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Let’s take a look at how has been the Contribution of the Service Sector to the Global Economy

Let’s take a look at how has been the Contribution of the Service Sector to the Global Economy

The Economic Survey 2021-22 which was tabled by Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman in Parliament on 31 January, a day ahead of the Union Budget 2022-23. It revealed that the services sector had contributed over 50% to India's GDP.

service sector

The Survey also noted that the Services Sector registered a steady recovery during the first half of the current fiscal year. “Overall, the Services Sector grew by 10.8% Year on Year (YoY) in the first half (H1) 2021-22", stated the Survey.

The overall Services sector GVA is expected to grow by 8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of uncertainty for near term, especially in segments that require human contact, the Survey emphasized.

FDI In Services

The Economic Survey noted that the Services Sector was the largest recipient of FDI inflows in India. During H1 2021-22, Services Sector received $ 16.73 billion FDI equity inflows. “Financial, Business, Outsourcing, R&D, Courier, Tech testing & Analysis along with the Education sub sector witnessed strong FDI inflows", mentioned the Survey.

Trade In Services

The Economic Survey highlighted that India had a dominant presence in global services exports. It remained among the top ten services exporter countries in 2020, with its share in world commercial services exports increasing to 4.1% in 2020 from 3.4% in 2019. “The impact of Covid-19 induced global lockdown on India’s services exports was less severe as compared to merchandise exports", stated the Economic Survey. The Survey further mentioned that despite Covid-19 impact on transport exports, double digit growth in gross exports of services, aided by exports of software, business and transportation services, resulted in an increase of 22.8% in net exports of services in H1 2021-22.

Sub-Sector Wise Performance

IT-BPM (Information technology - Business Process Management) Sector

The Economic Survey described the IT-BPM sector as a major segment of India’s services. During 2020-21, according to NASSCOM’s provisional estimates, IT-BPM revenues (excluding e-commerce) reached $ 194 billion, growing by 2.26% YoY, adding 1.38 lakh employees. The Survey further noted that within the IT-BPM sector, IT services constitute the majority share (>51%). The Economic Survey observed that over the last year, a number of policy initiatives have been undertaken to drive innovation and technology adoption in the sector, including relaxation of Other Services Provider regulations, Telecom Sector Reforms and Consumer Protection (e-commerce) Rules, 2020. “This would significantly expand access to talent, increase job creation and catapult the sector to the next level of growth and innovation", suggested the Survey.

Startups and Patents

The Economic Survey mentioned that Startups in India had grown remarkably over the last six years, most of which belonged to the Services Sector. More than 61,400 startups have been recognized in India as of January 10, 2022. Further, the Survey stated that India had a record number of Startups (44) reaching unicorn status in 2021. The Economic Survey also mentioned that intellectual property, specifically patents, were key to knowledge-based economy. “The number of patents filed in India has gone up to 58,502 in 2020-21 from 39,400 in 2010-11 and the patents granted in India has gone up to 28,391 from 7,509 during the same period", noted the Survey.

Tourism Sector

The Economic Survey stated that the tourism sector was a major contributor to GDP growth, foreign exchange earnings and employment, however, the Covid-19 pandemic had a debilitating impact on world travel and tourism everywhere, including India. Further, the Survey suggested that the resumption of International tourism will continue to depend largely on a coordinated response among countries in terms of travel restrictions, harmonized safety and hygiene protocols and effective communication to help restore consumer confidence. The Survey stated that special international flights have been operating under the Vande Bharat Mission which was currently in its 15th phase and had carried over 63.55 lakh passengers.

Ports, Shipping and Waterways Services

The Economic Survey observed that the development of ports was crucial for the economy. Ports handled around 90% of export-import cargo by volume and 70% by value. The Survey stated that the total cargo capacity of all ports had increased to 1,246.86 million Tonnes Per Annum (MTPA) as of March 2021 from 1052.23 MTPA in March 2014. Also, the Port traffic had picked up in 2021-22 registering a growth of 10.16% during April-November 2021, after being hit by disruptions caused by Covid-19 in 2020-21. The Survey also mentioned the Sagarmala Programme, a flagship programme, aimed at promoting port-led development in the country with 802 projects worth Rs. 5.53 lakh crore under its ambit.

Space Sector

The Economic Survey highlighted that since its inception in the 1960s, the Indian space program has grown drastically. Capabilities have been developed in the space sector across all domains including indigenous space transportation systems, space assets consisting of a fleet of satellites catering to various needs of the society. The Survey noted that the Government undertook various reforms in space sector in 2020, envisaging participation of the private sector in providing space-based services. These reforms included empowering New Space India Limited (NSIL) and changing the present supply-based model to demand-driven model; creating an independent nodal agency i.e., Indian National Space Promotion and Authorization Centre (IN-Space) under the Department of Space; and providing a predictable, forward-looking, well defined and enabling regulatory regime for space activities in the country.

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