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Last Updated: September 22, 2016
Managing Director, State Street Corporate Services – India
Latest update: July, 2016
Last Updated: July, 2016
The services sector is not only the dominant sector in India’s Gross Domestic Product (GDP), but has also attracted significant foreign investment flows, contributed significantly to exports as well as provided large-scale employment. India’s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction.
Indian service sector grew at approximately 8 per cent per annum and contributed to about 64 per cent of India's GDP in FY 2015-16#.
The services sector is the key driver of India’s economic growth. The sector contributed around 66.1 per cent of its Gross Value Added growth in 2015-16, thereby becoming an important net foreign exchange earner and the most attractive sector for FDI (Foreign Direct Investment) inflows.!
The Indian telecommunication services market is expected to grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020##.
India is the eighth largest services exporter in the world. The services exports have in 2014 stood at US$ 155.6 billion, which constitutes 7.5 per cent of the GDP. The services imports increased at a rate of 3.3 per cent to US$ 81.1 billion in 2014-15.
Out of overall services sector, the sub-sector comprising financial services, real estate and professional services contributed 21.6 per cent to the GDP, and grew the fastest among all sub-segments at 10.3 per cent year-on-year in 2015-16. The sub-sector of trade, hotels, transport, communication and services related to broadcasting contributed 12.6 per cent to the GDP. The third-largest sub-segment comprising public administration, defence and other services contributed nearly 12.6 per cent to the GDP.
The Indian services sector has attracted the highest amount of FDI equity inflows in the period April 2000-March 2016, amounting to about US$ 50.79 billion which is about 18 per cent of the total foreign inflows, according to the Department of Industrial Policy and Promotion (DIPP).
Some of the developments and major investments by companies in the services sector in the recent past are as follows:
The private security services industry in India is expected to register a growth of over 20 per cent over the next few years, doubling its market size to Rs 80,000 crore (US$ 11.86 billion) by 2020.
The Government of India recognises the importance of promoting growth in services sectors and provides several incentives in wide variety of sectors such as health care, tourism, education, engineering, communications, transportation, information technology, banking, finance, management, among others.
The Government of India has adopted a few initiatives in the recent past. Some of these are as follows:
Services sector growth is governed by both domestic and global factors. The sector is expected to perform well in FY16. Some improvement in global growth and recovery in industrial growth will drive the services sector to grow 7.4 per cent in FY16 (FY15: 7.3 per cent) ###. The Indian facilities management market is expected to grow at 17 per cent CAGR between 2015 and 2020 and surpass the $19 billion mark supported by booming real estate, retail, and hospitality sectors. The performance of trade, hotels and restaurants, and transport, storage and communication sectors are expected to improve in FY16. Loss of growth momentum in commodity-producing sectors had adversely impacted transport and storage sectors over the past two years. The financing, insurance, real estate, and business services sectors are also expected to continue their good run in FY16. The growth performance of the community, social and personal services sector is directly linked with government expenditure and we believe that the government will remain committed to fiscal consolidation in FY16.
Exchange Rate Used: INR 1 = US$ 0.0148 as on July 11, 2016
References: Media Reports, Press Releases, DIPP publication, Press Information Bureau, India budget 2015-16, Central Statistical Organisation
Note - @ - Global Market Perspective (Q4, 2015) report by JLL India, !- The Economic Survey 2015-16, # - According to Central Statistical Organisation (CSO), ## - According to the report by leading research firm Market Research Store, ### - as per Mr Dilip Chenoy, MD and CEO of National Skill Development Corporation
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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