growth of service sector in india

Growth of service sector in India

by santosh R.N.S.I.T coll

DEFINITION

The segment of the economy that provides services to its consumers. This includes a wide range of businesses including financial institutions, schools, transports and restaurants.

Also known as "tertiary sector of industry," or "service industry/sector".


THE VARIOUS SECTORS THAT COMBINE TOGETHER TO CONSTITUTE SERVICE INDUSTRY ARE: Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom) Banking Insurance Dwellings, Real Estate Business Services Public Administration; Defense Personal Services Community Services Other Services


OVER VIEW OF SERVICE SECTOR

Service Sector in India today accounts for more than half of India's GDP.

According to data for the financial year 2006-2007, the share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively


GROWTH OF SERVICE SECTOR UNDER FIVE-YEAR PLAN

First-five year plan(1951-56) The total plan of budget was 206.8

billion Among the total plan transportation

and communication had got allocated to 24% i.e., 49.7 billion and social services accounted for 16.64% 33 billion


At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as major technical institutions.


SECOND-FIVE YEAR PLAN(1956-61)

The second five-year plan focused on industry, especially heavy industry. Domestic production of industrial products was encouraged, particularly in the development of the public sector.

Transport and communication was given 23.6% of total budget(430 billion)


http://en.wikipedia.org/wiki/Heavy_industry

http://en.wikipedia.org/wiki/Public_sector

OBJECTIVES OF SECOND YEAR PLAN

a sizeable increase in national income so as to raise the level of living in the country;

rapid industrialization with particular emphasis on the development of basic and heavy industries;

a large expansion of employment opportunities; and

reduction of inequalities in income and wealth and a more even distribution of economic power.


THIRD-FIVE YEAR PLAN(1961-1966)

The third plan stressed on agriculture Again there was more emphasize was

given only on transportation in service sector which accounted to 21%.


FOURTH-FIVE YEAR PLAN(1969-74)

A total outlay of Rs. 24,882 crores is envisaged for the Fourth Plan. of the aggregate outlay, Rs. 15,902 crores is in respect of the public sector Plan and Rs, 8,980 crores for the private sector.

In service sector 14 major banks were nationalized


FIFTH-FIVE YEAR PLAN(1974-79)

Stress was laid on employment, poverty alleviation, and justice. The plan also focused on self-reliance in agricultural production and defense


http://en.wikipedia.org/wiki/Employment

http://en.wikipedia.org/wiki/Poverty

http://en.wikipedia.org/wiki/Justice

http://en.wikipedia.org/wiki/Self-reliance

SIXTH-FIVE YEAR PLAN(1980-85)

Called the Janata government plan, the sixth plan marked a reversal of the Nehruvian model.

When Rajiv Gandhi was elected as the prime minister, the young prime minister aimed for rapid industrial development, especially in the area of information technology. Progress was slow, however, partly because of caution on the part of labor and communist leaders.


http://en.wikipedia.org/wiki/Janata_Party

SIXTH-FIVE YEAR PLAN(1980-85)

Tourism also expanded. The sixth plan also marked the

beginning of economic liberalization Transport 12411.97 crores Communications and information and

broadcasting 3124.67 Social services 14035.26


OUTCOMES OF SIXTH-YEAR PLAN

The production of Computer Numerically Controlled (CNC) machine tools.

The commissioning of the first electronic telecom exchange and the running of trains with trailing loads of 3000 tonnes.


SEVENTH-FIVE YEAR PLAN(1985-89)

The plan lay stress on improving the productivity level of industries by up gradation of technology.

Communication, Information and broadcasting 647.2 billion

Posts 29.5 billion Telecommunications 453.8 billion Education, culture and sports 638.3

billion Health including medical 339.3 billion


PERIOD BETWEEN 1989-91

1989-91 was a period of political instability in India and hence no five year plan was implemented. Between 1990 and 1992, there were only Annual Plans


In 1991, India faced a crisis in Foreign Exchange (Forex) reserves, thus the country took the risk of reforming the socialist economy.

P.V. Narasimha Rao also called Father of Indian Economic Reforms was the twelfth Prime Minister of the Republic of India had led one of the most important administrations in India's modern history overseeing a major economic transformation.

At that time Dr. Manmohan Singh launched India's free market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning of privatization and liberalization in India.


http://en.wikipedia.org/wiki/Foreign_Exchange

EIGHTH-FIVE YEAR PLAN(1992-97)

This plan can be termed as Rao and Manmohan model of Economic development

Transport 879.10 billion Communication 2600 billion


Financial services 10.21% Trade 9.06% Communication 14.31% Other services 6.22%


NINTH-FIVE YEAR PLAN(1997-2002)

Total outlay was 85920 billion Transport 12132 billion 14.1 % Communication 4761 billion 5.5 %


Financial services 8.93% Trade 5.86% Communication 17.14% Other services 8.19%


CONTRIBUTION OF TRAVEL AND TOURISM TO GDP AND EMPLOYMENT

World Average(%)

Indian(%)

World rank

Contribution of Tourism and Travel Economy to GDP

10.7 5.3 140

Contribution of Tourism and Travel Industry to GDP

4.2 2.5 124

Contribution of Travel and Tourism Economy Employment

8 5.6 140

Contribution of Travel and Tourism Industry Employment

3.1 2.9 111


TENTH-FIVE YEAR PLAN(2002-07)

The projected resource allocation of tenth year plan was 15,92,300 crores

Transportation allocated 225977 crores

Information Technology 5492 crores

Post 1350 crores Télécommunications 86984 crores Tourism 2900 crores


TOURISM RECEIPTS(IN BILLION US$)

Year World earnings

Earnings by India

Share of India in world earnings

2002 487 2.9 .60

2003 533 3.5 .66

2004 633 4.8 .75

2005 678 5.7 .80

2006 735 6.6 .89


GROWTH RATE (REAL) OF FINANCIAL SERVICES(BANKING AND INSURANCE)S No.

