Service Sector in India

Last Updated: May 2013 Indian Services Sector: Brief Overview The Indian service sector accounts for a large part of the Indian economy be it in terms of employment potential or its contribution to the national income. Making-up for almost 60 per cent of Asias third largest economy, the industry spans from sophisticated fields like telecommunications, satellite mapping, and computer software to simple services like those performed by the barber, the carpenter, and the plumber; highly capital-intensive activities like civil aviation and shipping to employment-oriented activities like tourism, real estate, and housing; infrastructure-related activities like railways, roadways, and ports to social sector related activities like health and education. Thus, there is no concrete and definite definition of services. Key Statistics The share of services in Indias gross domestic product (GDP) at factor cost (at current prices) has expanded from 33.3 per cent in 1950-51 to 56.5 per cent in 2012-13 as per Advance Estimates (AE). Including construction, the contribution would increase to 64.8 per cent for 2012-13. Trade, hotels and restaurants as a group is the largest contributor (18 per cent) among the various services sub-sectors, followed by financing, insurance, real estate, and business services with a 16.6 per cent share The HSBC Markit services Purchasing Managers' Index (PMI), which gauges business activity from a survey of over 400 companies ranging from banks to hospitals, stood at 50.7 in April 2013

Indian service sector enjoyed foreign direct investment (FDI) inflows amounting to US$ 4.75 billion during April-February 2012-13, according to the recent statistics released by the Department of Industrial Policy and Promotion (DIPP)

Recent Investments/ Developments Jet Airways has ventured with CentrumDirect (one of Indias leading financial services groups), to offer Foreign Exchange Services to guests travelling abroad. The clients, or the guests, can avail this facility online by providing the stipulated details on the airlines Web site www.jetairways.com. They will be then contacted by the authorised representatives from CentrumDirect in order to complete transaction CentrumDirect offers 30 leading world currencies, travellers cheques and prepaid travel cards. across over 40 cities within India The US$ 4 billion-media conglomerate - Essel Group has forayed into the Indian financial services sector. It has set up two businesses, private equity (PE) and investment banking, under the names of Essel Finance Managers and CAPSTAR, respectively, under the holding company, Essel Financial Services. CAPSTAR, to focus on deals in

infrastructure, real estate and financial services, has set up an office each in Mumbai, Noida, Bangalore and Delhi and will open one each in Chennai and Pune. The firm will focus on mergers and acquisitions (M&A), pre-Initial Public Offering (IPO) deals, qualified institutional placements (QIPs) and portfolio management services

Lindstrom- a Finland based company - supplies work-wear to a host of companies in India from its service centres in Delhi, Mumbai, Kolkata, Chennai, Hyderabad and so on. Its clients are largely in the businesses of pharmaceuticals, hospitals, electrical, automotive and retail which involve corporate uniforms. Lindstrom is now hunting for more opportunities in India from smaller cities and towns Canadas largest insurer Manulife Financial is contemplating to enter Indian insurance sector. The company is actively doing a market research to find a viable business model to set up its shop here. The Indian insurance sector is home to many other foreign players like Allianz, Prudential, Standard Life, Aviva,Aegon and Nippon Life, which are present in the market through joint ventures (JVs)with their respective Indian partners

Government Initiatives Realising the value of growth the Indian economy is getting due to service-orientation, the government is making all the efforts to sustain the countrys position as a strategic service industry on the global platform, and hence, keeps introducing norms and policies for the betterment of related infrastructure and auxiliaries. The Indian Government has taken many policy initiatives to liberalise the FDI policy for the services sector. These include liberalising the policy on foreign investment for companies operating in the broadcasting sector, like increasing the foreign investment limit from 49 per cent to 74 per cent in teleports (setting up up-linking HUBs/teleports) and direct to home (DTH) and cable networks, and permitting foreign investment of up to 74 per cent in mobile TV. Foreign airlines have also been permitted to make investment up to 49 per cent in scheduled and nonscheduled air transport services. Last but not the least; it has permitted FDI, up to 51 per cent, in multi-brand retail trading and amended the existing policy on FDI in single-brand product retail trading. Road Ahead As the array of Indian service sector is very vast, the forecasts made pertaining to various subsectors are also numerous. For instance, the 'India Food Service Report 2013', prepared by the National Restaurant Association of India (NRAI) estimates that the Indian food service industry (having current size of about Rs 2,47,680 crore (US$ 44.54 billion) would be around Rs 4,08,040 crore (US$ 73.39 billion) by 2018. Meanwhile, the online advertising market is anticipated to reach Rs 2, 938 crore (US$ 528.41 million) by March 2014, according to the findings made by the Internet and Mobile Association of India (IAMAI) and IMRB International. The online advertising market in India, comprising

search, display, mobile, social media, email and video advertising, which was valued at Rs 1,750 crore (US$ 314.85 million) in March, 2012 has grown by 29 per cent over the previous year to reach Rs 2, 260 crore (US$ 406.62 million) by March, 2013. On the other hand, Indias mobile services market is expected to touch Rs 1.2 lakh crore (US$ 21.58 billion) of revenues in 2013, an 8 per cent increase from Rs 1.1 lakh crore (US$ 19.78 billion) posted in 2012. Mobile connections would grow to 770 million in 2013, an 11 per cent increase from 712 million connections of 2012, according to a report by research and analysis firm Gartner. Exchange Rate Used: INR 1 = US$ 0.01798 as on May 24, 2013 References: Media Reports, Press Releases, DIPP publication, Press Information Bureau, Indian budget publication, MOSPI document