EVOLUTION OF SERVICE

SECTOR IN INDIAN
ECONOMY SINCE 1991
 Introduction to Service Sector

• In the sense of economics, services are any functions or tasks,

performed by an individual or a group of individual, for which
there is a demand and hence a price is determined if it is
available in the relevant market.

• Consumed at the point of production they are usually non-

transferable.

• In a country like India, having a huge size of population,

services sector has its huge potential.
 Introduction to service sector
• The services sector has the largest share of India's GDP,
accounting for 57% in 2012, up from 15% in 1950. It is
the seventh-largest services sector by nominal GDP, and third
largest when purchasing power is taken into account. The
services sector provides employment to 27% of the
workforce. Information technology and business process
outsourcing are among the fastest-growing sectors, having a
cumulative growth rate of revenue 33.6% between fiscal years
1997–98 and 2002–03, and contributing to 25% of the
country's total exports in 2007–08.
 Trends in India’s Service sector
• The service sector has been a major contributor to the
high growth rates experienced by the Indian economy
in recent years. The average annual growth rate of
services rose from 7.7% in 1994–955 to 10.1% in 2009-
10. The sector registered superior performance
compared to industry and agriculture, and exceeded
the overall growth of the economy for the period
under review. Given the performance of India’s service
sector, its contribution to overall GDP has increased
sharply, from 41% in 1990–91 to 63% in 2009–10. The
shares of agriculture and industry declined over this
period. The growth performance within the service
sector itself has, however, varied across subsectors.
Aviation Industry

•India is the third-largest civil aviation market in the world .

• IATA estimated that aviation contributed $30 billion to India's GDP

in 2017, and supported 7.5 million jobs - 390,000 directly, 570,000
in the value chain, and 6.2 million through tourism.

• The Reserve Bank of India (RBI) announced that foreign

institutional investors might have shareholdings more than the
limited 49% in the domestic sector.

• UDAN scheme promotes regional development and regional

connectivity.
Aviation industry
• In April 2019, Jet Airways went out of business opening the
market opportunities for the competitors.

• It led to sudden vacuum in capacity, which meant higher

airfares.

• Recent numbers from the Directorate General of Civil Aviation

(DGCA) show that domestic air passenger growth was just
3.15 per cent in the first seven months of 2019.

• That's just a fraction of the 21.8 per cent growth achieved

during the same period of 2018
 Banking and financial services
• The financial services industry contributed $809 billion (37% of
GDP) and employed 14.17 million people (3% of the workforce) in
2016, and the banking sector contributed $407 billion (19% of GDP)
and employed 5.5 million people (1% of the workforce) in 2016.

• Prime Minister Indira Gandhi nationalised 14 banks in 1969,

followed by six others in 1980, and made it mandatory for banks to
provide 40% of their net credit to priority sectors to ensure that
the banks fulfilled their social and developmental goals.

• The government-owned public-sector banks hold over 75% of total

assets of the banking industry, with the private and foreign banks
holding 18.2% and 6.5% respectively. Since liberalisation, the
government has approved significant banking reforms.
Insurance
•India became the tenth-largest insurance market in the world in
2013. 4 billion in 2013, it remains small compared to world's
major economies, and the Indian insurance market accounted for
just 2% of the world's insurance business in 2017. Life insurance
accounts for 75.41% of the insurance market and the rest is
general insurance.

•Specialised insurers Export Credit Guarantee Corporation and

Agriculture Insurance Company (AIC) offer credit guarantee and
crop insurance. It has introduced several innovative products such
as weather insurance and insurance related to specific crops.

