The services sector is not only the dominant sector in India’s GDP, but has also attracted significant foreign investment, has contributed significantly to export and has provided large-scale employment. India’s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction.
As of 2018, 31.45 per cent of India’s employed population is working in the services sector.
The services sector is a key driver of India’s economic growth. The sector contributed 55.39 per cent to India’s Gross Value Added at current price in FY20*. Services sector’s GVA grew at a CAGR of 1.45 per cent to US$ 1,064.8 billion in FY20 from US$ 1,005 billion in FY16. Net export estimate in FY20 from services stood at US$ 214.14 billion, while import was at US$ 131.41 billion in FY20.
Nikkei India Services Purchasing Managers' Index (PMI) stood at 14.6 in May 2020, indicating a contraction as COVID-19 led shutdown impaired businesses.
Some of the developments and major investments by companies in the services sector in the recent past are as follows:
The Government of India recognises the importance of promoting growth in services sector and provides several incentives across a wide variety of sectors like health care, tourism, education, engineering, communications, transportation, information technology, banking, finance and management among others.
The Government of India has adopted few initiatives in the recent past, some of these are as follows:
Following are the achievements of the Government in the past four years:
Services sector growth is governed by domestic and global factors. The Indian facilities management market is expected to grow at 17 per cent CAGR between 2015 and 2020 and surpass the US$ 19 billion mark supported by booming real estate, retail, and hospitality sectors.
By 2023, healthcare industry is expected to reach US$ 132 billion. India’s digital economy is estimated to reach US$ 1 trillion by 2025. By end of 2023, India’s IT and business services sector is expected to reach US$ 14.3 billion with 8 per cent growth.
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.
Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123
References: Media Reports, Press Releases, DPIIT publication, Press Information Bureau
Note: P - Provisional, * As per second advance estimates
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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