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Services sector has been the largest recipient of FDI in India with inflow of US$ 83.14 billion between April 2000 and June 2020.

Services Industry Analysis

    Last updated on Oct, 11 2021

Share of the services sector accounted for 54% of the total GVA in FY21. 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.

Services exports comprise a major part of the total export from India. According to RBI, in June 2021, India’s service exports stood at US$ 19.72 billion, while imports stood at US$ 11.14 billion.

The services* category in India attracted cumulative foreign direct investment (FDI) worth US$ 87.06 billion between April 2000 and March 2021. 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.

The India Services Business Activity Index/ Nikkei/IHS Markit Services Purchasing Managers' Index increased to 45.4 in July 2021 from 41.2 in June 2021.

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. By June 2021, the Health Ministry’s eSanjeevani telemedicine service crossed 6 million (60 lakh) teleconsultations since its launch, enabling patient-to-doctor consultations, from the confines of their home, and doctor-to-doctor consultations.

Home healthcare industry in India is expected to reach US$ 10 billion by 2025. 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.

Information technology-business process management (IT-BPM) – IT-BPM industry revenue was estimated at around US$ 191 billion in FY20 with a growth rate of 7.7%. The domestic revenue of the IT industry is estimated at US$ 45 billion and export revenue is estimated at US$ 150 billion in FY21.

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. Further, in the mid-term review of Foreign Trade Policy 2015-20, SEIS incentives to notified services were increased by 2%. Also, the Government has identified 12 sectors under the Champion Services Sectors Initiative, aimed at formulating cross-cutting action plans to promote their growth.

India's exports increased by 48.34% to US$ 32.5 billion in June 2021, marking the seventh consecutive month of growth.

India's telephone subscriber base increased from 1,201.20 million in March 2021 to 1,203.47 million in April 2021.

In July 2021, Union Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution and Textiles, Mr. Piyush Goyal stated that the government is planning to formulate standards for enabling services in India deliver more efficiently.

In June 2021, India and Australia announced its collaboration in cyber-enabled critical technologies, highlighting the requirement to boost the critical information security infrastructure such as 5G telecom networks.

In April 2021, the Ministry of Education (MoE) and University Grants Commission (UGC) started a series of online interactions with stakeholders to streamline forms and processes to reduce compliance burden in the higher education sector, as a follow-up to the government’s focus on ease of doing business to enable ease of living for stakeholders.

In March 2021, various states and UTs started implementation of the ‘Intensified Mission Indradhanush 3.0’—a campaign aimed to reach those children and pregnant women who were missed out or have been left out of the routine immunisation programme due to the COVID-19 pandemic. This is aimed to accelerate the full immunisation of children and pregnant women through a mission mode intervention.

On January 15, 2021, the third phase of Pradhan Mantri Kaushal Vikas Yojana (PMKVY) was launched in 600 districts with 300+ skill courses. Spearheaded by the Ministry of Skill Development and Entrepreneurship, the third phase will focus on new-age and COVID-related skills. PMKVY 3.0 aims to train eight lakh candidates.

In January 2021, the Department of Telecom, Government of India, signed an MoU with the Ministry of Communications, Government of Japan, to strengthen cooperation in the areas of 5G technologies, telecom security and submarine optical fibre cable system.

In December 2020, a cohort of six health-tech start-ups—AarogyaAI, BrainSightAI, Fluid AI, InMed Prognostics, Wellthy Therapeutics, and Onward Assist—have been selected by the India Edison Accelerator, fuelled by GE Healthcare. India Edison Accelerator, the company's first start-up partnership programme focused on Indian mentors, creates strategic partners to co-develop healthcare solutions.

On November 4, 2020, the Union Cabinet, chaired by the Prime Minister, Mr. Narendra Modi, approved an MoU between the Ministry of Communication and Information Technology and the Department of Digital, Culture, Media and Sports (DCMS) of the UK government to cooperate in the field of telecommunications/information and communication technologies (ICTs).

Note: *- Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech Testing and Analysis, Other

Indian Services Industry Report (July, 2021)
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