SERVICE SECTOR IN INDIA: GROWTH AND PROSPECTS
The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. This paper mainly focuses on contribution of service sector to the economy, its performance, problems, growth and challenges. The paper also comes out with the latest GDP detail regarding service sector.
The Services Sector constitutes a large part of the Indian economy both in terms of employment potential and its contribution to national income. The services sector covers a wide range of activities from the most sophisticated information technology (IT) to simple services provided by the unorganized sector, such as the services of the barber, vegetable sellers, hawkers, rickshaw pullers and plumber. National Accounts classification of the services sector incorporates trade, hotels, and restaurants, transport, storage, and communication, financing, insurance, real estate, and business services and community, social, and personal services. In World Trade Organization (WTO) and Reserve Bank of India (RBI) classifications, construction is also included. Based on the National Income classification given by Central Statistical Organization, Service sector in India can broadly be classified into:
1. Trade, hotels and restaurants (THR)
1.2 Hotels and restaurants
2. Transport, storage and communication
2.2 Transport by other means
3. Financing, Insurance, Real Estate and Business Services
3.1 Banking and Insurance
3.2 Real Estate, Ownership of Dwellings and Business Services 4. Community, Social and Personal services
4.1 Public Administration and Defense (PA & D)
4.2 Other services
The share of service sector in country’s Gross Domestic Product (GDP) has risen from 50.4 percent in 2000-01 to 59.0% in 2011-12.
Based on this background, this paper makes an attempt to analyse the following: 1. The contribution of Service sector to the economy of India 2. Performance of some prominent Services in India
3. Problems in this sector
4. Potentials for future growth
5. Challenges ahead
1. Contribution of Service Sector:
The share of services in India’s GDP at factor cost (at current prices) increased from 33.5 per cent in 1950-1 to 55.1 per cent in 2010-11 and to 56.3 per cent in 2011-12 as per Advance Estimates (AE). If construction is also included, the service sector’s share increases to 63.3 per cent in 2010-11 and 64.4 per cent in 2011-12. With a 16.9 per cent share, trade, hotels, and restaurants as a group is the largest contributor to GDP among the various services’ sub sectors, followed by financing, insurance, real estate, and business services with a 16.4 per cent share. Community, social, and personal services with a share of 14.3 per cent is in third place. Construction, a borderline service inclusion, is at fourth place with an 8.2 per cent share.
Share of different services categories in GDP (current prices) (per cent) 2006-07 2007-08 2008-09 2009-10@ 2010-11* 2011-12**
| Trade, hotels, & restaurants
17.1 16.9 16.6
16.9 25.2 #Trade
15.4 15.3 15.1
15.4Hotels & restaurants
1.7 1.5 1.4
1.5Transport, storage, & 8.2 8.0 7.8 7.8 7.7communicationRailways
0.9 1.0 0.8Transport by other means
5.7 5.6 5.5 5.3 5.4Storage
1.5 1.4 1.4 1.5 1.4Financing, insurance,...
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