Introdn & Growth in Service Sector

GROWTH IN SERVICE SECTOR
Introduction
The economy of India is the eleventh largest economy in the world by nominal
GDP and the fourth largest by purchasing power parity (PPP). Following strong
economic reforms from the socialist inspired economy of a post-independence
Indian nation, the country began to develop a fast-paced economic growth, as free
market activities initiated in 1990 for international competition and foreign
investment. India is an emerging economic power with a very large pool of human
and natural resources, and a growing large pool of skilled professionals.
Economists predict that by 2020, India will be among the leading economies of the
world.
India was under social democratic-based policies from 1947 to 1991. The economy
was characterised by extensive regulation, protectionism, public ownership,
pervasive corruption and slow growth. Since 1991, continuing economic
liberalization has moved the country towards a market-based economy. A revival
of economic reforms and better economic policy in 2000s accelerated India's
economic growth rate. In recent years, Indian cities have continued to liberalize
business regulations. By 2008, India had established itself as the world's second-
fastest growing major economy. However, the year 2009 saw a significant
slowdown in India's GDP growth rate to 6.8% as well as the return of a large
projected fiscal deficit of 6.8% of GDP which would be among the highest in the
world.
India's large service industry accounts for 55% of the country's Gross Domestic
Product (GDP) while the industrial and agricultural sector contribute 28% and 17%
respectively. Agriculture is the predominant occupation in India, accounting for
about 52% of employment. The service sector makes up a further 34%, and
industrial sector around 14%. The labor force totals half a billion workers. Major
agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane,
potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major industries
include telecommunications, textiles, chemicals, food processing, steel,
transportation equipment, cement, mining, petroleum, machinery, information
technology enabled services and software.
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India's per capita income (nominal) is $1,030, ranked 139th in the world, while its
per capita (PPP) of US$2,940 is ranked 128th. Previously a closed economy,
India's trade has grown fast. India currently accounts for 1.5% of World trade as of
2007 according to the WTO. According to the World Trade Statistics of the WTO
in 2006, India's total merchandise trade (counting exports and imports) was valued
at $294 billion in 2006 and India's services trade inclusive of export and import
was $143 billion. Thus, India's global economic engagement in 2006 covering both
merchandise and services trade was of the order of $437 billion, up by a record
72% from a level of $253 billion in 2004. India's trade has reached a still relatively
moderate share 24% of GDP in 2006, up from 6% in 1985.
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Industry and services

The prestigious Tidel Park in Chennai. India has Asia's largest outsourcing
industry and is the world's second most favorable outsourcing destination after the
United States.
India has one of the world's fastest growing automobile industries Shown here is
the Tata Motors' Nano, the world's cheapest car.
Industry accounts for 28% of the GDP and employ 14% of the total workforce.
However, about one-third of the industrial labour force is engaged in simple
household manufacturing only.[dead link] In absolute terms, India is 16th in the
world in terms of nominal factory output.
Economic reforms brought foreign competition, led to privatisation of certain

public sector industries, opened up sectors hitherto reserved for the public sector
and led to an expansion in the production of fast-moving consumer goods.[64]
Post-liberalisation, the Indian private sector, which was usually run by oligopolies
of old family firms and required political connections to prosper was faced with
foreign competition, including the threat of cheaper Chinese imports. It has since
handled the change by squeezing costs, revamping management, focusing on
designing new products and relying on low labour costs and technology.
Textile manufacturing is the second largest source for employment after

agriculture and accounts for 26% of manufacturing output.[66] Ludhiana produces
90% of woolens in India and is also Known as the Manchester of India. Tirupur
has gained universal recognition as the leading source of hosiery, knitted garments,
casual wear and sportswear.[67] Dharavi slum in Mumbai has gained fame for
leather products. Tata Motors' Nano attempts to be the world's cheapest car.
India is fifteenth in services output. It provides employment to 23% of work force,

and it is growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It
has the largest share in the GDP, accounting for 55% in 2007 up from 15% in
1950.
Business services (information technology, information technology enabled

services, business process outsourcing) are among the fastest growing sectors
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contributing to one third of the total output of services in 2000. The growth in the
IT sector is attributed to increased specialization, and an availability of a large pool
of low cost, but highly skilled, educated and fluent English-speaking workers, on
the supply side, matched on the demand side by an increased demand from foreign
consumers interested in India's service exports, or those looking to outsource their
operations. The share of India's IT industry to the country's GDP increased from
4.8 % in 2005-06 to 7% in 2008.[68][69] In 2009, seven Indian firms were listed
among the top 15 technology outsourcing companies in the world.[70] In March
2009, annual revenues from outsourcing operations in India amounted to US$60
billion and this is expected to increase to US$225 billion by 2020.
Organized retail such supermarkets accounts for 24% of the market as of 2008.[72]
Regulations prevent most foreign investment in retailing. Moreover, over thirty
regulations such as "signboard licences" and "anti-hoarding measures" may have to
be complied before a store can open doors. There are taxes for moving goods to
states, from states, and even within states.
Tourism in India is relatively undeveloped, but growing at double digits. Some

