STUDY OF

SERVICE
SECTOR IN
INDIA
Animesh Goel 74052000105
Annanya Gaba 74052000168
Ansh Gupta 74052000142
Arnav Badgel 74052000116
Gargi Joshi 74052000158
Nishjeet Saluja 74052000149
Rebecca Bolleddu 74052000022
 Acknowledgement
This project would not have been possible without the kind support
and help of a lot of people. We would like to extend our sincere thanks
to all of them. We would like to express our gratitude to our professor
‘Vijay Khandare’ who gave us the golden opportunity to understand
the service sector in depth and showed us a different perspective of
the economy. We came to know about so many new things, which
would also help us in future.
 INDEX
01 INTRODUCTION
02 TYPES 03 CHARACTERSTICS OF SERVICES
04 CONTRIBUTION TO GDP
05 GROWTH
06 SIGNIFICANCE AND ADVANTAGES
07 GOVERNMENT POLICIES
08 EFFECTS ON PANDEMIC
09 FDI INFLOW
10 ROAD AHEAD
11 CONCLUSION
12 REFERENCES
 INTRODUCTION
Service sector has emerged as the largest and fastest-growing sector in the global
economy in the last two decades, providing more than 60 per cent of global output and,
in many countries, an even larger share of employment. The growth in services has
also been accompanied by the rising share of services in world transactions.
The segment of the economy that provides services to its consumers is the tertiary
sector.

India stands one of the leading economy because its growth has been led by the
Service sector. It’s a larger part of the Indian economy both in terms of employment
potential and its contribution to national income.
There have been significant changes in sectoral contribution of each sector to India’s GDP
over a period of time.
 In 1950-51 the primary sector was contributing about 56.5 percent to the Indian GDP. It is
followed by the secondary sector with 13.6 percent and tertiary sector with 29.9 percent.
 During 1990-91 the share of agriculture sector in India GDP was 34 percent. It was
followed by secondary sector with 23.2 percent and tertiary sector with 42.8 percent.
 During 2007 the contribution of primary sector came down to 18 percent, and industrial
sector increased to 29 percent sector to 53 percent (Misra and Puri, 2009).
 During 2008-09 the share of primary sector was 15.7 percent, the share of secondary
sector was 28 percent and the share of service sector was 56.4 percent (GOI, 2010) which
highlights the fact that the share of tertiary sector is raising constantly over a period of time.
 TYPES OF
SERVICE SECTOR
Service sector can be broadly divided into two parts:

(A) Economic Services:

(i) Transport, Storage and Communication
(ii) Trade, Hotels and Tourisms
(iii) Banking and Insurance Services
(B) Social Service:
(i) Education
(ii) Health
(iii) Administration
 Intangible: Cannot be seen, felt, tasted or
touched
Heterogenous: No two services are precisely
alike.
Inseparable: Simultaneous production and

Characteristics consumption of service is usual.

Perishable: Services cannot be saved, stored,

of Services
resold, or returned.
Service delivery and customer satisfaction
depend on employees actions. Service quality
depends on many uncontrollable factors.
Cannot be inventoried, patented, readily
displayed or communicated.
Pricing is difficult.
It is difficult to synchronize supply and demand
with services.
 The services sector is the largest sector of India.
Gross Value Added (GVA) at current prices for the
services sector is estimated at 96.54 lakh crore INR
in 2020-21. The services sector accounts for
Contribution 53.89% of total India's GVA of 179.15 lakh crore
Indian rupees. With GVA of Rs. 46.44 lakh crore, the
to GDP/ Industry sector contributes 25.92%. While
Agriculture and allied sector share 20.19%.

Economy Share of primary (comprising agriculture, forestry,

fishing, and mining & quarrying), secondary
(comprising manufacturing, electricity, gas, water
supply & other utility services, and construction),
and tertiary (services) sectors have been estimated
as 21.82 percent, 24.29 percent, and 53.89 percent.
 
 Growth in
 
Service Sector
Share of the services sector accounted for 54% of the total
GVA in FY21. India’s services sector GVA increased at a CAGR
of 11.43% to Rs. 101.47 trillion (US$ 1,439.48 billion) in FY20,
from Rs. 68.81 trillion (US$ 1,005.30 billion) in FY16.
Services exports comprise a major part of the total export from
India. According to RBI, between April 2021 and September
2021, India’s service exports stood at US$ 114.58 billion,
whereas imports stood at US$ 65.08 billion.
In October 2021, India’s service exports increased by 23.52%
to reach US$ 20.86 billion, while imports stood at US$ 12.71
billion.
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.
 What explains Growth in India’s Service Sector?
Both demand side and supply side factors operate that lead to higher growth in the service sector as
compared to the other sectors and also lead to a larger share of service sector in total employment.

