Growth of service sector in

India

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

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

Definition

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

The various sectors that combine together to

constitute service industry are:
q Trade
q Hotels and Restaurants
q Railways
q Other Transport & Storage
q Communication (Post, Telecom)
q Banking
q Insurance
q Dwellings, Real Estate
q Business Services
q Public Administration; Defense
q Personal Services
q Community Services
q Other Services
 by santosh R.N.S.I.T coll

Over view of service sector

qService Sector in India today accounts

for more than half of India's GDP.
qAccording 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
 by santosh R.N.S.I.T coll

Growth of service sector under five-year plan

qFirst-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
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qAt the end of the plan period in 1956,

five Indian Institutes of Technology
(IITs) were started as major technical
institutions.
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Second-five year plan(1956-61)

qThe 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
.
qTransport and communication was
given 23.6% of total budget(430
billion)
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Objectives of second year plan

qa sizeable increase in national income
so as to raise the level of living in the
country;
qrapid industrialization with particular
emphasis on the development of basic
and heavy industries;
qa large expansion of employment
opportunities; and
qreduction of inequalities in income
and wealth and a more even distribution
 by santosh R.N.S.I.T coll

Third-five year plan(1961-1966)

qThe third plan stressed on agriculture

qAgain there was more emphasize was
given only on transportation in service
sector which accounted to 21%.
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Fourth-five year plan(1969-74)

qA 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.
qIn service sector 14 major banks
were nationalized
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Fifth-five year plan(1974-79)

qStress was laid on employment,

poverty alleviation, and justice. The
plan also focused on self-reliance in
agricultural production and defense
 by santosh R.N.S.I.T coll

Sixth-five year plan(1980-85)

qCalled the Janata government plan, the

sixth plan marked a reversal of the
Nehruvian model.
qWhen 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
 by santosh R.N.S.I.T coll

Sixth-five year plan(1980-85)

qTourism also expanded.

qThe sixth plan also marked the
beginning of economic liberalization
qTransport 12411.97 crores
qCommunications and information and
broadcasting 3124.67
qSocial services 14035.26
 by santosh R.N.S.I.T coll

Outcomes of sixth-year plan

qThe production of Computer

Numerically Controlled (CNC) machine
tools.
qThe commissioning of the first
electronic telecom exchange and
the running of trains with trailing loads
of 3000 tonnes.
 by santosh R.N.S.I.T coll

Seventh-five year plan(1985-89)

qThe plan lay stress on improving the
productivity level of industries by up
gradation of technology.
qCommunication, Information and
broadcasting 647.2 billion
qPosts 29.5 billion
qTelecommunications 453.8 billion
qEducation, culture and sports 638.3
billion
qHealth including medical 339.3 billion
 by santosh R.N.S.I.T coll

Perio d b etw ee n 1989-9 1

q1989-91 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
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q In 1991, India faced a crisis in

Foreign Exchange (Forex) reserves, thus the
country took the risk of reforming the socialist
economy.
q 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.
q 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
 by santosh R.N.S.I.T coll

Eighth-five year plan(1992-97)

qThis plan can be termed as Rao and

Manmohan model of Economic
development
qTransport 879.10 billion
qCommunication 2600 billion
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qFinancial services 10.21%

qTrade 9.06%
qCommunication 14.31%
qOther services 6.22%
 by santosh R.N.S.I.T coll

Ninth-five year plan(1997-2002)

qTotal outlay was 85920 billion

qTransport 12132 billion 14.1 %
qCommunication 4761 billion 5.5 %
 by santosh R.N.S.I.T coll

qFinancial services 8.93%

qTrade 5.86%
qCommunication 17.14%
qOther services 8.19%
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Contribu tion o f T ra vel a nd Touri sm to GD P

and Em ploym ent
 by santosh R.N.S.I.T coll

Tenth-five year plan(2002-07)

qThe projected resource allocation of

tenth year plan was 15,92,300 crores
qTransportation allocated 225977
crores
qInformation Technology 5492
crores
qPost 1350 crores
qTélécommunications 86984 crores
qTourism 2900 crores
 by santosh R.N.S.I.T coll

Tou ris m R ece ipts

(in Billion US$)
 by santosh R.N.S.I.T coll

Gr owth Rat e ( Rea l) of F in an cial Ser vices

(Ban king an d I nsur an ce)
 by santosh R.N.S.I.T coll

Eleventh-five year plan(2007-2012)

qTransportation allocated 202045

qInformation Technology 11048
qPost 3536
qTélécommunications 80753
qTourism 4558
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Mile stone in the growth of service sector

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

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

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

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

Quar terly Esti mat es of P rod ucti on f or Maj or

Sub-sectors 2006-07 2005-06 2004-05 2006-07
2005-06
% change over
1. 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

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

India 's Ne t R ecei pts from T ra vel

on Ba lance of P ayme nts

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

India n Ba nki ng I ndu st r y

qBanking in India originated in the first

decade of 18th century with The
General Bank of India coming into
existence in 1786.
qBy 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
 by santosh R.N.S.I.T coll

q During fourth year plan the then prime

minister Indira Gandhi issued an ordinance and
nationalized the 14 largest commercial banks.

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

qThis 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.
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qCurrently, India has 88 scheduled

commercial banks (SCBs)
q28 public sector banks
q29 private banks
qand 31 foreign banks.
qThey 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%
 by santosh R.N.S.I.T coll

IT AND IT-ENABLED SERVICES

q India’s success in the export of IT Software and
Related Services over the past decade remains
unparalleled.
q 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.
q India now accounts for 65% of the global
market in offshore IT and 46% of the ITES
q market. A majority of the Fortune 500 and
Global
q 2000 corporations are sourcing IT and ITES
 by santosh R.N.S.I.T coll

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

Current gdp of sectors

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