hospitals woo medical tourism.
Service Sector in India today accounts for more than half of India's GDP.
According 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. 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.
Services or the "tertiary sector" of the economy covers a wide gamut of activities
like trading, banking & finance, infotainment, real estate, transportation, security,
management & technical consultancy among several others.
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The various sectors that combine together to constitute service industry in

India are:
Trade
Hotels and Restaurants
Railways
Other Transport & Storage
Communication (Post, Telecom)
Banking
Insurance
Dwellings,
Real Estate
Business Services
Public Administration;
Defence
Personal Services
Community Services
Other Services
There was marked acceleration in services sector growth in the eighties and
nineties, especially in the nineties. While the share of services in India's GDP
increased by 21 per cent points in the 50 years between 1950 and 2000, nearly 40
per cent of that increase was concentrated in the nineties. While almost all service
sectors participated in this boom, growth was fastest in communications, banking,
hotels and restaurants, community services, trade and business services. 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.
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The boom in the services sector has been relatively "jobless". The rise in services
share in GDP has not accompanied by proportionate increase in the sector's share
of national employment. Some economists have also cautioned that service sector
growth must be supported by proportionate growth of the industrial sector,
otherwise the service sector grown will not be sustainable. 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.
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Economy of India
Rank 11th
Currency 1 Indian Rupee (INR) () = 100 Paise
Fixed exchange rates USD = 46.6200 INR
(August 17, 2010)
Fiscal year Calendar year (1 April — 31 March)
Trade organizations WTO, SAFTA, G-20 and others
Statistics
GDP $1.250 trillion (nominal: 11th; 2009)
$3.526 trillion (PPP: 4th; 2009)
GDP growth7.4% (2009/2010)
GDP per capita $1,031 (nominal: 139th; 2009)
$2,941 (PPP: 128th; 2009)
GDP by sector agriculture (17.5%), industry (20%), services (62.5%) (2009 est.)
Inflation (CPI) 9.97% (July 2010)
Food inflation (9.53%) (Aug 2010)
Population below poverty line42% (456 million live below $1.25 per day) (2010
est.)
Gini index 36.8 (List of countries)
Labour force 467 million (2nd; 2009)
Labour force by occupation agriculture (52%), industry (14%), services (34%)

(2003)
Unemployment 10.7% (2010 est.)
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Main industries telecommunications, textiles, chemicals, food processing, steel,

transportation equipment, cement, mining, petroleum, machinery, information
technology
External
Exports $176.5 billion (18th; 2009)
Export goods software, petroleum products, textile goods, gems and jewelry,
engineering goods, chemicals, leather manufactures
Main export partners US 12.3%, UAE 9.4%, China 9.3% (2008)
Imports $287.5 billion (15th; 2009)
Import goods crude oil, machinery, gems, fertilizer, chemicals
Main import partners China 11.1%, Saudi Arabia 7.5%, US 6.6%, UAE 5.1%,
Iran 4.2%, Singapore 4.2%, Germany 4.2% (2008)
FDI stock Home: $161.3 billion (24th; 2009)
Abroad: $77.4 billion (24th; 2009)
Gross external debt $223.9 billion (31 December 2009 est.)
Public finances
Public debt 58% of GDP (2009 est.)
Revenues $153.5 billion (2008 est.)
Expenses $223 billion (2009 est.)
Economic aid $1.724 billion (2005)
Foreign reserves $279.4 billion (6th; Jun 2010)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars
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Indian GDP –Trend of Growth Rate

1960-1980: 3.5%
1980-1990: 5.4%
1990-2000: 4.4%
2000-2009: 6.4%
Contribution of Various Sectors in GDP
The contributions of various sectors in the Indian GDP for 1990-1991 are as
follows:
Agriculture: - 32%
Industry: - 27%
Service Sector: - 41%
follows:
Agriculture: - 20%
Industry: - 26%
follows:
Agriculture: - 17%
Industry: - 29%
It is great news that today the service sector is contributing more than half of the
Indian GDP. It takes India one step closer to the developed economies of the
world. Earlier it was agriculture which mainly contributed to the Indian GDP.
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The Indian government is still looking up to improve the GDP of the country and
so several steps have been taken to boost the economy. Policies of FDI, SEZs and
NRI investment have been framed to give a push to the economy and hence the
GDP.
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Job opportunities in emerging sectors by 2010

