Economic Survey data on service sector (2019-20)

Services sector

• Services sector is estimated to grow at 6.9% in 2019-20 as compared to 7.5% in 2018-19.  The services sector is estimated to contribute 55.3% to India’s GVA in 2019-20.   Currently, the services sector accounts for over 50% of the Gross State Value Added in 15 states and UTs.  
• Sub-sectors such as trade, hotels, transport, communication & services related to broadcasting, financial and real estate services saw a deceleration during this period.
• The share of services exports in overall exports of India has been increasing.  India’s share in the world’s commercial services exports was 3.5% in 2018, twice the share in the world’s merchandise exports at 1.7%.

Government Initiatives

The Government of India recognizes the importance of promoting growth in services sector and provides several incentives across a wide variety of sectors like Health Care, Tourism, Education, Engineering, Communications, Transportation, Information Technology, Banking, finance, and management among others.

The Government of India has adopted few initiatives in the recent past, some of these are as follows:

• In October 2020, the government selected Hughes Communications India to connect 5,000 village panchayats in border and Naxal-affected states and island territories with satellite broadband under BharatNet project by March 2021.
• In September 2020, the government announced that it may infuse Rs. 200 billion (US$ 2.72 billion) in public sector banks through recapitalization of bonds.
• In the next five years, the Ministry of Electronics and Information Technology is working to increase the contribution of the digital economy to 20% of GDP. The government is working to build cloud-based infrastructure for collaborative networks that can be used for the creation of innovative solutions by AI entrepreneurs and startups.
• On Independence Day 2020, Prime Minister Mr. Narendra Modi announced the National Digital Health Mission (NDHM) to provide a unique health ID to every Indian and revolutionise the healthcare industry by making it easily accessible to everyone in the country. The policy draft is under ‘public consultation’ until September 21, 2020.
• In September 2020, the Government of Tamil Nadu announced a new electronics & hardware manufacturing policy aligned with the old policy to increase the state’s electronics output to US$ 100 billion by 2025. Under the policy, it aims to meet the requirement for incremental human resource by upskilling and training >100,000 people by 2024.
• The Cabinet Committee on Economic Affairs has given its approval for continuation of the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum regulatory capital to RRBs for another year beyond 2019-20.
• Government of India has launched the National Broadband Mission with an aim to provide Broadband access to all villages by 2022.
• Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Central Government increased incentives provided under Services Exports from India Scheme (SEIS) by 2%.

ROAD AHEAD

Services sector growth is governed by domestic and global factors. The Indian facilities management market is expected to grow at 17% CAGR between 2015 and 2020 and surpass the US$ 19 billion mark supported by booming real estate, retail, and hospitality sectors.

by 2023, HEALTHCARE INDUSTRY is expected to reach US$ 132 billion. India’s digital economy is estimated to reach US$ 1 trillion by 2025. By end of 2023, India’s IT and business services sector is expected to reach US$ 14.3 billion with 8% growth.

The implementation of the Goods and Services Tax (GST) has created a common national market and reduced the overall tax burden on goods. It is expected to reduce costs in the long run-on account of availability of GST input credit, which will result in the reduction in prices of services.