services sector development in india
TRANSCRIPT
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Comparative study of service sector development
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A nation’s economy can be divided into various sectors to define the proportion of the population
engaged in the activity sector.
1. Primary Sector
The primary sector of the economy extracts or
harvests products from the earth.
2. Secondary Sector
The secondary sector of the economy
manufactures finished goods, automobile
production, Construction, etc.
3. Tertiary / Service Sector
The tertiary sector of the economy is the service industry. This sector provides services to the general
population and to businesses. Activities associated with this sector include retail and wholesale,
transportation and distribution, entertainment industry, restaurants, clerical services, media, tourism,
insurance, banking, healthcare, education and law.
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Investopedia Says:
Countries with primarily service-based economies are considered to be more advanced than countrieswith primarily industrial or agricultural economies.
Examples of countries with a heavy emphasis on the service sector include the United States,
Australia, Japan and the United Kingdom.
In the U.S., the Institute for Supply Management's (ISM) monthly index provides a measure of the
general state of business in the non-manufacturing sector. Because approximately two-thirds of U.S.
economic activity resides in the service sector, the index is considered a measure of the country's
overall economic health.
(Source : http://www.answers.com/topic/service-sector)
Services constitute over 50% of GDP in low income countries' and as their economies continue todevelop, the importance of services in the economy continue to grow. The service economy is also
key to growth, for instance it accounted for 47% of economic growth in sub-Saharan Africa over the
period 2000 – 2005 (industry contributed 37% and agriculture 16% in the same period).
Source: Massimiliano Cali, Karen Ellis and Dirk Willem te Velde (2008) The contribution of services to development: The role of regulation and trade
liberalisation London: Overseas Development Institute
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The service economy in developing countries is most often made up of the following:
1.Financial services
2.Tourism
3.Healthcare and
4.Education
The export potential of many of these products is already well understood, e.g. in tourism,
financial services and transport, however, new opportunities are arising in other sectors, such
as the health sector.
For example :
1.Indian companies who provide scanning services for US hospitals
2.South Africa is developing a market for surgery and tourism packages
3.India, South Africa and Mauritius have experienced rapid growth in IT services, such as call
centres, back-office functions and software development.
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The Services Sector constituted a huge employment potential &contribution in GDP to Indian economy.
The Services Sector has been the most dynamic sector of the Indian economy, especially over the
last 2 decades as shown in the table below:
Year Agriculture # Manufacturing Y Services*1950-51 59.19 13.29 27.52
1960-61 54.74 16.61 28.65
1970-71 48.12 19.91 31.97
1980-81 41.82 21.59 36.59
1990-91 34.92 24.49 40.59
1999-2000 27.49 24.63 47.88
2008-2009 14.6 28.6 57.2
Notes: Among the following symbols:
# includes forestry and logging, fishing, mining and quarrying;
Y includes construction, electricity, gas and water supply;
*includes (a) transport, communication and trade; (b) banking and insurance, real estate, dwellings & business services; and
(c) public administration and defence & other services.
From a low level of 27.52 per cent of
GDP in 1950-51, the share of
services increased to 57.2 per cent in
2008-2009.
Source: Economic Survey
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CSO’s classification of the services sector falls under four broad categories, namely a) trade, hotels, and
restaurants; b) transport, storage, and communication; c) financing, insurance, real estate, and business
services; and d) community, social, and personal services. Among these, financing, insurance, real estate, and
business services; and trade, hotels and restaurants are the largest groups accounting for 16.7 per cent and
16.3 per cent respectively of the national GDP in 2009-10. The community, social, and personal services category
accounts for a 14.4 per cent share, while transport, storage, and communication accounts for a 7.8 per cent
share. Construction, which is a borderline services inclusion, has a share of 8.2 per cent (Table 10.3).
Source : Website: http://indiabudget.nic.in
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This is a list of countries by Gross Domestic Product (GDP) sector composition based on
nominal GDP estimates and sector composition ratios provided by the CIA World Fact Book at
market or government official exchange rates with figures in trillions of United States dollars.
Source:
GDP (nominal): International Monetary Fund, World Economic Outlook Database, April 2011: Nominal GDP list of countries. Data for the year 2010. - IMF
GDP Sector composition: Field Listing - GDP composition by sector. - CIA World Factbook
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Few main reasons in the growth of Services Sector in Indianeconomy:
Foreign consumers are showing interest in the country's service exports due to large
pool of highly skilled, low cost, and educated workers available in India.
The foreign companies have started outsourcing their work to India.
There are also signs of an acceleration in the growth of India’s manufacturing
sector. But to date, it has been the Service sector that has led the way; and their
sheer size within the economy means they will continue to have a critical role.
This is an unusual growth path. In terms of per capita income India remains a poor
country. Yet the services dependent profile of its economy is much closer to that
which has typically been associated with middle-income developing countries.
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Key Points :
• Developments in India’s services sector potentially have worldwide significance.
The rapidly increasing importance of India’s economy, which could be the
third largest in the world by a significant margin in 2050, measured at market
exchange rates,
Changes in patterns of services production worldwide, in which India’s high-
end services providers are playing a major role.
• Services have been a major contributor to India’s strong recent GDP growth.
Rapidly increasing two-way trade in information technology and informationtechnology enabled services (IT – ITES) and other high-end services sub-sectors
has been a critical factor in India’s improved economic performance
‘[Information Technology (IT) and IT Enabled Services] can do for India what automotives did
for Japan and oil for Saudi Arabia.’
(Noshir Kaka, Principal, McKinsey & Company)
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