Chapter-9: Services Sector

What is the rank of India in terms of overall GDP?

• As per the UN National Accounts Statistics data, India’s ranking improved from 14th position in 2006 to 7th position in 2016, among the world’s 15 largest economies in terms of overall GDP.
• Among these top 15 economies, China (9.8 pp) recorded the highest increase in services share to Gross Value Added (GVA) during 2006-16, followed by India (7.1 pp) and Spain (7.0 pp).

World Investment Report 2017

• As per the World Investment Report 2017 published by United Nations Conference on Trade and Development (UNCTAD), following a surge in foreign investment in 2015, global FDI flows fell by 2 per cent in 2016, to US $1.75 trillion, amid weak economic growth.
• Global FDI flows are projected to increase by about 5 per cent in 2017. The services sector accounted for two thirds of global FDI stock in 2015, though a large part of this relates to affiliates of primary sector and manufacturing multinational enterprises (MNEs) that perform services-like activities, and fall under services as a default category.
• The share of services in total value of announced Greenfield projects increased to 58.2 per cent in 2016 from 54.1 per cent in the previous year.

State-wise Comparison of Services

• Out of the 32 States and Union Territories(UTs) for which data are released for new base 2011-12 series by CSO, the services sector is the dominant sector, contributing to more than half of the gross state value added (GSVA) in 15 states and UTs.
• The major services in most of the states are trade, hotels and restaurants, followed by real estate, ownership of dwellings and business services. However, there is wide variation in terms of share and growth of services GSVA.
• Out of the 32 states and UTs for which data are available for 2016-17 (or latest year for which data are available), in terms of services GSVA share, Delhi and Chandigarh are at the top with over 80 per cent share, while Sikkim is at the bottom with 31.7 per cent share.
• In terms of services GSVA growth, Bihar is at the top and Uttar Pradesh at the bottom with 14.5 per cent and 7.0 per cent growth.

What are the key measures taken by government to attract investment?

In the last three years, the Government has undertaken a number of reforms to ensure that India remains an increasingly attractive investment destination, which include

• Announcement of National Intellectual Property Rights (IPR) policy,
• Implementation of GST,
• Reforms for ease of doing business that resulted in improving India’s ranking by 30 position.
• The scale of reforms can be gauged from the fact that during this period, 25 sectors also including services activities and covering 100 areas of FDI policy have undergone reforms.
• FDI policy provisions were radically overhauled across sectors such as construction development, broadcasting, retail trading, air transport, insurance and pension. At present, more than 90 per cent of FDI inflows are through automatic route.
• After the successful implementation of the e-filing and online processing of FDI applications by the Foreign Investment Promotion Board (FIPB), the Government announced to phase out the FIPB in the Union Budget 2017-18.
• Recently, on 10th January 2018, Union Cabinet approved amendments in FDI policy allowing 100 per cent FDI under automatic route for Single Brand Retail Trading. Foreign airlines also have been allowed to invest up to 49 per cent in Air India.

What are key trends in service sector in India?

• India remained the eighth largest exporter of commercial services in the world in 2016 (WTO, 2017) with a share of 3.4 per cent, which is double the share of India’s merchandise exports in the world at 1.7 percent. Moreover, the ratio of services exports to merchandise exports increased from 35.8 per cent in 2000-01 to 58.2 per cent in 2016-17 indicating the growing importance of the services sector in India’s exports.
• To boost services exports, the Government in its mid-term Review of Foreign Trade Policy 2015-2020, has increased incentives under Services Exports from India Scheme (SEIS) by 2 per cent, leading to an additional annual incentive of Rs. 1,140 crore which could help services exports including Hotel & Restaurant, Hospital, Educational services, etc. Although world trade volume of goods and services is projected to accelerate in 2018, enhanced global uncertainty, protectionism and stricter migration rules would be key factors in shaping India’s services exports.

What are survey notes on Tourism?

• As per the latest World Tourism Barometer of the United Nation’s World Tourism Organization (December, 2017 edition) international tourist arrivals reached a total of 1.2 billion in 2016, 46 million more than in the previous year, though the growth rate of 3.9 per cent was lower than in 2015 (4.6 per cent). In India, the Tourism sector has been performing well with Foreign Tourist Arrivals (FTAs) growing at 9.7 per cent to 8.8 million and Foreign Exchange Earnings (FEEs) at 8.8 per cent to US$ 22.9 billion in 2016.
• In terms of number of domestic tourist visits, Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Madhya Pradesh, and Karnataka were the top 5 destination States, accounting for 61.3 per cent of total number of tourist visits in 2016. Amongst centrally protected ticketed monuments, for domestic visitors, Taj Mahal was the most visited monument in 2016 followed by Qutub Minar and Red Fort, while for foreign visitors Taj Mahal was the most visited monument, followed by Agra Fort and Qutub Minar.

