Growth in services
– Growth in output in service in India in recent times has mostly come from the
rapid development of skill intensive services in the IT and professional services
segments-oriented towards the external market
– Large proportion of services in India are a part of the informal economy and the
official employment figures mighty understate the actual size of the services
workforce is a lot cross-over between services and agriculture sector laborers
– There has been some debate on the repercussions of the skill biased
development of service sector jobs
Small brief about service sector
– Services sector is the lifeline for the socio-economic growth of a country. It is
today the largest and fastest growing sector globally contributing more to the
global output and employing more people than any other sector. In alignment
with global trend, the Indian Services sector has witnessed a major boom and is
one of the major contributors to both employment and national income in recent
time. Services sector in India today accounts for more than half of India’s GDP.
Since independence, there has been a marked acceleration in Services sector
growth in India. This paper provides an overview of the Indian Services sector. It
shows that this sector is the fastest growing sector in India, contributing
significantly to GDP and GDP growth rate. However, there are some concerns.
Service Sector in India
– The services sector with an around 57 per cent contribution to the gross domestic product (GDP), has made rapid
strides in the last few years and emerged as the largest and fastest-growing sector of the economy. Besides being
the dominant sector in India’s GDP, it has also contributed substantially to foreign investment flows, exports, and
employment. India’s services sector covers a wide variety of activities that have different features and dimensions.
They include trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate,
& business services, community, social and personal services and services associated with construction. Services in
India are emerging as a prominent sector in terms of contribution to national and states’ incomes, trade flows,
foreign direct investment (FDI) inflows, and employment.
– The compound annual growth rate (CAGR) of services sector GDP was 8.5 per cent for the period 2000-01 to 2013-
– As per the survey, in India, the growth of services-sector gross domestic product (GDP) has been higher than that
of overall GDP between the FY01- FY14. Services constitute a major portion of India’s GDP with a 57 per cent share
in GDP at factor cost (at current prices) in 2013-14, an increase of 6 per cent points over 2000-01.
– The shift from primary and secondary activities to tertiary activities by the citizens of a country indicates that it is
on the path of progress. The growth in the services sector can be attributed mostly to the emergence of the Indian
Information Technology (IT) and IT enabled Services (ITeS) sectors as well as e-commerce.
Key drivers of growth in the
– Low cost of operation and tax advantages
– Rapid industrialization and growth of IT parks in the country
– Supportive government policies
– Availability of technically skilled manpower and readily available resources in the
– Rapid introduction of IT technologies in major sectors such as telecom, BFSI.
– Strong growth in export demand
– Use of new technologies like cloud computing
– Government established SEZs
Contribution of IT sector
– IT and ITeS: Leading services segment
– India’s technology and BPM sector (including hardware) is estimated to have
generated US$ 146 billion in revenue during FY15 compared to US$ 118 billion
in FY14, implying a growth rate of 23.72 per cent
– The contribution of the IT sector to India’s GDP rose to approximately 9.5 per
cent in FY15 from 1.2 per cent in FY98
– TCS is the market leader, accounting for about 10.1 per cent of India’s total IT
& ITeS sector revenue
– The top six firms contribute around 36 per cent to the total industry revenue,
indicating the market is fairly competitive
Segments of Service Industry in
– Information Technology
– Hospitality, accommodation and food services
– Entertainment, culture and recreation
– Transportation and warehousing
– Healthcare & social assistance
– Public utilities
– Real estate and leasing
– Business support services
– Professional, scientific and technical services
– Highly skilled, English-speaking workforce.
– Abundant manpower
– Cheaper workforce than their Western counterparts. According to Nasscom, The wage difference
is as high as 70-80 percent when compared to their Western counterparts.
– Lower attrition rates than in the West.
– Dedicated workforce aiming at making a long-term career in the field.
– Round-the-clock advantage for Western companies due to the huge time difference.
– Lower response time with efficient and effective service.
– Operational excellence
– Conducive business environment
– High technology for database.
– Recent months have seen a rise in the level of attrition rates among ITES
workers who are quitting their jobs to pursue higher studies. Of late workers
have shown a tendency not to pursue ITES as a full-time career.
– The cost of telecom and network infrastructure is much higher in India than in
– Lack of financial suppliers
– Local infrastructure
– Political opposition from developed countries
– To work closely with associations like Nasscom to portray India as the most
favoured ITES destination in the world.
– Indian ITES companies should work closely with Western governments and
assuage their concerns and issues.
– India can be branded as a quality ITES destination rather than a low-cost
– Development market
– Provide more security and effective database environment
– The anti-outsourcing legislation in the US state of New Jersey. Three more states in
the United States are planning legislation against outsourcing Connecticut, Missouri
– Workers in British Telecom have protested against outsourcing of work to Indian
– Competition: Other ITES destinations such as China, Philippines and South Africa
could have an edge on the cost factor.
– Slowdown of demand
– Customer indecisiveness: the requirement change and change often