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 FY22 (as per advance estimates). The services sector's GVA increased by 6.5% in the third quarter (2022-23), and it was the main driver of aggregate GVA growth (accounting for approximately 84% of total GVA growth). The services industry performed well in H2:2022-23, boosted by contact-intensive services and building activities. 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 service sector has over 50% contribution to India’s GDP, and it has witnessed a growth of 10.8% during the first half of 2021-22. The service sector has emerged as the highest employment generator with a 5-7% y-o-y growth in 2022.
Buoyed by a significant jump in exports during 2022-23, the Services Export Promotion Council (SEPC) stated that the healthy growth trend will continue and shipments are expected to reach up to US$ 400 billion this fiscal year (2023-24).
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.
In March 2023, the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 57.8.
Services export are projected to set a new record of US$ 322.72 billion with a compound annual growth rate of 26.79% during 2022-23 as compared to 2021-22. 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 trade surplus for FY23 (April-March)* is expected to be US$ 144.78 billion, up from US$ 107.52 billion in FY22 (April-March). India’s service exports stood at US$ 254.53 billion, whereas imports stood at US$ 147.01 billion in FY22.
- According to RBI:
- Bank credit stood at Rs. 132.81 trillion (US$ 1.61 trillion) as of January 23, 2023.
- Credit to non-food industries stood at Rs. 126.08 trillion (US$ 1.54 trillion) as of September 23, 2022.
The Indian services sector was the largest recipient of FDI inflows worth US$ 105,400.88 billion between April 2000-June 2023.
According to the Ministry of Commerce and Industry, the service sector received US$ 7.1 billion in FDI equity inflows in FY22.
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.
India’s telephone subscriber base stood at 1,172.34 million as of March 2023.
The country’s total broadband subscriber base stood at 846.57 million, as of March 2023 2021. Teledensity (defined as the number of telephone connections for every 100 individuals) in India stood at 84.51%, as of March 2023. It is predicted that 5G technology will boost the Indian economy by US$ 450 billion between 2023 and 2040.
At the end of March 23, the top five service providers controlled 98.37% of the total broadband subscribers. These service providers were Reliance Jio Infocomm Ltd (438.56 million), Bharti Airtel (241.90 million), Vodafone Idea (124.83 million), BSNL (25.37 million), and Atria Convergence (2.14 million).
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 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$ 105,400.88 billion between April 2000-June 2023. 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.
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.
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
