The services sector of India remains the engine of growth for India’s economy and contributed 55% to India’s Gross Value Added at current prices in FY24 (as per advance estimates). As per the First Advance Estimates, Gross Value Added (GVA) in the services sector is estimated to grow at 10.7% in FY24, driven by 6.3% growth in the contact-intensive services sector. The services category ranked first in FDI inflows, as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT). The services industry performed well in H1:2023-24, driven by Construction segment. India’s services sector GVA increased YoY by 11.43% to Rs. 72.69 trillion (US$ 871.59 billion) in FY24 (April-September), from Rs. 68.81 trillion (US$ 1,005.30 billion) in FY16. The sector provides employment to a large share of Indian population. The service sector has the highest employment generator rate.
During October-December 2023, India experienced a 5.1% YoY to US$ 87.7 billion with a trade surplus of US$ 44.9 billion, growth in services exports, driven by software, business, and travel
The services sector has seen some developments, investments, and support from the Government in the recent past. As per the First Advance Estimates, Gross Value Added (GVA) in the services sector is estimated to grow at 9.1% in FY23, driven by 13.7% growth in the contact-intensive services sector.
The PMI services increased in June 2024, to reach at 60.5. PMI for services continued to expand, but at a slower pace.
Nearly half of the new jobs generated in FY23 are within the service sector, particularly in information technology (IT), banking, and finance segments.
India’s service exports stood at US$ 339.6 billion, whereas imports stood at US$177.56 billion in 2023-24. The services trade surplus for 2023-24 is expected to be US$ 162.0 billion. India’s service exports stood at US$ 322.72 billion, whereas imports stood at US$ 177.94 billion in April-March 2022-23.
The services category in India attracted cumulative foreign direct investments (FDIs) worth US$ 109 billion between April 2000 to March 2024.
According to RBI’s Scheduled Banks’ Statement, deposits of all scheduled banks collectively surged by a whopping Rs 2.11 lakh crore (US$ 2,544 billion) as on July 12th 2024.
India's medical tourism industry is poised for a robust resurgence, with projections indicating a significant rebound in the number of medical tourists surpassing pre-pandemic levels. Approximately 7.3 million medical tourists are expected to visit India in the calendar year 2024.
The telemedicine market is expected to reach US$ 5.4 billion by 2025, driven by increased demand for remote healthcare solutions and advancements in technology.
The hospital industry in India is expected to reach US$ 132 billion by 2023, growing at a CAGR of 16%-17%.
India’s telephone subscriber base stood at 1,199.28 million as of March 2024.
The country’s total broadband subscriber base stood at 904.54 million, as of December 2023. Teledensity (defined as the number of telephone connections for every 100 individuals) in India stood at 82.59%, as of December 2023.
At the end of December 2023, the top five service providers controlled 98.35% of the total broadband subscribers. These service providers were Reliance Jio Infocom Ltd stood at 470.19 million, followed by Bharti Airtel 264.76 million, Vodafone Idea 127.29 million, BSNL 25.12 million and Atria Convergence 2.23 million.
There are more than 2,000 DPIIT-recognised fintech start-ups in India which are striving towards comparatively more contribution to the nation’s GDP.
By 2023, the fintech sector in India is expected to be US$ 1 trillion in Assets Under Management (AUM) and US$ 200 billion in revenue. The sector is estimated to reach US$ 150 billion by 2025.
India took the lead with the fintech adoption rate of 87%, substantially higher than the world average of 64%.
As per 2022 University Grants Commission (UGC) statistics, there are a total of 1,072 universities in the country, including 460 state universities, 128 deemed to be universities (a status of autonomy granted to high-performing institutes and universities by the Department of Higher Education), 54 central universities (established by the Department of Higher Education), and 430 private universities.
The healthcare industry is growing at a CAGR of 16% and the total public and private spending on healthcare is 4% of GDP. India's healthcare industry is expected to grow to hit US$ 50 billion in size by 2025.
It is predicted that 5G technology will boost the Indian economy by US$ 450 billion between 2023 and 2040.
IT service exports is expected to grow at 3.3% YoY to reach at US$ 199 billion in in FY24.
The IT-BPM sector holds the potential to grow between 10-15% per annum. The IT and fintech segments provide over US$ 155 billion in gross value to the economy annually.
The IT and business services market will grow at a CAGR of 8.3% between 2021-26, reaching a US$ 20.5 billion valuation by the end of 2026.
India’s tourism and hospitality sector may earn US$ 50.9 billion as visitor exports by 2028.
Coforge Limited, a global digital services and solutions provider announced the opening of its centre 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 centre in Vancouver, Canada. The new centre will significantly expand its presence in the country to serve clients primarily in the HiTech industry.
IT-BPM industry revenues stood at US$ 227 billion in FY22 with a YoY growth rate of 15.5%.
As per data released on May 2023, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (ABPM-JAY) achieved 50 million hospital admissions, providing free treatment worth Rs. 61,501 crore (US$ 7.4 billion) to the public, marking a significant milestone.
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.
Centre has formulated ‘Action Plan for Champion Sectors in Services’ to give focused attention to 12 identified Champion Services Sectors.
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.
Indian 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. Advancements in technology and changing consumer preferences are likely to drive innovation and expansion in service offerings. Additionally, the increasing focus on sustainability and digital transformation is expected to shape the future landscape of the service sector, creating new opportunities for growth and development. 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.
Overall, the service sector is anticipated to play a significant role in the economy, contributing to employment opportunities and economic development in the coming years.
Note: *- Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech Testing and Analysis, Other
