Index Introduction Reforms in service sector Growth in service sector Booming service sector Will the growth of service

sector substained? Role of service sector in development Conclusion Bibliography

Travel and Tourism Though being a traditional segment of the services sector. which focuses on the revamping of theAirports Authority of India (AAI) and recommends far-reaching changes in the country s aviation sector. Real Estate The real estate activities in India has remained buoyant in recent times and is also witnessing a number of changing trends within the country. with over 9. the Country has a well-established stock market. and different kind of fiscal measures. CONCLUSION Services Sector Growth Rate in India GDP registered a significant growth over the past few years. comprising 23 stock exchanges. India boasts of a wide and sophisticated banking network. on the two dominant stock exchanges.926 billion and Rs. equipment leasing companies. improved standards of living and changing lifestyles of the masses. known as Vision 2020 . 7. development of travel and tourism industry has been accelerated in the recent past on account of expansion in the business and trading activities. etc. historical developments and tourism. Total market capitalization.000 listed companies. etc. venture capital funds. stood at Rs. The Indian capital markets are rapidly moving towards a market that is modern in terms of infrastructure as well as international best practices such as derivative trading with stock index futures. at the end of December 2000. Further.604 billion respectively. This has resulted in country witnessing increasing number of inbound tourists and thereby excellent growth in foreign exchange earnings. the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). BIBLIOGRAPHY .Banking Sector An extensive financial and banking sector supports the rapidly expanding Indian Economy. besides attracting vast interest from foreign players. cultural activities. For this will ensure the growth and prosperity of the country's economy. The Indian government must take steps in order to ensure that Services Sector Growth Rate in India GDP continues to rise. Aviation The central government has constituted a high powered group of ministers (GoM) headed by External Affairs minister Pranab Mukherjee to which the proposed new civil aviation policy. 6. has been referred as the cabinet ministers could not reach to an unanimous decision on the crucial aviation policy. These include foreign and institutional investors. investment funds. commencement of internet based trading. India is becoming increasingly popular for foreign visitors from the point of medical attendance. addition to the list of compulsory Demat trading and rolling settlement in certain specified shares. The sector also has a number of national and state level financial institutions.

banking & transportation. Services or the "tertiary sector" of the economy covers a wide gamut of activities like http://business.indiabizclub. real estate.4 per cent. 26. industry.1 per cent. Telecom) . The various sectors that combine together to constitute service industry in India are: y y y y y Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post.http://services.mapsofindia. the share of services. and 18.5 per cent respectively. infotainment.html Introduction Service Sector the part of industry or business which deals with the marketing and selling of intangible products rather than physical goods.html file:///C:/Documents%20and%20Settings/Administrator/Desktop/service/index.html file:///C:/Documents%20and%20Settings/Administrator/Desktop/service/service. The fact that the service sector now accounts for more than half the GDP marks a watershed in the evolution of the Indian economy and takes it closer to the fundamentals of a developed economy. and agriculture in India's GDP is 55. Service Sector in India today accounts for more than half of India's GDP. management & technical consultancy among several others. security.shtml file:///C:/Documents%20and%20Settings/Administrator/Desktop/service/major-economic-sectors. According to data for the financial year 20062007.

community services. While the share of services in India's GDP increased by 21 per cent points in the 50 years between 1950 and 2000. especially in the nineties. nearly 40 per cent of that increase was concentrated in the nineties. The boom in the services sector has been relatively "jobless". banking. Real Estate Business Services Public Administration. One of the reasons for the sudden growth in the services sector in India in the nineties was the liberalization in the regulatory framework that gave rise to innovation and higher exports from the services sector. . trade and business services. growth was fastest in communications. While almost all service sectors participated in this boom. The rise in services share in GDP has not accompanied by proportionate increase in the sector's share of national employment. otherwise the service sector grown will not be sustainable.y y y y y y y y y y Banking Insurance Dwellings. hotels and restaurants. In the current economic scenario it looks that the boom in the services sector is here to stay as India is fast emerging as global services hub. Defence Personal Services Community Services Other Services There was marked acceleration in services sector growth in the eighties and nineties. Some economists have also cautioned that service sector growth must be supported by proportionate growth of the industrial sector.