* Number of jobs in retail sector would be 2,000,000; in KPOs 250,000; BPOs
230,000; Hospitality 94,000
* BPO is a $9.5 billion industry and is likely to employ close to 2,300,000 people
by 2010.
* Owing to soaring property prices in big cities, rising wages coupled with talent
shortage and high attrition rates, BPO players are beginning to move their
operations to tier II and tier III cities. Resultantly, a number of openings would
come up in cities like Pune, Hyderabad, Jaipur and Chandigarh.
* Global companies are increasing their presence in KPOs following the BPO
success in India. KPO industry is pegged at $3 billion and is expected to touch
$10-12 billion by 2010. The players in the sector are seeking professionals for
financial analysis, equity research, treasury operations, credit decision processes
and accruals services among others. The segment is set to create 250,000 jobs by
2010, hiring workforce from a range of backgrounds from science, engineering,
law, accounting, pharmaceuticals to technological streams.
* LPO, though at a nascent stage, is expected to grow fast due to a significant cost
advantage in India. It would generate about 79,000 jobs by 2015. At present the
processes being outsourced include patent application drafting, legal research, pre-
litigation documentation, advising clients, analyzing drafted documents, writing
software licensing agreements and drafting distribution agreement.
Trends that fuel demand
High consumer spending has spawned a huge interest in the retail sector, which is
still 97% unorganized. As of today the Government allows FDI in single brand
retail and Cash and Carry business. It is estimated that the sector will add $14
billion in terms of market size by 2010 to cross $21.5 billion.
As per the study, retail is expected to churn maximum number of job opportunities
among upcoming fields after IT/ITES. Forecasts suggest that the sector may create
2,000,000 jobs by 2010 directly through retail operations.
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With business travel increasing at a rapid pace and Commonwealth Games round
the corner, hoteliers are in the expansion mode. The sector would need a fresh
workforce of at least 94,000 by 2010-11. HR managers are seeking graduates from
home science, commerce, physics and engineering to plug gaps and anticipated
demand. Trained personnel are required for food and beverage, house keeping and
front office and customer care.
Bollywood driven music industry including expanding reach of FM is leading to

expansion of the entertainment sector in a big way. Besides, content creating firms
for television have grown manifold. The animation industry has grown by over
30% on a yearly basis in the last three years and looks promising in the time to
come as well. This sector will need 300,000 professionals by 2009.
Aviation sector in India is growing at a whopping 25% per annum, creating a large
chunk of jobs. There is presently a shortage of trained pilots. The industry is
expected to add 130 airliners to the current fleet of 270 airliners, which would in
turn push up manpower demand. Plum posts include that of flight dispatchers,
cabin crew, airline managers, airport managers and ground handling personnel.
The industry would create 200,000 jobs by 2017.
Growing at more than 10% for the past three years, Financing, Insurance, Real
Estate and Business Services have outpaced overall GDP growth. Consequently,
there are abundant opportunities in finance and more will pour in the years to
come. With investment and banking companies growing at a rapid pace there
would be many vacancies in retail banking, asset management and financial
management inter alia.
Service sector is the lifeline for the social economic growth of a country. It is
today the largest and fastest growing sector globally contributing more to the
global output and employing more people than any other sector.
The real reason for the growth of the service sector is due to the increase in
urbanization, privatization and more demand for intermediate and final consumer
services. Availability of quality services is vital for the well being of the economy.
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In advanced economies the growth in the primary and secondary sectors are
directly dependent on the growth of services like banking, insurance, trade,
commerce, entertainment etc.
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Indian Service Sector

In alignment with the global trends, Indian service sector has witnessed a major
boom and is one of the major contributors to both employment and national
income in recent times. The activities under the purview of the service sector are
quite diverse. Trading, transportation and communication, financial, real estate and
business services, community, social and personal services come within the gambit
of the service industry.
One of the key service industry in India would be health and education. They are
vital for the country’s economic stability. A robust healthcare system helps to
create a strong and diligent human capital, who in turn can contribute productively
to the nation’s growth.
Post Liberalization
The Indian economy has moved from agriculture based economy to a knowledge
based economy. Today the IT industry and ITE'S industry are the dominant
industry in the service sector. Media and entertainment have also seen tremendous
growth in the past few years.
Subsectors
Information Technology Industry
The Information Technology industry has achieved phenomenal growth after

liberalization. The industry has performed exceedingly well amidst tough global
competition. Being knowledge based industry; India has been able to leverage the
global markets, because of the huge pool of engineering talent available and the
proficiency in English language among the middle class.
ITES sector
The ITES sector has also leveraged the global changes positively to emerge as one
of the prominent industries. Some of the services covered by the ITES industry
would be:
Customer interaction services -Non voice and Voice.
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Back office, revenue accounting, data entry, data conversion, HR services.
Medical Transcription.
Content development and animation.
Remote education, market research and GIS
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Financial Services-Banking and Insurance