•The Indian insurance business had been under-developed with

low levels of insurance penetration.
Retail
The retail industry, excluding wholesale, contributed $482 billion (22% of
GDP) and employed 249.94 million people (57% of the workforce) in 2016.
The industry is the second largest employer in India, after agriculture.[166] The
Indian retail market is estimated to be US$600 billion and one of the top-five
retail markets in the world by economic value. India has one of the fastest-
growing retail markets in the world, is projected to reach $1.3 trillion by 2020.
The e-commerce retail market in India was valued at $32.7 billion in 2018,
and is expected to reach $71.9 billion by 2022.
India's retail industry mostly consists of local mom-and-pop stores, owner-
manned shops and street vendors. Retail supermarkets are expanding, with a
market share of 4% in 2008. In 2012, the government permitted 51% FDI in
multi-brand retail and 100% FDI in single-brand retail. However, a lack of
back-end warehouse infrastructure and state-level permits and red tape
continue to limit growth of organised retail.[276] Compliance with over thirty
regulations such as "signboard licences" and "anti-hoarding measures" must
be made before a store can open for business. There are taxes for moving
goods from state to state, and even within states.[275] According to The Wall
Street Journal, the lack of infrastructure and efficient retail networks cause a
third of India's agriculture produce to be lost from spoilage
Tourism
The World Travel & Tourism Council calculated that tourism generated ₹15.24
lakh crore (US$220 billion) or 9.4% of the nation's GDP in 2017 and
supported 41.622 million jobs, 8% of its total employment. The sector is
predicted to grow at an annual rate of 6.9% to ₹32.05 lakh crore (US$460 billion)
by 2028 (9.9% of GDP). Over 10 million foreign tourists arrived in India in 2017
compared to 8.89 million in 2016, recording a growth of 15.6%. India earned
$21.07 billion in foreign exchange from tourism receipts in 2015. International
tourism to India has seen a steady growth from 2.37 million arrivals in 1997 to
8.03 million arrivals in 2015. The United States is the largest source of
international tourists to India, while European Union nations and Japan are other
major sources of international tourists. Less than 10% of international tourists
visit the Taj Mahal with the majority visiting other cultural, thematic and holiday
circuits. Over 12 million Indian citizens take international trips each year for
tourism, while domestic tourism within India adds about 740 million Indian
travellers.
India has a fast-growing medical tourism sector of its health care economy,
offering low-cost health services and long-term care. In October 2015, the
medical tourism sector was estimated to be worth US$3 billion. It is projected to
grow to $7–8 billion by 2020. In 2014, 184,298 foreign patients travelled to India
to seek medical treatment.
Healthcare Industry
•India's healthcare sector is expected to grow at a CAGR of 29%
between 2015 and 2020, to reach US$280 billion, buoyed by rising
incomes, greater health awareness, increased precedence of
lifestyle diseases, and improved access to health insurance.

•The ayurveda industry in India recorded a market size of $4.4

billion in 2018. The Confederation of Indian Industry estimates that
the industry will grow at a CAGR 16% until 2025. Nearly 75% of the
market comprises over-the-counter personal care and beauty
products, while ayurvedic well-being or ayurvedic tourism services
accounted for 15% of the market.
 Healthcare Industry
• Rising income level, greater health awareness, increased
precedence of lifestyle diseases and improved access to
insurance would be the key contributors to growth

• The sector is expected to generate 40 million jobs in India by

2030. 100,000 jobs are expected to be created from Ayushman
Bharat, the National Health Protection Scheme

• The Government of India approved the continuation of

National Health Mission with a budget of Rs 31,745 crore (US$
4.40 billion) under the Union Budget 2019-20.
Telecommunications
•The telecommunication sector generated ₹2.20 lakh
crore (US$32 billion) in revenue in 2014–15, accounting for
1.94% of total GDP. It has one of the lowest call-tariffs in the
world, due to fierce competition among telecom operators.

• India has the world's third-largest Internet user-base. As of

31 March 2016, there were 342.65 million Internet subscribers
in the country.

•Industry estimates indicate that there are over 554 million TV

consumers in India as of 2012. India is the largest direct-to-
home (DTH) television market in the world by number of
subscribers. As of May 2016, there were 84.80 million DTH
subscribers in the country.