Year Rate of growth

Percentage share in GDP

12345678

2000-012001-022002-032003-042004-052005-062006-072000-01 to 2006-07(average)

-2.09.111.32.28.814.013.08.1

5.55.76.15.85.96.16.35.9


ELEVENTH-FIVE YEAR PLAN(2007-2012) Transportation allocated 202045 Information Technology 11048 Post 3536 Télécommunications 80753 Tourism 4558


MILE STONE IN THE GROWTH OF SERVICE SECTOR

The emergence of India as one of the fastest growing economies in the world during the 1990s is attributable to the rapid growth of its services sector to a great extent.

The sector has been experiencing double-digit since 2004-05 importantly, a strong growth of 10 % in 2005-06 has been instrumental in providing an impetus to overall real sector activity in the economy and propelling it to record a sturdy growth of 8.4 per cent.


Keynote reforms, initiated by the then Finance Minister Dr Manmohan Singh in 1991, provided the momentum for a major reduction of the role of the public sector in the economy, a degree of deregulation, and greater integration of India’s economy into international markets. India’s entrepreneurial spirit was unleashed.


Subsequent to this, the sector has continued to exhibit vibrant growth (10.6 per cent) during the first quarter of 2006-07 over the corresponding period of the previous year, mainly propelled by growth in ‘trade, hotels, transport and communication’ (13.2 per cent) followed by ‘finance, insurance, real estate and business services’ (8.9 per cent)


Due to the structural transformation of the Indian economy in the new millennium in favor of a service-dominated economy, the share of the services sector in the total GDP has increased notably from 49.8% in 2000-01 to 54% in 2005-06.

During the first quarter (April-June) 2006-07, the services sector has accounted for a share of 54.2% as compared to 53.3% in the comparable period during last year


QUARTERLY ESTIMATES OF PRODUCTION FOR MAJOR COMPONENTS OF SERVICES SECTOR (RS CRORE)

Sub-sectors 2006-07 2005-06 2004-05 2006-07 2005-06

% change over1. Trade, hotels, 175025 154642 138390 13.2 11.7 Transport and communication (26.7) (25.7) (24.9) 2. Financing, insurance, real estate and business services 91527 84021 77245 8.9 8.8

(14.0) (13.9) (13.9) 3. Community, social and personal services 88,771 82637 77009 7.4 7.3

(13.5) (13.7) (13.9)

All Services (1+2+3) 355323 321300 292644 10.6 9.8 (54.2) (53.3) (52.7)

GDP at factor cost 656,064 602476 555,075 8.9 8.5


INDIA'S NET RECEIPTS FROM TRAVEL ON BALANCE OF PAYMENTS

Year Receipts Payments Net Receipts Foreign Tourist

Arrivals (in million US$)

(million no) 2000-01 3497 2804 693 2.7 2001-02 3137 3014 123 2.4 2002-03 3312 3341 -29 2.5 2003-04 5037 3602 1435 2.9 2004-05 6495 5510 985 3.5 2005-06 7789 6421 1368 4.1


INDIAN BANKING INDUSTRY

Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786.

By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry.


During fourth year plan the then prime minister Indira Gandhi issued an ordinance and nationalized the 14 largest commercial banks.

In the early 1990s the then Narasimha Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis Bank) (the first of such new generation banks to be set up), ICICI Bank and HDFC Bank.


This move, along with the rapid growth in the economy of India, kick started the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.


Currently, India has 88 scheduled commercial banks (SCBs)

28 public sector banks 29 private banks and 31 foreign banks. They have a combined network of over 53,000

branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the 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.


IT AND IT-ENABLED SERVICES

India’s success in the export of IT Software and Related Services over the past decade remains unparalleled.

Total export revenues earned by this sector have grown from US$ 7.7 billion in 2001–02 to US$ 31.3 billion in 2006–07, thus showing a near 32% compound growth rate.

India now accounts for 65% of the global market in offshore IT and 46% of the ITES

market. A majority of the Fortune 500 and Global 2000 corporations are sourcing IT and ITES from India.


The Banking and Financial Services, Communications and Media, Manufacturing (Consumer Durables/Automobile), Aviation, Hospitality, and Retail are some of the key verticals that primarily benefit from the ITES-BPO services in the domestic market in India.


CURRENT GDP OF SECTORSUnit of

Description

Period of latest data

Latest Data

Previous data @

Percentage change from previous to latest period

Agriculture, Forestry & FishingRs.Crore

Oct/08-Dec/08

273723 253873 7.8

Mining & Quarrying Rs.Crore 32955 26731 23.3Manufacturing Rs. Crore 192994 178390 8.2Electricity, Gas & Water Supply.

Rs. Crore

19867 18962 4.8

Construction

Rs.Crore

110773 95227 16.3

Trade, Hotels, Transport and Communication

Rs.Crore

318345 282357 12.7

Financing, Insurance, Real Estate & Business Services. Rs.Crore

177464 149629 18.6

Community, Social & Personal Services.

Rs.Crore

178345 138694 28.6


CONCLUSION

New Delhi, Feb 15 (IANS) India's service sector could see slower growth, said a Confederation of India Industry (CII) report released here Sunday.

According to CII, recent data on specific service sector activities gives a mixed picture - while there has been a sharp drop in indicators such as tourist arrivals or air freight and passenger movements, railway traffic and cellular subscriber growth have been holding up.

In banking, deposit and credit growth have begun to slow down - though only moderately.


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