Prior to liberalization these two sectors were controlled and regulated by the
government. Nationalized banks and insurance companies had a firm grip over the
market. After liberalization the banking and insurance domain opened up for
private participation.
Banking Sector
The three major changes in the banking sector after liberalization are:
Step to increase the cash outflow through reduction in the statutory liquidity and
cash reserve ratio.
Nationalized banks including SBI were allowed to sell stakes to private sector and
private investors were allowed to enter the banking domain. Foreign banks were
given greater access to the domestic market, both as subsidiaries and branches,
provided the foreign banks maintained a minimum assigned capital and would be
governed by the same rules and regulations governing domestic banks.
Banks were given greater freedom to leverage the capital markets and determine
their asset portfolios. The banks were allowed to provide advances against equity
provided as collateral and provide bank guarantees to the broking community.
Insurance Sector
The Insurance Regulatory and Development Authority Act 1999 (IRDA Act)
allowed the participation of private insurance companies in the insurance sector.
The primary role of IRDA was to safeguard the interest of insurance policy
holders, to regulate, promote and ensure orderly growth of the insurance industry.
The insurance sector could invest in the capital markets and other than traditional
insurance products, various market link insurance products were available to the
end customer to choose from.
Some of the prominent insurance companies are:
Bajaj Allianz Insurance Corporation
Birla Sun Insurance Co Ltd
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HDFC Standard Insurance Co Ltd
ICICI Prudential Insurance Co Ltd
Max New York Insurance Co Ltd
Tata AIG Insurance Co Ltd
The Indian money market is classified into: the organised sector (comprising
private, public and foreign owned commercial banks and cooperative banks,
together known as scheduled banks); and the unorganised sector (comprising
individual or family owned indigenous bankers or money lenders and non-banking
financial companies (NBFCs)). The unorganised sector and microcredit are still
preferred over traditional banks in rural and sub-urban areas, especially for non-
productive purposes, like ceremonies and short duration loans.
Mumbai is the financial and commercial capital of India. Shown here is the World
Trade Centre of Mumbai
Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six

others in 1980, and made it mandatory for banks to provide 40% of their net credit
to priority sectors like agriculture, small-scale industry, retail trade, small
businesses, etc. to ensure that the banks fulfill their social and developmental
goals. Since then, the number of bank branches has increased from 10,120 in 1969
to 98,910 in 2003 and the population covered by a branch decreased from 63,800
to 15,000 during the same period. The total deposits increased 32.6 times between
1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of
rural branches, from 1,860 or 22% of the total number of branches in 1969 to
32,270 or 48%, only 32,270 out of 5 lakh (500,000) villages are covered by a
scheduled bank.
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% respectively. Since
liberalisation, the government has approved significant banking reforms. While
some of these relate to nationalised banks (like encouraging mergers, reducing
government interference and increasing profitability and competitiveness), other
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reforms have opened up the banking and insurance sectors to private and foreign
players.
More than half of personal savings are invested in physical assets such as land,
houses, cattle, and gold. Indian has the highest saving rate in the world at 36
percent.
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Services
Last Updated: May 2010
The services sector has been at the forefront of the rapid growth of the Indian
economy.
As per the Central Statistical Organisation (CSO), Ministry of Statistics and

Programme Implementation:
Trade, hotels, transport and communication grew 12.4 per cent in Jan-March 2010
over the corresponding quarter from a year earlier
Similiarly, financing, insurance, real estate and business services grew at 7.9 per
cent in the fourth-quarter of 2009-10
Community, social & personal services grew by 1.6 per cent in the fourth quarter
Indicators
Lead indicators suggest that the pace of expansion in the services sector activity is
likely to be sustained.
Foreign tourist arrivals (FTAs) during January to April 2010 were 19.18 lakh, an
increase of 10.6 per cent, over 17.35 FTAs over the corresponding quarter in 2009
According to the Telecom Regulatory Authority of India (TRAI), the number of

