Indian service industry

1. Service Sector in India
Submitted by:
Ashish Priyadarshi
Avisek Das
Mohit Anand
Varun Pratap Singh
Vijayshri Kumari

2. Service Sector- Highlights
Services are the type of economic activities that are intangible , cannot be
stored and do not result in transfer of ownership.
Service sector is one of the three economic sectors of India, also known as
tertiary sector.
This sector, accounts for around 57% of country’s GDP at factor cost.
India has the second fastest growing services sector with its compound
annual growth rate at nine per cent, just below China’s 10.9 per cent, during
the last 11-year period from 2001 to 2012
(Economic Survey 2013-14)
In 2013-14 the growth rate of the services sector at 6.8 per cent is
marginally lower than in 2012-13. This is due to deceleration in the growth
rate of the combined category of trade, hotels, restaurants, transport, storage
and communications.
Sudden growth due to Liberalization.
Wide range of activities - like trading, banking and finance, real estate,
transportation, security, management, storage, communication , banking IT
and so on.

3. •Since 1950-51, there has been a
constant increase in the relative
importance of services sector in GDP
composition
•The percentage share of services
sector in GDP has increased from
29.54% in 1950-51 to 42.55% in
1990-91 to 58.79% in 2012-13
•The percentage share of services
sector is predicted to cross 60% in
the year 2014 as per Planning
Commission Website
•The percentage share of industry is
at 15.76% and the agricultural share
has declined to
Share of India’s Service Sector in GDP
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1950-51
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14(P)
Years
Sectoral GDP Composition
Services Industry Agriculture

4. Growth of Service Sector
•Since 1991 the service
sector’s growth has been
head strong and it has
been a major contribution
to India’s growth. It won’t
be wrong to call service
sector the engine of
growth since 1991. Thus
India’s has been a service
led growth.
•India’s compound annual
growth rate (CAGR) in the
0
2
4
6
8
10
12
14
1951-52
1954-55
1957-58
1960-61
1963-64
1966-67
1969-70
1972-73
1975-76
1978-79
1981-82
1984-85
1987-88
1990-91
1993-94
1996-97
1999-2K
2002-03
2005-06
2008-09
2011-12
GrowthRate
Years
Services Growth Rate

5. Major Components of the Indian Service Sector
Under the National Income Accounting in
India, service sector includes the following:
•Trade, hotels and restaurants
–Trade
–Hotels and restaurants
•Transport, storage and communication
–Railways
–Transport by other means
–Storage
–Communication
•Financing, Insurance, Real Estate and Business
Services

6. •There has been a steady growth
in the banking and financial
services segment from 4.7% in
1950-81 to 10.5% in 2012-13.
•There has been a decline in
social and community services
from 26.3% in 1950-51 to 14.6%
in 2012-13.
•Railways has seen a decline in its
share of transport services from
4.1% in 1950-51 to 1.4% in 2012-
13 whereas other forms of
transport have increased from
5.9% in 1950-51 to 10% in 2012-
13.
Major Components of the Indian Service Sector
0
5
10
15
20
25
30
35
40
1950-51
to1959-60
1960-61
to1969-70
1970-71
to1979-80
1980-81
to1989-90
1990-91
to1999-00
2000-01
to 2009-
10
2012-13
Component of Service SectorSocial Service BFSI Trade Transport

7. State-wise Comparison of Services
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Composition of GSDP(2012-13)
Services Industry Agriculture

8. •Services sector is the dominant sector in all states of India. The only
exception to this is Uttar Pradesh where services sector accounts for
only 27% of the State GDP
•Services Sector accounts for more than 75% of the GSDP in case of
Kerala, Uttarakhand, Goa, Mizoram, and Tamil Nadu
•Union territories such as Delhi, Chandigarh and Andaman & Nicobar
islands have services sector composition as high as 90%
•Kerala has the highest services sector contribution to GSDP ratio. This
is largely due to its tourism and banking services(largest disburser of
loans.)
•In absolute terms , Maharashtra makes the highest contribution to
the services sector with Rs. 5543.99 billion in 2012-13
•Some states like Goa and Tripura have been consistently showing
double-digit growth in the services sector in the last five years.
•Goa - growth in tourism & Tripura - banking and insurance
State-wise Comparison of Services

