Services Industry Analysis

Services sector is the biggest one in India and contributes more than half of Gross Value Added (GVA). As of 2016, 30.6 per cent of the Indian population was employed in this sector. The sector is a major contributor to the country’s FDI Inflows. In May 2018, business sentiments under Nikkei India Services Purchasing Managers’ Index (PMI) were at their strongest since January 2015. India’s services exports grew 19.60 per cent year-on-year to US$ 195.09 billion during 2017-18P.

Services exports comprise a major part of the total exports of India. Net Services exports from India grew 14.98 per cent year-on-year to US$ 77,562.89 million in 2017-18P.

India is the export hub for software services. It has a 55 per cent share in the US$ 185-190 billion global sourcing market in 2017.

Sub-sectors that are performing well in FY18 are:

• Aviation – India’s air passenger traffic doubled to 117.18 million in 2017 from 59.87 million in 2011.
• Tourism – Foreign Exchange Earnings from tourism rose 20.8 per cent year-on-year to US$ 27.7 billion in 2017.
• Information technology-business process management (IT-BPM) – Software exports are expected to grow 7-8 per cent and the domestic market is expected to expand by 10-11 per cent*.

The Government introduced ‘Services Exports from India Scheme’ (SIES) aimed at promoting export of services from India by providing duty scrip credit for eligible exports. Under this scheme, a reward of 3 to 5 per cent of net foreign exchange earned is given for Mode 1 and Mode 2 services. In the mid-term review of Foreign Trade Policy 2015-20, SEIS incentives to notified services were increased by 2 per cent.

Note: * According to NASSCOM