The services sector has played a vital role in powering India’s growth over the past two decades, including exports.
Great Eastern Hotel in Calcutta, 19th Century
TeaGrowth in the services sector largely began after the 1991 reforms. Liberalisation, removal of FDI restrictions, easier approvals and so on, the development of this sector has been broadly classified under the following categories- Information and Communication, Financial and Insurance Sector, Education, Arts and Entertainment, Real Estate etc. In the 1950s, the sector’s share in India’s GDP was about 29 per cent, rising to over 30 per cent in the 60s and 70s and rising to over 53 per cent by the 2000s. India has also emerged as one of the top service exporting countries, increasing its share from 0.6 per cent in 1991 to 4.6 per cent in 2020.
Between 1980 and 2010, India’s share in the global services sector increased from less than 1 percent to more than 3 percent, while its share in the goods trade remained stagnant at 1 percent. In 2011, the AT Kearney Global Services Location Index noted that the country was the leading outsourcing destination in a list of 50 countries. But though India ranks high in human resources, it was rated poorly in terms of business environment.
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An analysis by the Asian Development Bank noted that in the 1950s and 60s, there was a rapid growth in transportation, warehousing, communication, trade, hotel and restaurant services, while in the 1970s and 80s, there was a boom in financing and business services. Started coming The 2000s saw the fastest growth in transportation, storage and communication. In terms of FDI inflows, between January 2000 and December 2019, the services sector received $80.7 billion (Rs 6.4 lakh crore), which is about 17.6 per cent of the total FDI equity inflows into the country. While the sector continues to contribute over 50 per cent to India’s GDP, the pandemic has had an adverse impact – the share in Gross Value Added (GVA) declined from 55 per cent in 2019-20 to 53 per cent in 2021-22 .
ITC Royal Bengal now in Kolkata
On the policy front, some service industries such as transport and energy have ministries with conflicting interests, requiring multiple approvals. Businesses such as e-commerce and fintech are currently grappling with several policy changes. Having said that, the government has removed the FDI limit in several sectors, including increasing the share in the insurance sector to 74 per cent in Budget 2021.