telephone subscribers in the country reached 621.28 million as on March 31, 2010,
an increase of 3.38 per cent from 600.98 million in February 2010. With this the
overall tele-density (telephones per 100 people), touched 52.74
Cargo handled at major ports during April–March 2010 has been 560.96 million
tonnes as against 530.53 million tonnes during April-March 2009
According to the Central Statistical Organisation, the key indicators of railways,

namely, the net tonne kilometres and passenger kilometres have shown growth
rates of 12.5 per cent and 6.7 per cent, respectively in the third-quarter of 2009-10
Production of commercial vehicles has projected an immense growth rate of 195

per cent whereas cargo handled by civil aviation has grown by 19.6 per cent and
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passengers handled by civil aviation has grown by 22.2 per cent in the third-quarter
of 2009-10
According to an HSBC survey, HSBC Markit Business Activity Index, based on a

survey of 400 firms, rose to 62.1 in April 2010.The services index has expanded
robustly for the twelfth month in April 2010.
Investments
According to data released by the Department of Industrial Policy and Promotion,
the services sector (financial and non-financial) attracted foreign direct investments
(FDI) worth US$ 4.4 billion between April and March 2009-10 while the
cumulative FDI between April 2000 and March 2010 has been US$ 23.6 billion,
accounting for 21 per cent of the total FDI inflow.
Some of the investments in the service sector include:
Tata Consultancy Services (TCS), the country's largest software exporter by

revenue, was awarded a contract in March 2010 to administer the UK's National
Employee Savings Trust (NEST) scheme's administered services under a 10-year
deal, worth around US$ 906 million.
Aditya Birla Minacs, the information technology business solutions firm, has
acquired UK-based Compass BPO, a finance and accounting (F&A) services
provider
India's largest back office firm, Genpact, has acquired US-based analytics and data
management services provider, Symphony Marketing Solutions (SMS)
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Foreign direct investment in India

Share of top five investing countries in FDI inflows. (2000–2007)[115]
Rank Country Inflows (Million USD) Inflows (%)
1 Mauritius 85,178 44.24%
2 United States 18,040 9.37%
3 United Kingdom 15,363 7.98%
4 Netherlands 11,177 5.81%
5 Singapore 9,742 5.06%
6 Cyprus 5,742 3.06%
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Performance of key drivers of the service sector
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Business in different sectors

Automobile Industry in India
Automobile Industry in India has witnessed a tremendous growth in recent years
and is all set to carry on the momentum in the foreseeable future. Indian
automobile industry has come a long way since the first car ran on the streets of
Bombay in 1898. Today, automobile sector in India is one of the key sectors of the
economy in terms of the employment. Directly and indirectly it employs more than
10 million people and if we add the number of people employed in the auto-
component and auto ancillary industry then the number goes even higher.
The automobile industry comprises of heavy vehicles (trucks, buses, tempos,

tractors); passenger cars; and two-wheelers. Heavy vehicles section is dominated
by Tata-Telco, Ashok Leyland, Eicher Motors, Mahindra and Mahindra, and Bajaj.
The major car manufacturers in India are Hindustan Motors, Maruti Udyog, Fiat
India Private Ltd., Ford India Ltd., General Motors India Pvt. Ltd., Honda Siel
Cars India Ltd., Hyundai Motors India Ltd., and Skoda India Private Ltd., Toyota
Motors, Tata Motors etc. The dominant players in the two-wheeler sector are Hero
Honda, Bajaj, TVS, Honda Motorcycle & Scooter India (Pvt.) Ltd., Yamaha etc.
In the initial years after independence Indian automobile industry was plagued by
unfavorable government policies. All it had to offer in the passenger car segment
was a 1940s Morris model called the Ambassador and a 1960s Suzuki-derived
model called the Maruti 800. The automobile sector in India underwent a
metamorphosis as a result of the liberalization policies initiated in the 1991.
Measures such as relaxation of the foreign exchange and equity regulations,
reduction of tariffs on imports, and refining the banking policies played a vital role
in turning around the Indian automobile industry. Until the mid 1990s, the Indian
auto sector consisted of just a handful of local companies. However, after the
sector opened to foreign direct investment in 1996, global majors moved in.
Automobile industry in India also received an unintended boost from stringent
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government auto emission regulations over the past few years. This ensured that
vehicles produced in India conformed to the standards of the developed world.
Indian automobile industry has matured in last few years and offers differentiated
products for different segments of the society. It is currently making inroads into
the rural middle class market after its inroads into the urban markets and rural rich.
In the recent years Indian automobile sector has witnessed a slew of investments.
India is on every major global automobile player's radar. Indian automobile
industry is also fast becoming an outsourcing hub for automobile companies
worldwide, as indicated by the zooming automobile exports from the country.
Today, Hyundai, Honda, Toyota, GM, Ford and Mitsubishi have set up their
manufacturing bases in India. Due to rapid economic growth and higher disposable
income it is believed that the success story of the Indian automobile industry is not
going to end soon.
Some of the major characteristics of Indian automobile sector are:
Second largest two-wheeler market in the world.
Fourth largest commercial vehicle market in the world.
11th largest passenger car market in the world
Expected to become the world's third largest automobile market by 2030, behind
only China and the US.
Note: The above information was last updated on 21-07-2007
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BPO Industry in India

