The services sector of India remains the engine of growth for India’s economy and contributed 53% to India’s Gross Value Added at current prices in FY21-22 (as per advance estimates). India’s services sector GVA increased at a CAGR of 11.43% to Rs. 101.47 trillion (US$ 1,439.48 billion) in FY20, from Rs. 68.81 trillion (US$ 1,005.30 billion) in FY16. Between FY16 and FY20, financial, real estate and professional services grew at a CAGR of 11.68% (in Rs. terms), while trade, hotels, transport, communication and services related to broadcasting registered a CAGR of 10.98% (in Rs. terms). The sector provides employment to a large share of Indian population.
The services sector has seen some developments, investments and support from the Government in the recent past.
In September 2022, the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 55.1.
India’s service exports stood at US$ 181.39 billion, whereas imports stood at US$ 106.45 billion in April-October 2022.
According to RBI:
- Bank credit stood at Rs. 126.30 trillion (US$ 1.55 trillion) as of September 23, 2022.
- Credit to non-food industries stood at Rs. 126.08 trillion (US$ 1.54 trillion) as of September 23, 2022.
Coforge Limited, a global digital services and solutions provider announced the opening of its center of excellence (CoE) for the Metaverse and Web3 on August 30, 2022.
In June 2022, HCL Technologies (HCL), a leading global technology company, announced the opening of its new 9,000 sq. ft. delivery center in Vancouver, Canada. The new center will significantly expand its presence in the country to serve clients primarily in the HiTech industry.
India’s telephone subscriber base stood at 1,171.92 million as of September 30, 2022.
IT-BPM industry revenues stood at US$ 227 billion in FY22 with a YoY growth rate of 15.5%.
The Indian services sector was the largest recipient of FDI inflows worth US$ 94.19 billion between April 2000-March 2022. The services category ranked 1st in FDI inflow as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT).
In the first-half of 2021, private equity investments in India stood at US$ 11.82 billion, as compared with US$ 5.43 billion in the same period last year.
By October 2021, the Health Ministry’s eSanjeevani telemedicine service, crossed 14 million (1.4 crore) teleconsultations since its launch, enabling patient-to-doctor consultations, from the confines of their home, and doctor-to-doctor consultations.
The Indian government is planning to introduce a credit incentive programme worth Rs. 50,000 crore (US$ 6.8 billion) to boost healthcare infrastructure in the country. The programme will allow companies to access funds to ramp up hospital capacity or medical supplies with the government acting as a guarantor.
In October 2021, Prime Minister, Mr. Narendra Modi, approved the establishment of 157 new medical colleges to boost accessibility of affordable health treatments among citizens.
In an effort to build IT capabilities and competitive advantage over international players, Indian companies plan to deploy ~10 cloud platforms to drive business transformation in sectors such as retail, telecommunication and insurance, which is expected to boost growth in the IT & BPM sector.
The Government has undertaken various steps towards boosting growth of the services sector. The Government introduced ‘Services Exports from India Scheme’ (SEIS) aimed at promoting export of services from India by providing duty scrip credit for eligible exports. Under this scheme, a reward of 3-5% of net foreign exchange earned is given for Mode 1 and Mode 2 services.
In October 2021, the government launched a production linked incentive (PLI) scheme to boost manufacturing of telecom and networking products in India. The scheme is expected to attract an investment of Rs. 3,345 crore (US$ 446.22 million) over the next four years and generate additional employment for >40,000 individuals.
In October 2021, the government launched phase-II of the Mahatma Gandhi National Fellowship to empower students and boost skill development.
In October 2021, the PM Ayushman Bharat Health Infrastructure Mission was launched by the government, to strengthen the critical healthcare network across India in the next four to five years.
The future outlook of the services sector looks on track with pandemic easing out.
India‘s IT and business services market is projected to reach US$ 19.93 billion by 2025. In the healthcare sector, the telemedicine market is driving growth with the increasing demand for remote consultation. By 2025, the telemedicine market in India is expected to reach US$ 5.5 billion. Home healthcare industry in India is expected to reach US$ 10 billion by 2025.
The implementation of the Goods and Services Tax (GST) has created a common national market and reduced the overall tax burden on goods. It is expected to reduce costs in the long run-on account of availability of GST input credit, which will result in the reduction in prices of services. India's software service industry is expected to reach US$ 1 trillion by 2030.
Note: *- Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech Testing and Analysis, Other