A. Demand-Side Factors
B. Supply-Side Factors: Trade Liberalisation and
a)  High-income elasticity of demand for final product Reforms
services, a)  Increased trade
b)  Slower productivity growth in services that leads to b) Higher foreign direct investments in services
higher employment potential and
c)  Improved technology
c)  Structural changes within the manufacturing sector,
which make contracting out services more efficient 
than producing them in the firm or household.
 Both global and domestic factors affect and incorporate the growth of
service sector. There are various factors which has contributed a
tremendous growth in service sector in India some are discussed below.

Global
Standard of living: The standard of living and affluent economy has
been a reason for the increasing spending power and demand for goods
and services. This has led to rapid growth and demand in service sector.

and
Women Empowerment: The recent development women
empowerment and increased percentage of women employees has
created a need for various services in the household and the other
service sectors like transport, financial services etc.

Domestic
Services marketing: The retail sector’s growth has also created a
demand for marketing services. Much importance has been given to the
network chain of wholesalers, distributors to provide a better service to
the customer. The services marketing have become a major concept for

Factors
customer satisfaction.
Growth in IT industry: One of the major business services is IT
services in India. India is having world’s largest IT professionals and has
made an IT as an important sector, which eases the business activities.
Migration of rural into Cities: The tremendous migration of rural
people from rural villages to the towns and cities has created a demand
for real estate services, transportation and rental services.
 Following are some reasons of fast development of this sector-

REASONS The necessity for basic services like hospitals, educational

institutions, post and telegraph services, police stations, courts,
transportation and banking services have in- creased with
FOR ITS increase in population.
The development in agriculture and industrial sector has

FAST
increased the need of services such as transportation, storage
and trade.
As per income of the people increased the demand for services

DEVELOP- like tourism, retailing, catering and elite

education also increased.
With increase in income people have started travelling long
MENT distances for getting education and for job etc. This results in
increase in the need of fast transportation. So this increased
the services of transportation and
communication sector.
 
 Credit Growth of Service Sector
 Credit growth to services sector registered a growth of 3.6 per cent in November 2021 against 8.2
per cent a year ago.
 Credit to non-food industries stood at Rs. 110.86 trillion (US$ 1.49 trillion), as of November 5, 2021.
 On a year-on-year (y-o-y) basis, non-food bank credit1 growth improved to 7.1 per cent in November
2021 as compared to 5.9 per cent in November 2020
 Growth in bank loans to the services sector remained tepid across all bank groups since the onset of
the pandemic and slipped into negative zone in Q4:2020-21, with PSBs being the major contributors
to the fall. In 2021-22 so far (till April 2021), outstanding loans to the services sector have contracted
by more than one per cent as compared to end-March 2021 level.
 Significance of
the Service Sector
Promotes Removes
industrialization Increase
regional
in the
Provides disparities
productivity
of the goods Good
Quality Life
Growth of Increase in
Agriculture international
Growth of trade
Market
 Easy to start up: In comparison to other business industries,
starting a business in the service sector is relatively easy.
Because business in the service sector requires little more
than a license, phone, and a person with the required skills
and expertise to get up and going. This not only makes it quite
easier but also very affordable to get started.

Advantages Flexible hours: Working in the service sector provides

flexibility in the working hours, which in turn allows you
to get an opportunity to further increase your skill and

of the education and to accomplish other important tasks at

times you might not otherwise be able to.

Service Greater adaptability to changes: The service sector

Sector companies are able to adapt to the changes in customer

needs much easily and quickly in comparison to product-
based companies.

Provides job even during economic crisis: During an economic

dip, when people are cutting down their expenditure and are
only paying for basic necessities, the service sector helps to
keep the job and bring in the revenue as service sector experts
are always in demand.
Government The Government introduced ‘Services
Policies Exports from India Scheme’ (SEIS).
The third phase of Pradhan Mantri
Kaushal Vikas Yojana (PMKVY) was
launched in 600 districts
The Department of Telecom,
Government of India, signed an MoU with
the Ministry of Communications,
Government of Japan
 The COVID-19 Pandemic which resulted in lockdown
across the world and business were forced to run their
activities by keeping the Social Distancing in Mind to reach
out to the customers. The sudden or drastic change in the
business approach due to the pandemic has resulted many
Effects of of the players in service industry to stop their business
activities or have seen the drastic decline in their business

pandemic on
till they are accustomed to the new approach of doing the
business. Sectors like Education, Health Care, Gym,
Tourism have witnessed a direct impact as the involvement

service
of the people/Customers/Consumers were limited or
completely shut to provide the services, With the
government’s restrictions on the E-Commerce platform was

sector allowed to operate with lot of restrictions to provide only

essential goods to the borrowers and the service providers
came in with the improvement in their services to provide
contact less deliveries to the customers at their doorsteps,
these type of activities has resulted enormous increase in
the E-Payments crossing multi billions in the months after
the initial lock downs.
Number of employees in
the service sector India
FY 2017-2021,
by service type
(in millions)

Among the three segments of the

service sector of India, it was the non-
financial services segment that
constituted the most number of
employees in financial year 2021, that
is 128.4 million Indians. Meanwhile,
the other two segments' number of
employees figured below 10 million
personnel each. Over the course of
the pandemic, employment within the
service sector as a whole, declined
significantly.
 
