Services has been at the forefront of the rapid growth of the Indian economy, contributing nearly 55 per cent of the GDP in 2006-07. The sector has come to play an increasingly dominant role in the economy accounting for 68.6 per cent of the overall average growth in GDP in the last five years between 2002-03 and 2006-07.

While the Indian economy grew at the rate of 9.4 per cent in 2006-07 against 9 per cent the previous year, services grew at an impressive rate of 11 per cent in 2006-07 against 10.3 per cent in 2005-06. The sector has continued to record double-digit growth in the last fiscal with a growth rate of 10.4 per cent during April-December 2007-08.

• Trade, hotels, transport and communication grew by a robust growth rate of 11.6 per cent.
• Financial services (comprising banking, insurance, real estate and business services) grew by 10.8 per cent as against 11.1 per cent.
• Community, social and personal services grew at the rate of 7.7 per cent.
• Construction activity grew by 10 per cent.

Indicators

Lead indicators suggest that the pace of expansion in the services sector activity is likely to be sustained for the rest of the financial year.

• The communication sector has recorded robust growth with 94.65 million telephone connections (fixed plus cellular) in 2007-08 which is 44.41 per cent higher than corresponding period last year. Consequently, India has now become the second largest wireless network in the world.
• Cargo handled at major ports increased by 12 per cent during 2007-08 over the same period in 2006-07.
• The total freight handled by the civil aviation sector has increased by 11 per cent during April-December 2007 over the corresponding period in 2006.
• The freight traffic of the Railways increased by 9.06 per cent during 2207-08 over the same period in 2006-07, recording its highest ever incremental freight loadings of 66 million tonne.
• Passengers handled at domestic and international airport terminals during April-December, 2007 increased by 27.9 per cent and 17 per cent, respectively compared to the same period in 2006.
• Aggregate bank deposits and non-food credits by scheduled commercial banks year-on-year have shown growth rates of 21.2 per cent and 22.3 per cent, respectively as on March 28, 2008.

In its last release of "State of the Economy Report", CII expects the growth to continue apace with services expected to grow at a rate of 11.2 per cent in 2007-08.

Reflecting the confidence of the service industry, provisional information available from select Scheduled Commercial Banks as on November 23, 2007 indicates that bank credit to services expanded by 20.8 per cent on a year-on-year basis, according to the RBI's third quarter review of the economy. Important constituents in this growth have been transport operators, real estate and non-banking financial companies.