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May, 2011

The services sector (financial and non-financial) attracted cumulative foreign direct investments (FDI) worth US$ 26,873 million between April 2000 and February 2011, accounting for 21 per cent of the total FDI inflows, according to data released by the Department of Industrial Policy and Promotion (DIPP).

Services or the “tertiary sector” of the economy covers a wide variety of activities such as trading, banking and finance, infotainment, real estate, transportation, security, management and technical consultancy among several others.

The HSBC Markit Purchasing Managers' Index (PMI), which measures business activity among Indian services companies, based on a survey of 500 firms, registered 58.0 in April 2011 from 57.9 in March 2011, underlining considerable strength in the manufacturing sector. The PMI reading in April marked the 25th consecutive month that the key index of manufacturing in Asia's third-largest economy has been above the 50 mark that divides growth from contraction.

The insurance industry is expected to continue to outpace the rapid economic growth to reach US$ 350-400 billion in premium income by 2020, making India amongst the top three life insurance markets and top 15 non-life insurance markets by the year, according to an industry report titled ‘India Insurance — Turning 10, Going on 20’. The report added that the number of life policies in force has increased nearly 12 fold over the past decade and health insurance, nearly 25 times.

The health services sector’s sale is expected to grow by a healthy 25.6 per cent in 2010-11 and 19.8 per cent in 2011-12 driven by a healthy rise in sales. The sector’s PAT increased by a whopping 107.1 per cent in the quarter ending September 2010-11 on account of a faster rise in income vis-a-vis expenses and is expected to grow by 45 per cent in 2010-11.

Medical tourism in India has emerged as the fastest growing segment of tourism industry. There are over 3,371 hospitals and around 754,985 registered practitioners catering to the needs of traditional Indian healthcare as per a market research report ‘Booming Medical Tourism in India’ by RNCOS. Indian hotels are also entering the wellness services market by collaborating with professional organisations in a range of wellness fields and offering spas and ayurvedic massages.

The financial year 2010-11 is characterised by broad-based growth across mature and emerging verticals, as per NASSCOM. The overall Indian IT-ITeS revenue has grown to US$ 63.7 billion in 2009-10 and an estimated US$ 76.1 billion in 2010-11, translating into a CAGR of 22.5 per cent from 2004-05 to 2010-11.

As the economy is growing, banking and financial services, healthcare and consumer products are emerging as the most attractive sectors for the investors. The infrastructure and energy sectors are expected to see a strong influx of investment, with nearly 40 per cent of all PE investments in India targeting infrastructure projects, according to Bain’s India Private Equity Report 2011, produced in collaboration with the Indian Private Equity and Venture Capital Association (Ivca).