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Last Updated: May 09, 2018
Latest update: April, 2018
Notes: E – Estimate, CAGR - Compound Annual Growth Rate, Exchange Rate used is average for the year
Source: Indiabudget, MOSPI (Second Advance Estimates of National Income 2017-18 and First Revised Estimates of National Income 2016-17)
Last Updated: April, 2018
The services sector is not only the dominant sector in India’s GDP, but has also attracted significant foreign investment flows, contributed significantly to exports as well as 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.
The services sector is the key driver of India’s economic growth. The sector is estimated to contribute around 54.0 per cent of India’s Gross Value Added in 2017-18 and employed 28.6 per cent of the total population. India’s net services exports during reached US$ 57.60 billion April-December 2017.
Nikkei India Services Purchasing Managers Index grew from 47.80 in February 2018 to 50.30 in March 2018, supported by growth in the growth in Information & Communications and Finance & Insurance.
As per Ministry of Statistics and Programme Implementation’s second advance estimates of National Income 2017-18, services sector GVA is expected to grow to US$ 1,266.10 million in FY18.
According to a report called ‘The India Opportunity’ by leading research firm Market Research Store, the Indian mobile services market is expected to reach $37 billion in 2017 and grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020.
Out of overall services sector, the sub-sector comprising financial services, real estate and professional services contributed US$ 305.8 billion or 20.5 per cent to the GDP. The sub-sector of community, social and personal services contributed US$ 188.2 billion or 12.6 per cent to the GDP.
The Indian services sector which includes financial, banking, insurance, non-financial/business, outsourcing, research and development, courier and technical test analysis, has attracted FDI equity inflows in the period April 2000-December 2017, amounting to about US$ 64.10 billion according to the Department of Industrial Policy and Promotion (DIPP).
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 sectors and provides several incentives in wide variety of sectors such as health care, tourism, education, engineering, communications, transportation, information technology, banking, finance, management, among others.
Prime Minister Narendra Modi has stated that India's priority will be to work towards trade facilitation agreement (TFA) for services, which is expected to help in the smooth movement of professionals.
The Government of India has adopted a few initiatives in the recent past. Some of these are as follows:
Services sector growth is governed by both 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$19 billion mark supported by booming real estate, retail, and hospitality sectors. The performance of trade, hotels and restaurants, and transport, storage and communication sectors are expected to improve in FY17. The financing, insurance, real estate, and business services sectors are also expected to continue their good run in FY17.
The implementation of the Goods and Services Tax (GST) has created a common national market and reduced the overall tax burden on goods. It is expected to reduce costs in the long run on account of availability of GST input credit, which will result in the reduction in prices of services.
Exchange Rate Used: INR 1 = US$ 0.015 as on March 01, 2018
References: Media Reports, Press Releases, DIPP publication, Press Information Bureau,
Note: # - according to a report by Google India and KPMG
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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