, stood at 50.7 in April 2013
  • Indian service sector enjoyed foreign direct investment (FDI) inflows amounting to US$ 4.75 billion during April-February 2012-13, according to the recent statistics released by the Department of Industrial Policy and Promotion (DIPP)

Recent Investments/ Developments

  • Jet Airways has ventured with CentrumDirect (one of India’s leading financial services groups), to offer Foreign Exchange Services to guests travelling abroad. The clients, or the guests, can avail this facility online by providing the stipulated details on the airline’s Web site www.jetairways.com. They will be then contacted by the authorised representatives from CentrumDirect in order to complete transaction

    CentrumDirect offers 30 leading world currencies, travellers’ cheques and prepaid travel cards. across over 40 cities within India
  • The US$ 4 billion-media conglomerate - Essel Group has forayed into the Indian financial services sector. It has set up two businesses, private equity (PE) and investment banking, under the names of Essel Finance Managers and CAPSTAR, respectively, under the holding company, Essel Financial Services. CAPSTAR, to focus on deals in infrastructure, real estate and financial services, has set up an office each in Mumbai, Noida, Bangalore and Delhi and will open one each in Chennai and Pune. The firm will focus on mergers and acquisitions (M&A), pre-Initial Public Offering (IPO) deals, qualified institutional placements (QIPs) and portfolio management services
  • Lindstrom- a Finland based company - supplies work-wear to a host of companies in India from its service centres in Delhi, Mumbai, Kolkata, Chennai, Hyderabad and so on. Its clients are largely in the businesses of pharmaceuticals, hospitals, electrical, automotive and retail which involve corporate uniforms. Lindstrom is now hunting for more opportunities in India from smaller cities and towns
  • Canada’s largest insurer Manulife Financial is contemplating to enter Indian insurance sector. The company is actively doing a market research to find a viable business model to set up its shop here. The Indian insurance sector is home to many other foreign players like Allianz, Prudential, Standard Life, Aviva,Aegon and Nippon Life, which are present in the market through joint ventures (JVs)with their respective Indian partners