Government announced the New Economic Policy. audiotex services. 1996-97: . Telecom Manufacturing Equipment license was delicensed in 1991. These included cellular mobile phones.The companies. 2. For value added services the foreign equity cap was fixed at 51 per cent. 3. Automatic foreign collaboration was permitted with 51 per cent equity by the collaborator. services are highest. It opened basic telecom services to private participation including foreign investments. 1994-95: 1. Corporate Sector¶s 2007 Q4 performance higher than Q4 2006 thanks to a booming service sector. organizations. data services using VSAT's. 1992-93: Value added services were opened for private and foreign players on franchise or license basis. and activities in an economy that provide services such as banking. industry at 9. voice mail. 3. Foreign equity participation up to 49 per cent was allowed in basic telecom services. electronic mail. rather than manufacturing goods. On 24th July 1991.4%. at 11. The Government announced a National Telecom Policy 1994 in September 1994. and video conferencing. Eight cellular licensees for four metros were finalized. videotex services. transport. while agriculture is growing at 3%. radio paging. 2. radio paging and cellular mobile. tourism etc.2% Reforms in service sector IN telecom sector : Liberalization and reforms in Telecom sector since early 1990's till date are briefed below: 1991-92: 1.

Domestic long distance services opened up without any restriction on the number of operators. TRAI reconstituted: clear distinction was made between the recommendatory and regulatory functions of the Authority. 2.1. Internet Policy was finalized. Voice and data segment was opened to full competition and foreign ownership increased to 100 per cent from 49 per cent previously. 4. 2002 from March 31. Department of Telecom Services and Department of Telecom operations corporatized by creating Bharat Sanchar Nigam Limited. National Telecom Policy 1999 was announced which allowed multiple fixed Services operators and opened long distance services to private operators. STD and ISD charges were reduced by 23 per cent on an average. 2. Internet Service Providers were given approval for setting up of International Gateways for Internet using satellite as a medium in March 2000. 2000-01: 1. 2. Second phase of tariff rationalization started with further reductions in the long distance STD rates by an average of 13 per cent for different distance slabs and ISD rates by 17 per cent. External Commercial Borrowing (ECB) limits on telecom projects made flexible with an increased share from 35 per cent to 50 per cent of total project cost. A package for migration from fixed license fee to revenue sharing offered to existing cellular and basic service providers. 7. 3. 2001-02: . 5. The termination of monopoly of VSNL in International Long Distance services was antedated to March 31. Department of Telecom Services was set up. An agreement between Department of Telecommunication (DoT) and financial institutions to facilitate funding of cellular and basic telecom projects. First phase of re-balancing of tariff structure started. To separate service providing functions from policy and licensing functions. The Amendment clarified and strengthened the recommendatory power of TRAI. 4. 6. DOT/MTNL was permitted to start cellular mobile telephone service. 3. permitted in companies providing Global Mobile Personal Communication (GMPC) by satellite services. especially with respect to the need and timing of introduction of new services provider. 1999-00 1. and in terms of licenses to a services provider. 2004. Coverage of the term "infrastructure" expanded to include telecom to enable the sector to avail of fiscal incentives such as tax holiday and concessional duties. 7. TRAI was set up as an autonomous body to separate the regulatory functions from policy formulations and operational functions. 5. 3. 5. private players were allowed to set up international gateways via the submarine cable route. 4. TRAI Act was amended. 6. subject to license. 1998-99: FDI up to 49 per cent of total equity. In August 2000.

