Indian Service Industry: An Overview

Global, Asian & Indian Scenario:

  • Globally the services sector had grown tremendously with the share of Services 63.6 per cent and global GDP was US$71.7 trillion (2012). As economy shifts from developing to developed stage, they will show more and more shift toward services. This is the reason why all major economies developed and developing are now shifting from manufacturing to service industry.
  • Globally US contributed 78.4 %, UK 76%, Italy 73.1%, Japan 70.5 % and Germany 70% and India Rank 12th in International Comparisons with 58.2 % (UN accounts statistics, 2012).
  • In Asia Singapore is highest contributor to services with 73.2 % followed by India 58.2 %, Philippines 57.1 % Thailand 52.7% and Malaysia 49.3%, where as China contribution is just 44.6%.(International Monetary Fund, 2012)
  • The Indian economy is now on the tenth largest economy of the world and is one of the fastest growing world economies. India’s services sector has emerged as a prominent sector in terms of its contribution to national and state incomes, trade flows, FDI inflows and employment. For more than a decade the sector has been pulling up the growth of Indian economy with great stability. India’s GDP growth in the last decade has come mainly from the services sector, which constitutes 65 percent of the total economy, while the industry and agriculture sectors have been 27 percent and 8 percent, respectively. (The Economic Survey of India Report, 2013).


Employment Scenario:

Being the major contributor towards GDP i.e. 65%, service sector contributes only 28% employment out of total employment. However the contribution of agriculture sector and manufacturing sector towards employment are 47 % and 25 % respectively. (Source: World Bank 2012). If this is compared with Hong Kong SAR China whose services contribution towards GDP highest at 93% employing 88 % of total employed, thereby service industry specificHRD policies need to be reworked.

  FDI – Key Statistics

  • FDI inflows to India grew 17 per cent in 2013 to touch US$ 28 billion, according to a United Nations report.
  • Bulk of the FDI inflow into India is routed through Mauritius. Other important investing countries include Singapore, Japan, the US and the UK.

FII – Key Statistics

  • At US$ 4.18 billion, India’s foreign institutional investor (FII) inflows are higher than that of other emerging economies such as Taiwan (US$ 3.6 billion), Indonesia (US$ 2.4 billion), Brazil (US$ 1.2 billion) and South Africa (US$ 0.7 billion).
  • In 2013, foreign investors infused a net Rs. 1,130 billion (US$ 18.76 billion) in equities.
  • Total number of FIIs registered in India was 1,710 in FY 14.


Future of Services:

Indian government projection shows that services sector will continue to grow at a fast pace. The Planning Commission estimates that the economy will grow at 9.5% in the XIIth Five Year Plan (2012-2017). The services sector is projected to grow at the rate of 10% during 2012-2017. Certain services like trade, hotels and restaurants and transport, storage and communications and financing, insurance, real estate are expected to grow faster than overall services growth while others like community social and person services may grow at a slower pace.

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