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Service Sector in India

August, 2013

Indian Services Sector: Brief Overview

The services sector is a vital cog in the wheel of the Indian economy. The sector, accounting for 60 per cent of the gross domestic product (GDP), grew 5 per cent in the FY13.

The Indian service industry has emerged as one of the largest and fastest-growing sectors on the global landscape and hence has made substantial contribution towards global output and employment. Growing at faster pace as compared to agriculture and manufacturing sectors, Indian service segment comprises of wide range of activities, such as trading, transportation and communication, financial, real estate and business services, as well as community, social and personal services.

Key Statistics

  • 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 47.9 points in July 2013.
  • Indian service sector enjoyed foreign direct investment (FDI) inflows amounting to US$ 547 million during April-May 2013-14, according to the recent statistics released by the Department of Industrial Policy and Promotion (DIPP).
  • Services sector, including insurance and real estate, grew by 9.1 per cent in January-March quarter of 2013. The segment grew by 8.6 per cent in 2012-13. Community social and personal services expanded by 4 per cent in the fourth quarter of FY13 while they grew by 6.6 per cent in 2012-13. Trade, hotels, transport and communications segment grew at 6.2 per cent in the January-March quarter this year as against 5.1 per cent in the same period a year ago. The sector grew at 6.4 per cent in 2012-13.

Recent Investments/ Developments

  • In order to facilitate easier urgent travels to the UK, the UK Home Office has launched the same-day visa service in South India. The ‘super priority’ service, which has already been initiated in Delhi and Mumbai, is available to customers who apply for a six-months to a two-year multiple entry visit visa (excluding student visitors) who have previously travelled to the UK, the US, Australia, New Zealand, Canada or a Schengen country within the last five years. It is also available to visa applicants sponsored by companies which are members of the Business Express Programme.
  • In another bid to make things easier for passengers, Indian Railway Catering and Tourism Corporation (IRCTC) has launched a pilot project of ticket booking through non-internet based mobile phones with effect from 1st July 2013. If the pilot goes well, the new development will enable people using non-internet based mobile phones to easily access Railway ticketing services through SMS/IVRS/USSD. The facility is user-friendly, secure and also eco-friendly, as no print-out is required.
  • Tata Communications’ 100 per cent subsidiary Tata Communications Payment Solutions (TCPS) has launched India’s first white label ATM (WLA) at Chandrapada, a tier-V town near Mumbai. The WLA has been branded 'Indicash' by the company. TCPS already operates about 27, 000 ATMs for 37 banks in India.
  • E-commerce and internet are one of the fastest growing service sub-segments in the Indian economy. Finding the Indian e-commerce space lucrative enough, Amazon, the world’s largest online retail company, has entered the market with a promise of ensuring low prices for users and a better platform for sellers. India is the tenth market where Amazon has come up with a country-specific retail Web site.

    While will introduce categories like mobile phones and cameras in its online store eventually, it has made available books, movies and TV shows for sale to its users.