Business Process Outsourcing (BPO) is one of the fastest growing segments of the
Information Technology Enabled Services (ITES) industry in India. Business
Process Outsourcing refers to the delegation of one or more IT-intensive business
processes to an external provider that in turn owns, administers and manages the
selected process based on defined and measurable performance criteria.
The trend to outsource work is on rise in today's competitive environment. There

are number of reasons behind the increasing trend of outsourcing. Firstly,
companies want to focus on mission-critical issues and are not interested in
frittering away time and energy on non-core functions. Secondly, as businesses
grow exponentially, the companies do not have resources have resources to cope
with the growth and as a result they outsource part of their business processes.
Thirdly, companies may not have the best talent and skills to do the job
themselves. Lastly, converging technologies of telecommunication, information
technology and media have redefined the way we do business and have made
outsourcing possible.
There are a number of advantages of outsourcing. Major among them are: (1)
Reduce overheads and free up resources, (2) Improves Efficiency, (3) Offloads
non-core functions, (4) Gives access to specialized skills, (5) Saves on manpower
and training costs, (6) Reduces operating costs, (7) Enhances tactical and strategic
advantages, (8) Spreads risks, (9) Provides the best quality services, products and
people, and (10) Helps to focus scarce resources on time-critical projects.
Some of typical services and processes that are outsourced include: Technical
Support Services, Telemarketing Services, Insurance Processing, Data Entry
Services / Data Processing Services, Data Conversion Services, Book Keeping and
Accounting Services et al.
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The Indian BPO industry is constantly growing and a lot of Fortune 500 companies
are outsourcing services to India. There are several reasons for India's emergence
as one of leading outsourcing destinations. India is very rich in educated and
talented human resource. India is one of the pioneers in software development.
India has a mature industrial set up with world class systems. India has excellent
technical facilities and infrastructure for setting up call centers. Time zone
difference between India and America has also worked to the advantage of Indian
BPO industry. India has an 8-12 hour time zone difference with respect to the US
and other developed markets. Most of the Indian call centers servicing American
customers have timings between 5:30 p.m. to 9:30 a.m. This time zone difference
allows Indian companies BPOs to service American clients by working in the
nights. Last, but not the least, India has a huge pool of English speaking workforce
that provides excellent voice based services at extremely competitive costs
resulting in huge savings for companies. Some of the leading BPO companies in
India are: GE Capital, Convergys, Wipro Spectramind, WNS, Dell, Daksh e-
Services, ICICI OneSource, and MphasiS.
Some of the problems afflicting Indian BPO industry are high attrition rate, and
backlash in developed countries against perceived job losses due to outsourcing to
India. To tackle the problem of attrition companies are adopting measures such as
good rewards, bonding programme, flexible working hours and stronger career
path. As regards backlash against outsourcing, the backlash is mainly political.
There is compelling economic logic for companies to outsource to India and also
Indian BPO companies have taken initiatives allay fears of job loss.
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Insurance Sector in India

Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent annum. Together with banking services, it
contributes to about 7 per cent to the country's GDP. Insurance is a federal subject
in India and Insurance industry in India is governed by Insurance Act, 1938, the
Life Insurance Corporation Act, 1956 and General Insurance Business
(Nationalisation) Act, 1972, Insurance Regulatory and Development Authority
(IRDA) Act, 1999 and other related Acts.
The origin of life insurance in India can be traced back to 1818 with the
establishment of the Oriental Life Insurance Company in Calcutta. It was
conceived as a means to provide for English Widows. In those days a higher
premium was charged for Indian lives than the non-Indian lives as Indian lives
were considered riskier for coverage. The Bombay Mutual Life Insurance Society
that started its business in 1870 was the first company to charge same premium for
both Indian and non-Indian lives. In 1912, insurance regulation formally began
with the passing of Life Insurance Companies Act and the Provident Fund Act.
By 1938, there were 176 insurance companies in India. But a number of frauds
during 1920s and 1930s tainted the image of insurance industry in India. In 1938,
the first comprehensive legislation regarding insurance was introduced with the
passing of Insurance Act of 1938 that provided strict State Control over insurance
business.
Insurance sector in India grew at a faster pace after independence. In 1956,