The IHS Markit India Services PMI (Purchasing Managers' Index) is based on data compiled from monthly
replies to questionnaires sent to purchasing executives in around 350 private service sector companies.
The index tracks variables such as sales, employment, inventories and prices. A reading above 50
indicates that the services sector is generally expanding; below 50 indicates that it is generally declining.
  The IHS Markit India Services PMI fell to 55.5 in December of
2021 from 58.1 in November, missing market expectations of
57.5 and pointing to the weakest reading since September, amid
concerns over another wave of COVID-19. Still, this was the fifth
straight month of expansion in the service sector, with new orders
rising for the fifth month running despite the rate of growth being
at a 3-month low. Meantime, export sales fell further due to curbs
around traveling, and employment dropped slightly on the back of
the fifth straight month of drop in outstanding business. On the
price front, input price inflation hit a three-month low, but the
figure was sharp and above its long-run average. Meanwhile,
output charges inflation moderated to the weakest since
September and was below trend. Looking ahead, sentiment
improved to a four-month high, but remained subdued in the
context of historical data, amid inflationary pressures and
potential new waves of COVID-19. 
 Number of
people employed
across major
sectors in India
in financial year
2021
(in millions)
 The Indian services sector was the largest recipient
of FDI inflows worth US$ 88.95 billion between April
2000 and June 2021. The services category ranked
1st in FDI inflow as per data released by the
Department for Promotion of Industry and Internal
Trade (DPIIT).

FDI In the first-half of 2021, private equity investments

in India stood at US$ 11.82 billion, as compared with
US$ 5.43 billion in the same period last year.

Inflow The IT sector in India received the highest share in

FDIs amounting to over 1.8 tillion Indian rupees in
fiscal year 2021, as of December 2020. The
infrastructure sector came sector amounting for over
500 billion rupees. The services sector witnessed a
significant decrease and lost its leading position.
In August 2021, the Department of
Telecommunications (DoT) issued a letter of intent
(LoI) to OneWeb (backed by Bharti Group) for
satellite communication services licence.
 Distribution of
foreign direct
investment
equity inflows in
India for
financial year
2021, by sector
(in billion
Indian rupees)
  By 2025, healthcare industry is expected
to reach US$ 372 billion.
 India’s digital economy is estimated to

Road reach US$ 1 trillion by 2025. By end of

2023, India’s IT and business services
sector is expected to reach US$ 14.3

Ahead
billion with 8% growth. India‘s IT and
business services market is projected to
reach US$ 19.93 billion by 2025.
 India's software service industry is
expected to reach US$ 1 trillion by 2030.
 Conclusion
The service sector in India has the highest employment elasticity among all sectors. Thus, it has
the potential for huge growth as well as the capability to deliver highly productive jobs - leading to
revenue generation. To address the challenge of job creation, the Skill India program aims to
achieve its target of skilling/ up - skilling 400 million people by 2022. It aims to do this mainly by
fostering private sector initiatives in skill development programs, and by providing them with the
necessary funding.

Similarly, the Make in India program - while attempting to bolster the manufacturing sector - will
cause a multiplier effect in adding to the portfolio of the Service Sector. In this context, the Startup
India initiative is a key enabler for both the manufacturing as well as service industry in India - by
offering to support innovative startups.
 References
https://www.indiabudget.gov.in/economicsurvey/
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vol2.pdf#:~:text=However%2C%20credit%20growth%20to%20the%20serv
ices%20sector%20was,Hotels%20%26%20Restaurants%E2%80%99%2C
%20%E2%80%98Transport%20Operators%E2%80%99%2C%20and%20
%E2%80%98Other%20Services%E2%80%99
https://taxguru.in/finance/services-sector-economic-survey-2019-2020.html
https://www.ukessays.com/essays/economics/role-service-sector-economic
-8066.php#:~:text=Today%2C%20in%20India%20service%20sector%20ac
counts%20more%20than,contributing%20about%2056.5%20percent%20to
%20the%20Indian%20GDP.
https://tradingeconomics.com/india/services-pmi#:~:text=The%20IHS%20
Markit%20India%20Services%20PMI%20%28Purchasing%20Managers%
27,variables%20such%20as%20sales%2C%20employment%2C%20inven
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https://www.statisticstimes.com/economy/country/india-gdp-sectorwise.php
THANK
YOU!