The cell phone providers were given freedom to provide. HTL was also disinvested. National Long Distance Service was opened up for unrestricted entry with the announcement of guidelines for licensing NLD operators. 14. Unified Access Service Licenses regime for basic and cellular services was introduced in October 2003. 13. 3. The licensing terms and conditions for Cellular Mobile were simplified to encourage entry for operators in areas without effective competition. This regime enabled services providers to offer fixed and mobile services under one license. within their area of operation. 11. Thirteen ISP's were given clearance for commissioning of international gateways for Internet using satellite medium for 29 gateways. 33 Basic Service licenses (31 private and one each to MTNL and BSNL) were issued up to 31stDecember 2001. one each in four metros and thirteen were permitted with 17 fresh licenses issued to private companies in September/October 2001. 3. During the year. Usage of Voice over Internet Protocol permitted for international telephony service. TRAI recommended deregulating regulatory intervention in cellular tariffs. 2. TRAI finalized the System of Accounting Separation (SAS) providing detailed accounting and financial system to be maintained by telecom service providers. 10. which meant that operators need no longer have prior approval of the regulator for implementing tariff plans except under certain conditions. TRAI recommended opening up of market to full competition and introduction of new services in the telecom sector. Disinvestment of PSU's in the telecom sector was also undertaken during the year. Telephony on internet permitted in April 2002. 2. Wireless in Local Loop (WLL) was introduced for providing telephone connection in urban. 12. 9. License conditions for Global Mobile Personal Communications by Satellite finalized in November 2001. Government allowed CDMA technology to enter the Indian market. Four cellular operators. 5. The five-year tax holiday and 30 per cent deduction for the next five years available to the telecommunication sector till 31st March 2000 was reintroduced for the units commencing their operations on or before 31st March 2003. 4. In February 2002. The basic services were also opened up for competition. Reliance. Competition was introduced in all services segments. 2003-04 1. the disinvestment of VSNL was completed by bringing down the government equity to 26 per cent and the management of the company was transferred to Tata Group. a strategic partner. These concessions were also extended to internet services providers and broadband networks. 2001 was introduced in August 2001. including circuit and/or package switches that meet the relevant International Telecommunication Union (ITU)/ Telecom Engineering Centre (TEC) standards. Consequently 27 licenses out of 31 licenses converted to Unified Access Service Licenses. Four companies were issued Letter of Intent (LOI) for National Long Distance Service of which three licenses have been signed.1. semi-urban and rural areas. all types of mobile services equipment. 6. MTNL and Tata were issued licenses to provide the CDMA based services in the country. 2002-03 1. 7. International long distance business opened for unrestricted entry. Interconnection Usage Charge regime was introduced with the view of providing termination charge for cellular services and enable introduction of Calling Party Pays regime . 8. Communication Convergence Bill. 2.

2004-05: 1.62 billion with share of 10% in total inflow during January 2000 to June 2005. 6. 7. 100 per cent FDI was permitted in the area of telecom equipment manufacturing and provision of IT enabled services. 4. Broadcasting notified as Telecommunication services under Section 2(i)(k) of TRAI Act. Broadband Policy announced on 14th October 2004. 4. The Telecommunications (Broadcasting and Cable Services) Interconnection Regulation 2004 was introduced on 10th December 2004. 7. 5. 5. 6. 1 per minute. 2. Therefore. TRAI fixed Ceiling Tariff for International voice telephony segment. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's for establishing their own last mile to their customers. 2005-2006 1. 3. BSNL and MTNL launched broadband services on 14th January 2005. Regulation on Quality of Service of Basic and Cellular Mobile Telephone Services 2005 introduced on 1st July 2005. Indoor use of low power equipments in 2. 3. broadband had been defined as an "always-on" data connection supporting interactive services including internet access with minimum download speed of 256 kbps per subscriber. BSNL announced 33 per cent reduction in call charges for all the countries for international calls. 5. it is essential to enhance the prospect . This is mainly in telecom services and not in telecom manufacturing sector. 3. The fund was to be collected through a 5 per cent levy on the adjusted gross revenue of all telecom operators. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to 74 per cent as an incentive to the cellular operators to fall in line with the new unified licensing norm. Cellular Mobile Services. The Universal Service Obligation fund was introduced as a mechanism for transparent cross subsidization of universal access in telecom sector. Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulation 2006 introduced on 21st March 2006. 11th plan (2007-20012) FDI in Telecom sector has increased in recent years with value of 81. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per cent on ISD calls and by 61 per cent on STD calls which were applicable from 1st February 2005. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per cent from the earlier limit of 49 per cent.4 GHz band de-licensed from August 2004. In this policy. any time of the day to phone. and Long Distance Services (STD/ISD) throughout the territory of India 4. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March 2006 which enable the customers of BSNL and MTNL to call from one end of India to other at the cost of Rs. Annual license fee for National Long Distance (NLD) as well as International Long Distance (ILD) licenses reduced to 6 per cent of Adjusted Gross Revenue (AGR) with effect from 1st January 2006. 2. Ceiling Tariff for higher capacities reduced by about 70 per cent and for lower capacity by 35 per cent. The Telecommunication Interconnection Usage Charges Regulation 2003 was introduced on 29th October 2003 which covered arrangements among service providers for payment of Interconnection Usage Charges for Telecommunication Services and covered Basic Service that includes WLL (M) services.

