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Growing service sector in

Indian economy

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GROUP MEMBERS

APRANTA

KHUSHBOOJAYDEEP

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DEFINATION The segment of the economy that

provides services to its consumers. This

includes a wide range of businessesincluding financial institutions, schools,transports .. Also known as "tertiary sector of

industry," or "service industry

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The various s ect ors th a t c ombin e t og ethe r t oc ons t i t u te s e rvi ce indus t ry ar e:

H otels and RestaurantsOther Transport and storageRailwaysCommunication(Post ,Telecom)Banking, InsuranceDwellings, Real estate s

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Public Administration ;DefancePersonal serviceCommunity serviceOther servicesBusiness service

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OVERVIEW OF INDIA S

SERVICE SEC TORIndia stands out from other emerging economy

because its growth has been led by the service

sector.The Sector constitutes a large part of the Indianeconomy both in terms of employment potentialand its contribution to national income.The services sector contributes more than half of,the GDP in India, i.e.,55.8%(2007-08)and60.7% as per the recent data.

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REASONS FOR GROWTH OFSERVICE SEC TOR

Both demand and supply factors have led to this

growth.

On the demand side, the high growth of servicesoutput was mostly attributed to factors such as

increasing input usage of services by other sectors,mainly manufacturing sector (i.e. higher domesticdemand); higher foreign demand due to trade

liberalization; and high income elasticity for services .

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On the supply side, the increased trade inservices following trade liberalization policiesand other reforms in the 1990s induced thisgrowth .

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CURRENT SCENARIO

Services sector in future providing about 70 per cent of the new job opportunities in the economy.

Share of agriculture in total employment alreadyfalling, in the coming years, the share of serviceswould increase.

New employment possibilities in the services

sector are in the field of construction trade,transport, storage, Financial services,communication and personal service

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E mployment in manufacturing would alsoexpand, but its contribution to the totalincrease in employment would only be around17 percentage.

.

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SERVICE-BEFORE AND AF TER

LIBERALISA TIONBefore liberalization Services was the residual sector drawing refugees from agriculture.The share of services in GDP was 28.2% in 1950s and it roseconsistently over the period of the five decades and stood at44% in the 1990s.The service sector's share finally rose from 43.69 per cent in1990-91 to 51.16 per cent in 1998-99.

Between 1996 and 2005- the impact of Indias externalliberalization, domestic economic reforms and the rise of aglobal market for skilled services facilitated by informationtechnology makes itself felt, share of services in Indias GDPgrew from just over 40% to about 54%.

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COMPARISON OF SERVICES AS A SHARE

OF GDP WITH OTHER COUNTRIES .

0

1

2

3

4

5

6

78

9

UNITED

STATES

UNITED

KINGDOM

MEXICO RUSSIA INDIA BRAZIL CHINA

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SECTORAL GROWTH PERFORMANCE

OF THE ECONOMY

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Th ree major service sectors t h at h ave seenremarkable growt h are

communication, transportation and financialservices.

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SERVICE TAX-A SOURCE OF

REVENUEThe number of services being taxed in India hasincreased progressively from 3 in 1994-95 to about 92 in2006-07.The services tax was imposed at the rate of5% this hasnow been increased to 12%.There has also been a substantial growth in assesses

base, which increased from 3,493 in 1994-95 to 7,74,988in 2004-05.The collection of the services tax revenue has witnessed asubstantial expansion since 1994-95, rising from Rs. 407crore in 1994-95 to Rs. 23,000 crore in 2005-06.

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SERVICE SEC TOR-COMPONENT OFINDIRECT TAX.

Further, services tax is emerging as an important componentindirect taxes.The share of services tax in indirect taxes has increased morethan twenty-folds from a mere 0.6 per cent in 1994-95 to 13 per cent in2005-06.

Almost 60 per cent of the GDP is contributed by the servicessector alone. The growth in absolute quantum of GDP and higher

proportion of services sector therein holds promise for a larger revenue generation.

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EFFECTS OF U.S. RECESSION ON

INDIAN SERVICE SECT

OR Not much effect as Indian Service Sectors boomattributed to the hike in internal consumption andthe per capita income of Indian lot.Certain sectors led by IT/IT E S which makesubstantial amount of export toUS are incurringlosses.

Services like tourism, health care, educationengineering, communication, transportation, finance, IT, banking will continue it boom.

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CONCLUSIONService Sector of Indian E conomy contributes toaround 55 percent of India's GDP during 2006-07and 60.7%as per recent data.Services like tourism, health

care, education, engineering, communication, transportation, finance, IT, banking is continuously

booming .

India stands out from other emerging economies because its growth has been led by the servicesector.

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THANKING YOU .