Government of India brought together 245 Indian and foreign insurers and
provident societies under one nationalised monopoly corporation and formed Life
Insurance Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a
capital contribution of Rs.5 crore.
43
The (non-life) insurance business/general insurance remained with the private

sector till 1972. There were 107 private companies involved in the business of
general operations and their operations were restricted to organised trade and
industry in large cities. The General Insurance Business (Nationalisation) Act,
1972 nationalised the general insurance business in India with effect from January
1, 1973. The 107 private insurance companies were amalgamated and grouped into
four companies: National Insurance Company, New India Assurance Company,
Oriental Insurance Company and United India Insurance Company. These were
subsidiaries of the General Insurance Company (GIC).
In 1993, the first step towards insurance sector reforms was initiated with the
formation of Malhotra Committee, headed by former Finance Secretary and RBI
Governor R.N. Malhotra. The committee was formed to evaluate the Indian
insurance industry and recommend its future direction with the objective of
complementing the reforms initiated in the financial sector.
Key Recommendations of Malhotra Committee
Structure
Government stake in the insurance Companies to be brought down to 50%.
Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
All the insurance companies should be given greater freedom to operate.
Competition
Private Companies with a minimum paid up capital of Rs.1billion should be

allowed to enter the industry.
No Company should deal in both Life and General Insurance through a single
Entity.
44
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only one State Level Life Insurance Company should be allowed to operate in
each state.
Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance should be made independent.
Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced

from 75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in any company.
Customer Service
LIC should pay interest on delays in payments beyond 30 days
Insurance companies must be encouraged to set up unit linked pension plans.
Computerisation of operations and updating of technology to be carried out in the

insurance industry.
Malhotra Committee also proposed setting up an independent regulatory body -

The Insurance Regulatory and Development Authority (IRDA) to provide greater
autonomy to insurance companies in order to improve their performance and
enable them to act as independent companies with economic motives.
45
Insurance sector in India was liberalized in March 2000 with the passage of the
Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry
restrictions for private players and allowing foreign players to enter the market
with some limits on direct foreign ownership. There is a 26 percent equity cap for
foreign partners in an insurance company. There is a proposal to increase this limit
to 49 percent. The opening up of the insurance sector has led to rapid growth of the
sector. Presently, there are 16 life insurance companies and 15 non-life insurance
companies in the market. The potential for growth of insurance industry in India is
immense as nearly 80 per cent of Indian population is without life insurance cover
while health insurance and non-life insurance continues to be well below
international standards.
46
Retail Industry in India

Retail is India's largest industry. It accounts for over 10 per cent of the India's GDP
and around eight per cent of the employment. Retail sector is one of India's fastest
growing sectors with a 5 per cent compounded annual growth rate. India's huge
middle class base and its untapped retail industry are key attractions for global
retail giants planning to enter newer markets. Driven by changing lifestyles, strong
income growth and favorable demographic patterns, Indian retail is expected to
grow 25 per cent annually. It is expected that retail in India could be worth US$
175-200 billion by 2016.
The organized retail industry in India had not evolved till the early 1990s. Until
then, the industry was dominated by the un-organized sector. It was a sellers
market, with a limited number of brands, and little choice available to customers.
Lack of trained manpower, tax laws and government regulations all discouraged
the growth of organized retailing in India during that period. Lack of consumer
awareness and restrictions over entry of foreign players into the sector also
contributed to the delay in the growth of organized retailing. Foundation for
organized retail in India was laid by Kishore Biyani of Pantaloon Retails India
Limited (PRIL). Following Pantaloon's successful venture a host of Indian business
giants such as Reliance, Bharti, Birla and others are now entering into retail sector.
A number of factors are driving India's retail market. These include: increase in the
young working population, hefty pay-packets, nuclear families in urban areas,
increasing working-women population, increase in disposable income and
customer aspiration, increase in expenditure for luxury items, and low share of
organized retailing. India's retail boom is manifested in sprawling shopping
centers, multiplex- malls and huge complexes that offer shopping, entertainment
and food all under one roof.
47
But there is a flip side to the boom in the retail sector. It is feared that the entry of
global business giants into organized retail would make redundant the
neighbourhood kiryana stores resulting in dislocation in traditional economic
structure. Also, the growth path for organized retail in India is not hurdle free. The
taxation system still favours small retail business. With the intrinsic complexities
of retailing such as rapid price changes, constant threat of product obsolescence
and low margins there is always a threat that the venture may turn out to be a loss
making one.
A perfect business model for retail is still in evolutionary stage. Procurement is

