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SERVICE SECTOR IN CONTEMPORARY INDIAN ECONOMY: A BRIEF STUDY

Introduction
Whats GDP growth

India gross domestic product (GDP) means the total value of all the services and goods that are manufactured within the territory of the nation during the specified period of time. The Indian economy is the second fastest major growing economy in the whole world with the growing rate of the GDP at 9.4% in 2006- 2007. The economy of India is the twelfth biggest in the world for it has the GDP of US$ 1.09 trillion in 2007.
Brief introduction to Indias GDP growth

The Gross Domestic Product or GDP is the indicator of the performance of an economy. According to the estimates of 2008, India's GDP is $1.209 trillion and this is slated to make improvement in the coming times. It is estimated that India's GDP will grow by 6.5% in the year 2009. In 2008 the country's GDP was 9%; the slowdown that has been witnessed this year in the estimates is largely due to the slowdown witnessed by the agriculture and the industrial sectors. A look at the India GDP composition sector wise throws up some interesting figures. The agriculture sector contributed 17.2%; industry contributed 29.1% while the service sector had a contribution of 52.7% according to 2008 estimates.
Sectors contributing to India's GDP

India is a vast country, so the sectors contributing to the country's GDP is also big in numbers. Various sectors falling under the India GDP composition includes food processing, transportation equipment, petroleum, textiles, software, agriculture, mining, machinery, chemicals, steel, cement and many others. Agriculture is the pre dominant occupation in India, employing more than 50% of the population. The service sector accounts for employing more than 25% while the industrial sector accounts for more than 10%.
SECTORS All Industries Basic Goods Capital Goods Intermediates Consumer Goods a) Durables b) Non-Durables Weight 100 35.57 9.26 26.51 28.66 5.36 23.3 1995-96 13 10.8 5.3 19.4 12.8 25.8 9.8 1996-97 6.1 3 11.5 8.1 6.2 4.6 6.6 1997-98 6.7 6.9 5.9 8 5.5 7.8 4.8 1999-00 6.7 5.5 6.9 8.8 5.7 14.1 3.2 2000-01 5 3.9 1.8 4.7 8 14.5 5.8 2001-02 2.8 2.8 -3.9 1.6 6 11.5 4 Apr-June 2002* 4 5.1 1.6 1.1 6.5 0.5 8.7

Major Service sectors of India

Service Sector in India: 1. 2. 3. 4. 5. 6. 7. 8. 9. Travel & Tourism Transportation Services Couriers, Cargo, Logistics Communication and Entertainment Services Financial Services Retail Services Information Technology & Consultancy Services Hospitality Services Tele-Communication Services

Share of sector wise contribution to GDP

Agriculture makes the highest contribution to India's GDP. It has been seen in the last few years that the input of the agriculture sector has been declining, but it is still the biggest contributor. This decline in growth has been largely attributed to the irregular climatic condition, which saw less rain this year. Contributions from the manufacturing sector in the country's GDP have been largely along expected lines, though it was slightly down. The reasons attributed for this are the global economic recession, changing pattern of consumer consumption and a stringent liquidity policy. The service and the industrial sector have performed much better compared to the contribution from the other sectors. The global economic slowdown is showing very slow but some sure signs of recovery. Now is the time for all the sectors to undertake measures to ensure that these sectors contribute appropriately to the GDP of the country. Liberal governmental policies will also ensure that India GDP composition sector wise registers a significant improvement.
Service Sector contribution to Indian Economy

The Services Sector contributes the most to the Indian GDP. The Sector of Services in India has the biggest share in the country's GDP for it accounts for around 53.8% in 2005. The contribution of the Services Sector in India GDP has increased a lot in the last few years. The Services Sector contributed only 15% to the Indian GDP in 1950. Further the Indian Services Sector's share in the country's GDP has increased from 43.695 in 1990- 1991 to around 51.16% in 1998- 1999. This shows that the Services Sector in India accounts for over half of the country's GDP.

Service Sectors in India

India ranks fifteenth in the services output and it provides employment to around 23% of the total workforce in the country. The various sectors under the Services Sector in India are construction, trade, hotels, transport, restaurant, communication and storage, social and personal services, community, insurance, financing, business services, and real estate.
The reasons for the growth of the service sector contribution in Indian economy

The contribution of the Services Sector has increased very rapidly in the India GDP for many foreign consumers have shown interest in the country's service exports. This is due to the fact that India has a large pool of highly skilled, low cost, and educated workers in the country. This has made sure that the services that are available in the country are of the best quality. The foreign companies seeing this have started outsourcing their work to India specially in the area of business services which includes business process outsourcing and information technology services. This has given a major boost to the Services Sector in India, which in its turn has made the sector contribute more to the India GDP.

Lead Indicators
Lead indicators suggest that the pace of expansion in the services sector activity is likely to be sustained even in the next financial year. Foreign tourist arrivals (FTAs) during calendar year 2009 were 5.10 million. Railways freight traffic increased to 833.03 million tonnes during fiscal 2008-09 from 794.21 million tonnes carried during 2007-08, an increase of 4.89 per cent. The number of telecom subscribers in the country increased to 562.21 million in December 2009, an increase of 3.5 per cent from 543.20 million in November 2009. With this the overall tele-density (telephones per 100 people) has touched 47.89. Cargo handled at major ports during AprilDecember 2009 2010 has been 411.95 million tones as against 391.82 million tonnes in the corresponding period in the previous fiscal.

