Services Industry Analysis

Services sector is the biggest one in India and contributes more than half of Gross Value Added (GVA). As of 2017, 33 per cent of India’s employed population was working in the services sector. India ranked as the eighth largest exporter of commercial services globally in 2017. The sector is a major contributor to the country’s FDI Inflows.

Nikkei India Services Purchasing Managers' Index (PMI) improved to 53.7 in November 2018 from 52.2 in October 2018 driven by rising demand and strong growth in new business for the consecutive ninth month.

Services exports comprise a major part of the total exports of India. Net Services exports from India stood at US$ 38.95 billion in H1 2018-19 (P).

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. It stood at 226.80 million during April-November 2018.
• 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. Also, Government of India has identified 12 sectors under the Champion Services Sectors Initiative which is aimed at formulating cross-cutting action plans to promote their growth.

Note: P – Provisional, * According to NASSCOM, H1 2018-19 – April-September 2018