very vital cog in the retail wheel. The retailer has to fight issues like fragmented
sourcing, unpredictable availability, unsorted food provisions and daily fluctuating
prices as against consumer expectations of round-the-year steady prices, sorted and
cleaned food and fresh stock at all times.
Trained human resource for retail is another big challenge. The talent base is
limited and with the entry of big giants there is a cat fight among them to retain
this talent. This has resulted in big salary hikes at the level of upper and middle
management and thereby eroding the profit margin of the business. All the
companies have laid out ambitious expansion plans for themselves and they may
be hampered due lack of requisite skilled manpower.
But retail offers tremendous for the growth of Indian economy. If all the above
challenges are tackled prudently there is a great potential that retail may offer
employment opportunities to millions living in small town and cities and in the
process distributing the benefits of economic boom and resulting in equitable
growth.
48
Conclusion
We have concluded that today in the globally competitive world service sector is
very important aspect & its growth is relatively important & The economy of India
is the eleventh largest economy in the world by nominal GDP and the fourth
largest by purchasing power parity (PPP). The service sector booms in 1990 the
growth was very good after that till now it keeps on increasing. The Indian service
sector contributes more than 50% of GDP to Indian economy.
The growth of a service sector is very important for the growth of a country as
India is performing well in the growth of service sector as well as in the growth of
its economy. After liberalization & globalization service sector have showed very
well result, earlier service sector was contributing very less but now service sector
is very important for every country, now the service sector change with the global
change
49
Bibliography
www.google.com
www.yahoo.com
www.wikipedia.com
50

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Introdn & Growth in Service Sector

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GROWTH IN SERVICE SECTOR

Industry and services

Economic reforms brought foreign competition, led to privatisation of certain

Textile manufacturing is the second largest source for employment after

India is fifteenth in services output. It provides employment to 23% of work force,

Business services (information technology, information technology enabled

Tourism in India is relatively undeveloped, but growing at double digits. Some

The various sectors that combine together to constitute service industry in

Hotels and Restaurants

Other Transport & Storage

Communication (Post, Telecom)

Currency 1 Indian Rupee (INR) () = 100 Paise

Fixed exchange rates USD = 46.6200 INR

(August 17, 2010)

Fiscal year Calendar year (1 April — 31 March)

Trade organizations WTO, SAFTA, G-20 and others

GDP $1.250 trillion (nominal: 11th; 2009)

$3.526 trillion (PPP: 4th; 2009)

GDP growth7.4% (2009/2010)

GDP per capita $1,031 (nominal: 139th; 2009)

$2,941 (PPP: 128th; 2009)

Inflation (CPI) 9.97% (July 2010)

Food inflation (9.53%) (Aug 2010)

Gini index 36.8 (List of countries)

Labour force 467 million (2nd; 2009)

Labour force by occupation agriculture (52%), industry (14%), services (34%)

Unemployment 10.7% (2010 est.)

Main industries telecommunications, textiles, chemicals, food processing, steel,

Exports $176.5 billion (18th; 2009)

Main export partners US 12.3%, UAE 9.4%, China 9.3% (2008)

Imports $287.5 billion (15th; 2009)

Import goods crude oil, machinery, gems, fertilizer, chemicals

FDI stock Home: $161.3 billion (24th; 2009)

Abroad: $77.4 billion (24th; 2009)

Gross external debt $223.9 billion (31 December 2009 est.)

Public debt 58% of GDP (2009 est.)

Revenues $153.5 billion (2008 est.)

Expenses $223 billion (2009 est.)

Economic aid $1.724 billion (2005)

Foreign reserves $279.4 billion (6th; Jun 2010)

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars

Indian GDP –Trend of Growth Rate

Contribution of Various Sectors in GDP

Service Sector: - 41%

Service Sector: - 54%

Service Sector: - 54%

Job opportunities in emerging sectors by 2010

Trends that fuel demand

Bollywood driven music industry including expanding reach of FM is leading to

Indian Service Sector

Information Technology Industry

The Information Technology industry has achieved phenomenal growth after

Customer interaction services -Non voice and Voice.

Back office, revenue accounting, data entry, data conversion, HR services.

Content development and animation.

Remote education, market research and GIS

Financial Services-Banking and Insurance

Some of the prominent insurance companies are:

Bajaj Allianz Insurance Corporation

Birla Sun Insurance Co Ltd

HDFC Standard Insurance Co Ltd

ICICI Prudential Insurance Co Ltd