Various initiatives have been taken by the Government to promote tourism

• Recent measures include the introduction of the e-Visa facility under three categories of Tourist, Medical and Business for the citizens of 163 countries; launch of Global Media Campaign for 2017-18 on various Channels; launch of ‘The Heritage Trail’ to promote the World Heritage Sites in India, launch of International Media Campaign on various international TV channels; Celebration of ‘Paryatan Parv’ having 3 components namely ‘Dekho Apna Desh’ to encourage Indians to visit their own country, ‘Tourism for All’ with tourism events at sites across all states in the country, and ‘Tourism & Governance’ with interactive sessions & workshops with stakeholders on varied themes. FTAs on e-Tourist Visa grew by 143 per cent to 10.8 lakh in 2016, and further grew by 57.2 per cent to 17.0 lakh during 2017

What are survey notes on Real Estate and Housing?

• The share of real estate sector which includes ownership of dwellings accounted for 7.7 per cent in India’s overall GVA in 2015-16. The growth of this sector decelerated in the last three years from 7.5 per cent in 2013-14 to 6.6 per cent in 2014-15 and further to 4.4 per cent in 2015-16. This was mainly due to the growth of ownership of dwelling segment having a share of 6.8 per cent in overall GVA decelerating from 7.1 per cent in 2013-14 to 3.2 per cent in 2015-16. The growth of the construction sector which includes buildings, dams, roads, bridges, etc. has decelerated to 1.7 per cent in 2016-17 from 5.0 per cent in 2015-16.
• Residential launches across top 14 cities in India during H1 2017 fell to the lowest in past five years to about 58,000 units as per the National Real Estate Development Council (NAREDCO).
• As per NHB RESIDEX, housing price index has shown increasing annual trend in 36 cities during April-June 2017 out of 50 major cities, with Vizag recording the highest increase of 15.7 per cent, Delhi recording 8.1 per cent, and NOIDA recording the lowest increase of 0.9 per cent.
• Real estate and construction together, is the second largest employment provider in the country, next only to agriculture. It employed over 40 million workforce in 2013, and as per projections is slated to employ over 52 million workforce by 2017, and 67 million workforce by 2022.

What are survey notes on Research and Development in India?

• India’s gross expenditure on R&D has been low at around 1 per cent of GDP. India currently ranks 60th out of 127 on the Global Innovation Index (GII) 2017, though this ranking has improved from 66th rank in 2016. Among the BRICS countries only South Africa is behind India in R & D expenditure ranking.
• As per the CSO’s new method, there is no separate head for Research and Development (R&D), which is now a part of the professional scientific & technical activities. These services grew by 17.5 per cent and 41.1 per cent in 2014-15 and 2015-16 respectively. India-based R&D services companies, which account for almost 22 per cent of the global market, grew at 12.7 per cent.

Steps taken to promote the R&D sector in India

• The government has taken many initiatives to promote the R&D sector in India, which include among others establishing the Atal Innovation Mission (AIM) in the National Institution for Transforming India (NITI) Aayog. Some other initiatives related to R&D include the following.
• The agreement between India and Israel in 2016 to enhance bilateral cooperation in science and technology provides US$ 1 million from each side in the next two years to support new R&D projects in the areas of big data analytics in healthcare and cyber security.
• The Ministry of Environment, Forest and Climate Change (MoEFCC) has announced an R&D initiative to develop next generation sustainable refrigerant technologies as alternatives to the currently used refrigerant gases like hydrofluorocarbons (HFCs), in order to mitigate its impact on the ozone layer and climate.
• The Department of Industrial Policy and Promotion (DIPP) aims at lowering the time taken to clear pending Intellectual Property Rights (IPR) applications.
• The Department of Scientific & Industrial Research (DSIR) is operating a scheme for granting recognition & registration to in-house R&D units established by corporate sector, such as, development of new technologies, design & engineering, process/product/design improvements, developing new methods of analysis & testing, research for increased efficiency in use of capital equipment, materials & energy, pollution control, effluent treatment, recycling of waste products etc.