India’s services sector has remained resolute and on a steady rise. According to a recent report published by the Confederation of Indian Industry (CII) and KPMG, India has moved up to become the fastest growing service economy in the world. The services sector is a dominant sector in India’s GDP, with attractive foreign investment flows and contributing significantly to exports. The Indian services sector has attracted the highest amount of Foreign Direct Investment (FDI) inflows.
We have witnessed good revenue generation with growing sectoral activities across trade, tourism, healthcare, transport, communications, information technology, finance, insurance, real estate, business services, social and personal services. The factors leading to this rapid rise are obvious. Increasing purchasing power, rising social mobility and digital penetration to rural markets are creating a spurt in demand for the services sector in India.
India has moved up to become the fastest growing service economy in the world.
The contribution of the services sector has increased very rapidly in India’s GDP, with many foreign consumers showing interest in the country’s service exports. This is attributed largely to our country’s pool of highly skilled, low cost and educated manpower. Foreign companies are outsourcing their work to India especially in the area of business services, including business process outsourcing and information technology services. This has given a major boost to the services sector in India, which in turn has increased the services share in the GDP pie.
The Government of India recognizes the importance of promoting growth in this area and is creating an enabling environment that will give a further push to sectors such as healthcare, tourism, communications, information technology, among others. An encouraging regulatory framework and an easing of trade barriers at both domestic and international levels through agreements will only enhance India’s competitiveness at a global level. This will also mean an increase in the quality of employment and not just numbers. This will lead to a quality labour force for the country.
The multiplier effect on ancillary industries owing to the growth in the services sector is a natural outcome. For instance, a spurt in tourist arrivals into India will not only positively impact the hotel and airlines industries but also boost the sale of crafts and artefacts that can be showcased as part of integrated business plans between stakeholders, both private and public. The regulatory framework also needs to take into account the evolving nature of the services sector, and how it’s interlinked with other sectors.
India’s services sector, while generating high income, is still low on generating employment as per the ILO’s Global Employment Trends 2016. However, the Indian healthcare sector has grown to become one of the largest sectors in the services industry in terms of both revenue and employment generation. Healthcare essentially comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. This sector in India is growing at a brisk pace due to its increasing coverage, services and growing investments by public as well as private players. Due to the diverse range of medical services, this sector impacts tertiary industries by virtue of indirect employment to healthcare professionals such as nurses, residential associates and medical assistants.
The contribution of the services sector has increased very rapidly in India’s GDP, with many foreign consumers showing interest in the country’s service exports.
The government is taking conscious steps to engage with other nations to give a further fillip to the services sector. India has signed comprehensive bilateral agreements with the Governments of Singapore, South Korea, Japan and Malaysia. A Free Trade Agreement (FTA) in services and investment was also signed with the Association of South East Asian Nations (ASEAN).
With the right regulatory and policy framework and creating a climate that will ease the way of doing business, this industry can leapfrog to achieve substantial growth. Significant efforts in this direction are already underway. The first ever Global Exhibition on Services (GES), inaugurated by Prime Minister Modi, was held in April 2015 in New Delhi, providing a platform for all the participants, delegates, business visitors and other key decision-makers from the services industry and other related industries to interact with each other, and explore new business avenues. The success of GES resulted in a second edition that took place in April this last year — it focused on the services sector of the world economy and provided a platform to discuss and debate the future of our nation’s services industry.
India’s services sector is advancing rapidly and is now poised for a bigger slice of India’s GDP. This is no ordinary achievement for a country which is predominantly dependent on agriculture. The accomplishment is even more commendable against the backdrop of challenges such as policy changes, a fragile world economic environment and raising growth capital.
We need to amplify our presence manifold in sectors where onshore and non-off-shore services are valued such as travel, transportation, healthcare, education, communications and financial services. Services sector growth rate in India’s GDP has indeed registered a significant growth over the past few years and it is just getting started to diversify range of services it offers.