1 billion people. The railways play a leading role in carrying passengers and cargo across India's vast territory. creation of integrated facilities for telecom equipment through SEZ and encouraging overseas vendors to set up facilities in India. the sector has not been able to keep pace with rising demand and is proving to be a drag on the economy. most of its major corridors have capacity constraint requiring capacity enhancement plans. For individuals. are required for making India a hub for telecom equipment manufacturing and attract FDI. with road transportation contributing the lion¶s share. it caters to the needs of 1. The NTP 1999 sought to promote exports of telecom equipments and services. IN Transport : India Transport Sector India¶s transport sector is large and diverse. Because of its rapid growth. It carries some 17 million passengers and 2 million tonnes of freight a day in year 2007 and is one of the world¶s largest employers. In 2007. Major improvements in the sector are required to support the country's continued economic growth and to reduce poverty. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. Indian Railways is one of the largest railways under single management. businesses and individuals can access information at electronic speed from almost anywhere in the world. Railways. There is thus immense potential for indigenous manufacturing in India. The following table and discussions from the report of the working report on the telecom sector for the 11th plan (2007-2012)will show the growth of telecom sector since 2003: Conclusion Telecommunications is one of the fastest-growing areas of technology in the world. Since the early 1990s. But till date export of telecom equipment remains minimal. Good physical connectivity in the urban and rural areas is essential for economic growth. the sector contributed about 5.5 percent to the nation¶s GDP. . businesses can provide better services and products to their customers. By including telecommunications in their operations. However. formation of a telecom export promotion council. However. telecommunications provides access to worldwide information and services. Certain measures like financial packages. The telecom sector has shown robust growth during the past few years. India's growing economy has witnessed a rise in demand for transport infrastructure and services.for inflow of increased funds. Most of the state-of-the-art telecom equipments including mobile phones are imported from abroad.

MAJOR challenges of Transport sector Challenges The major challenges facing the sector are: y India¶s roads are congested and of poor quality. The problem is more acute in India's northern and northeastern states which are poorly linked to the country¶s major economic centers. Inland water transportation remains largely undeveloped despite India's 14. Lane capacity is low . Also. Rural areas have poor access. Urban centres are severely congested. Aviation. Rural Roads. roads are often severly congested during the y y y . as well as the increasing movement of containers. Many roads are of poor quality and road maintenance remains under-funded . The dramatic increase in air traffic for both passengers and cargo in recent years has placed a heavy strain on the country's major airports.65) and much greater than China's (0.20). Roads are significant for the development of the rural areas . and coal. India has 12 major and 187 minor and intermediate ports along its more than 7500 km long coastline. Roads are the dominant mode of transportation in India today.5 million tonnes of cargo in year 2006-2007. Although the rural road network is extensive. All the country¶s high-density rail corridors face severe capacity constraints.A Lifeline for Villages in India: Connecting Hinterland to Social Services and markets Ports. iron ore. India has 125 airports.3 million tonnes by year 2010.most national highways are two lanes or less.home to almost 70 percent of India's population. In Mumbai.16) or Brazil's (0. including 11 international airports. However. an increase of 31. This leads to the deterioration of roads and high transport costs for users. freight transportation costs by rail are much higher than in most countries as freight tariffs in India have been kept high to subsidize passenger traffic. A quarter of all India's highways are congested. and 40 percent of India¶s villages do not have access to all-weather roads.only around one-third of maintenance needs are met.66 km of highway per square kilometer of land ± is similar to that of the United States (0.000 kilometers of navigable rivers and canals. some 33 percent of India¶s villages do not have access to all-weather roads and remain cut off during the monsoon 0. most highways in India are narrow and congested with poor surface quality.Roads. The density of India¶s highway network -.4% for passenger and 10.6% for cargo traffic over previous year. These ports serve the country¶s growing foreign trade in petroleum products. TIndian airports handled 96 million passengers and 1. They carry almost 90 percent of the country¶s passenger traffic and 65 percent of its freight. Delhi and other metropolitan centers. Passenger traffic is projected to cross 100 million and cargo to cross 3. Transport infrastructure in India is better developed in the southern and southwestern parts of the country. The railways are facing severe capacity constraints.

The activities under the purview of the service sector are quite diverse. This is expected to grow further to about 900 million tons by 2011-12. ITES sector The ITES sector has also leveraged the global changes positively to emerge as one of the prominent industries.y rush hours. India's ports need to significantly ramp up their capacity and efficiency to meet this surging demand. especially in the Delhi and Mumbai airports which account for more than 40 percent of nation¶s air traffic. community. real estate and business services. who in turn can contribute productively to the nation¶s growth. Growth in service sector Indian Service Sector In alignment with the global trends. One of the key service industry in India would be health and education. Post Liberalization The Indian economy has moved from agriculture based economy to a knowledge based economy. financial. Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times. Today the IT industry and ITE'S industry are the dominant industry in the service sector. They are vital for the country¶s economic stability.has reduced rush hour speeds especially in the central areas of major cities. Air traffic has been growing rapidly leading to severe strain on infrastructure at major airports. The industry has performed exceedingly well amidst tough global competition. A robust healthcare system helps to create a strong and diligent human capital. Being knowledge based industry. Port traffic has more than doubled during the 1990s. The dramatic growth in vehicle ownership during the past decade . social and personal services come within the gambit of the service industry. Some of the services covered by the ITES industry would be: y Customer interaction services -Non voice and Voice. Media and entertainment have also seen tremendous growth in the past few years. Airport infrastructure is strained. Trading. Subsectors Information Technology Industry The Information Technology industry has achieved phenomenal growth after liberalization. transportation and communication. India has been able to leverage the global markets. . touching 650 million tons in 2006-07. because of the huge pool of engineering talent available and the proficiency in English language among the middle class. Ports are congested and inefficient.