9. Major Services-Overall Performance
Sector Indicators Unit Period
2009-10 2010-11 2011-12 2012-13 2013-14
Aviation Airline passengers (domestic andinternational)* Million 77.4 88.9 99.6 97.7 103.3
Telecom Telecom connections (wireline andwireless)b lakh 6212.8 8463.3 9513.5 8980.2 9330.2
Tourism Foreigntouristarrivals Million 5.17 5.78 6.31 6.58 6.97
Tourism Foreignexchangeearningsfromtouristarrivals US$ million 11136 14193 16564 17737 18133
Shipping Gross tonnage of Indian shippingb Million GT 9.69 10.45 11.06 10.45 10.49
Shipping No. of shipsb Numbers 1003 1071 1122 1158 1213
Ports Port traffic Million tonnes 850.0 885.5 911.7 933.7 980.5
Railways Freight traffic by railwaysc Million tonnes 887.8 921.7 969.1 1008.1 1050.2
Railways Net tonne kilometres of railwaysc Million 600548 625723 667607 691658 651869
Storage Storage capacity Lakh MT 106.0 103.5 100.3 102.3 105.6
Storage No. of warehouses Numbers 487 479 468 469 471

10. Exports and Employment in Services Sector
•India’s share in world’s service
exports which increased from
0.6% in 1990 to 1.1% in 2000 and
to 3.3% in 2013
•Exports of software services
which accounts for 46 % of India's
total services exports, decelerated
to 5.4 per cent in 2013-14 from
5.9 per cent in 2012-13
•The share of the services sector in
employment has gone up in the
same period from 19.7 per cent in
1993-94 to 26.8 per cent in 2011-
12.This is in spite of the high share
of services in GDP at 57.42%. In
2011-12.

11. 18%
11%
7%
6%
3%
55%
Share of Services in FDI(2013-14)
BFSI Construction
Telecommunications Computer Software & Hardware
Hotels & Tourism Other Services
FDI In Services Sector
•The Indian services sector has attracted the highest
amount of FDI equity inflows in the period April 2000-
September 2014, amounting to about US$ 217.58 billion
•Financial services accounted for the highest inflow during
the period with 39.5 billion$ cumulative inflows from April
2000-March 2014
•FDI Inflows for other sectors:-
Construction- 23 Billion $
Telecommunications-14.2 Billion
Computer Software and Hardware-12.8 billion
•Other services include trading(2.4%), information and
broadcasting(1.7%),consultancy services(1.1%).

12. •Rail freights and fares have increased by about 60% from 2004-05 to 2013-14.
•Government recently hiked the rail fare by 14.2% with effect from June 25,2014
•There has been no inflation in the power sector throughout 2004-05
•There has been a decline in prices in the telecom sector due to intense
competition faced by the players in the market as well as infusion of FDI by many
foreign players.
Inflation in Services Sector

13. International Comparison
0
10
20
30
40
50
60
70
80
90
PercentageShare
Countries
Share of Services in 2012In GDP In Employment
•India ranked 10t in terms of overall
GDP and 12th in terms of services GDP
in 2012
•India has the second fastest growing
services sector with its CAGR at 9.0 %
just below China’s CAGR at 10.9%
during the period from 2001-2012
•Services share in World GDP was 65.9
%. However, in the case of India Service
sector accounted for 56.9% of GDP
•India is one of the leading exporter of
services and has the fastest growth
with a CAGR of 20.2%.

14. Growth Prospects
 India has the potential to build a US$ 100 billion software product industry by 2025
riding on its IT services market, according to Indian Software Product Industry
Roundtable .
 In the telecommunication sector, India is all set to emerge as a leading player in the
virtual world by having 700 million internet users of the 4.7 billion global users by
2025, as per a Microsoft report.
 With increase in standard of living, growing disposable income and demand for
quality healthcare, sectors such as healthcare services and insurance are slated for
some major growth.
 Global market for medical tourism ranging from US$ 100 billion to US$150 billion.
Promotion of India as medical tourist destination – YOGA . Like Thailand - elements
such as spas and alternative therapies
 Powerful backup by Primary and Secondary Sector.