The prospects for growth in the Indian services sector continues to be robust, according to a survey by KPMG, conducted across the BRIC (Brazil, Russia, India and China) countries in the spring of 2009. The survey revealed that 31.3 per cent of Indian companies saw their activity levels improving. Around 37 per cent forecast new order growth in one years time, compared with 16 per cent that anticipated a fall. Even capital expenditure at Indian services firms is anticipated to rise, with 43 per cent of companies saying they plan to increase spending on fixed assets. According to a HSBC survey, business activity among Indian services companies expanded at its fastest pace in 16 months in January 2010, rising for a second straight month on a sharp increase in new work orders.

The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 58.96 in January 2010, its highest since September 2008. (A reading above 50 represents expansion while anything below points to a contraction.)

TABULATION OF SOME RELEVANT DATA


share of the service sector in India's GDP (in Rs. crore). Figures in brackets indicate percentage share of different sectors and subsectors. Figures for 1994-95 onwards are on a changed base (1993-94=100), so they show huge increases compared to the preceding period.
Year Services of which Construction Trade, hotels & restaurants of which i) Trade ii) Hotels & restaurants Transport, storage & communication s of which i) Railways ii) Transport by other means iii) Storage iv)Communicati on Financing, insurance, real estate of which i) Banking & insurance ii) Real estate, dwelling business Community, social, personal of which i) Public admin. & defence ii) Other services 199899 1997- 1996- 1995- 1994- 1993- 1992- 1991- 1990- 1985- 198098 97 96 95* 94 93 92 91 86 81

49857 46398 42320 10897 10214 97045 92733 66306 50177 569005 537642 2 0 0 4 2 (45.35 (43.69 (42.25 (40.99 (51.16) (51.24) (49.91 (50.08 (49.15 (45.62 (45.34 ) ) ) ) ) ) ) ) ) 50328 49313 47382 46054 42560 10517 10386 10047 9833 7183 6114 (4.53) (4.70) (4.74) (4.97) (4.94) (4.40) (4.61) (4.70) (4.63) (4.59) (4.99) .... .... .... 164355 155954 143858 127532 31057 28650 26827 26580 19649 14713 (15.68) (15.61) (15.53) (14.81) (13.00) (12.72) (12.54) (12.52) (12.55) (12.02) 155120 147305 136087 121546 29082 26866 25147 24933 18498 13839 (14.78) (14.75) (14.69) (14.12) (12.18) (11.93) (11.75) (11.75) (11.81) (11.30) 9235 8649 7771 5986 1975 1784 1680 1647 1151 874 (0.88) (0.87) (0.84) (0.70) (0.83) (0.79) (0.79) (0.78) (0.74) (0.71) 79819 (7.61) 11521 (1.10) 50144 (4.78) 655 (0.06) 17499 (1.67) 74956 68788 63118 13057 12398 11785 11164 7951 5724 (7.50) (7.43) (7.33) (5.47) (5.50) (5.51) (5.26) (5.08) (4.68) 11189 (1.12) 47895 (4.79) 646 (0.06) 15226 (1.52) 10647 (1.15) 44513 (4.80) 652 (0.07) 12976 (1.40) 9846 (1.14) 41706 (4.84) 621 (0.07) 10945 (1.27) 1746 (0.73) 9209 (3.86) 188 (0.08) 1914 (0.80) 1758 (0.78) 8735 (3.88) 180 (0.08) 1725 (0.77) 1778 (0.83) 8275 (3.87) 175 (0.08) 1557 (0.73) 1677 (0.79) 7853 (3.70) 177 (0.08) 1457 (0.69) 1404 (0.90) 5309 (3.39) 163 (0.10) 1075 (0.69) 1124 (0.92) 3680 (3.01) 122 (0.10) 798 (0.65)

....

.... .... .... ....

127205 119814 110575 102438 94609 27711 25084 23972 21700 14708 10791 (11.44) (11.42) (11.07) (11.06) (10.99) (11.06) (11.14) (11.20) (10.22) (9.39) (8.81) .... .... 65814 (6.27) 54000 (5.15) 58034 51343 45190 16111 13861 13107 11169 5828 3408 (5.81) (5.54) (5.25) (6.74) (6.15) (6.13) (5.26) (3.72) (2.78) 52481 51095 49419 11600 11223 10865 10531 8880 7383 (5.25) (5.52) (5.74) (4.86) (4.98) (5.08) (4.96) (5.67) (6.03)

131047 124341 109705 102842 95381 26632 25624 24414 23456 16815 12835 (11.78) (11.85) (10.98) (11.10) (11.08) (11.15) (11.37) (11.41) (11.05) (10.74) (10.48) .... 43620 12483 12170 11570 11328 8016 5794 (5.07) (5.23) (5.40) (5.41) (5.34) (5.12) (4.73) 51761 14149 13454 12844 12128 8799 7041 (6.01) (5.92) (5.97) (6.00) (5.71) (5.62) (5.75) 86106 23886 22526 21398 21225 15656 12242 4 4 8 3 3 6 7 base (1993-94=100), so they show huge increases

58631 48736 46635 (5.59) (4.88) (5.03) 65710 60969 56207 .... (6.26) (6.10) (6.07) 111220 104919 99897 92641 Total GDP: 6 1 8 2 * Figures for 1994-95 onwards are on a changed compared to the preceding period. Source: Studies by Reserve Bank of India

Future Prospects: Service Sector in India.


1. Now a days this sector is booming like anything. Because now business firms are taking customer as king. 2. There are n-number of varieties available in market for the same goods or services, thats why the rate of switching over from one product to another is very high. 3. Now companies are giving their best because they want to retain their customers for a long time. 4. Companies want to make their better services their USP. 5. Service sector is directly concern with customers. So it is important to give the best quality to the customers to differentiate the company from others. In conclusion I would like to say that Service sector (as mentioned above- travel & tourism, telecom, retail, financial service etc.) has a very good future in India. It is coming with new types of employment. You can easily find out this sector around you, because it is every where in so many forms.