revenue accounting. data conversion. Banking Sector The three major changes in the banking sector after liberalization are: y y y Step to increase the cash outflow through reduction in the statutory liquidity and cash reserve ratio. HR services. Content development and animation. data entry. Organized retailing with prominence on self service and chain stores has changed the dynamics of retailing. various market link insurance products were available to the end customer to choose from.y y y y Back office. to regulate. In most of the tier I and tier II cities supermarket chains mushroomed. The banks were allowed to provide advances against equity provided as collateral and provide bank guarantees to the broking community. The primary role of IRDA was to safeguard the interest of insurance policy holders. This indirectly contributed to the growth of the packaged food industry and other consumer goods. Nationalized banks including SBI were allowed to sell stakes to private sector and private investors were allowed to enter the banking domain. Financial Services-Banking And Insurance Prior to liberalization these two sectors were controlled and regulated by the government. catering to the needs of vibrant middle class. After liberalization the scenario changed dramatically. promote and ensure orderly growth of the insurance industry. both as subsidiaries and branches. Medical Transcription. Insurance Sector The Insurance Regulatory and Development Authority Act 1999 (IRDA Act) allowed the participation of private insurance companies in the insurance sector. Foreign banks were given greater access to the domestic market. Some of the prominent insurance companies are: y y y y y Bajaj Allianz Insurance Corporation Birla Sun Insurance Co Ltd HDFC Standard Insurance Co Ltd ICICI Prudential Insurance Co Ltd Max New York Insurance Co Ltd . Nationalized banks and insurance companies had a firm grip over the market. provided the foreign banks maintained a minimum assigned capital and would be governed by the same rules and regulations governing domestic banks. The insurance sector could invest in the capital markets and other than traditional insurance products. India had one of the most underdeveloped retail sectors in the world. Remote education. After liberalization the banking and insurance domain opened up for private participation. market research and GIS Retailing Prior to liberalization. Banks were given greater freedom to leverage the capital markets and determine their asset portfolios.

. Role of services in development ‡ While high-end services are a key driver of economic growth. ‡ Broadly speaking. telecommunications). Technological power shift from the West to the East as India and China emerge as major players. more countries in the European Union would outsource their business. Following the success of US and UK. other services have a critical role to play. Political backlash over outsourcing would come down as companies reap the benefit of outsourcing. the services driving economic growth in India have either not been subject to significant amounts of regulation (notably IT±ITES) or have been deregulated and opened to competition (most prominently.y Tata AIG Insurance Co Ltd Future Trends y y y y Globally outsourcing industry would continue to grow.

and the emergence of a large consumer base with the discretionary spending power to spur demand and employment growth in key labour-intensive sectors.‡ Growth in high-end services like IT±ITES has the potential to generate significant spin-offs. technological improvements in manufacturing. ‡ Improvements in the delivery of education and healthcare services. and services inputs should enable India to derive maximum benefit from mineral exploitation once an investmentfriendly platform is established for the mining sector. are vital for sustainable growth. including productivity growth in other services and in agriculture. and prevent modernisation and inhibit productivity growth in a number of sectors. ‡ Services sector developments are facilitating modernisation in India¶s relatively capital-intensive manufacturing industries and in agriculture. logistics. including retail. ± Retail and wholesale trade and housing and construction in particular have the potential to employ large numbers of less skilled workers. ‡ Restrictive labour laws and a raft of other regulations provide a strong disincentive to small Indian companies growing above a certain size. ‡ The services sector has a major role to play in absorbing India¶s rapidly growing labour force. ‡ Financial services and transport infrastructure can be expected to face further pressure to expand capabilities and improve productivity through reform if these sectors are to play their critical role in facilitating economic expansion. particularly in rural areas. and legal and accountancy services. .

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