Global Trends in Services Sector 2016

Currently, Services Sector stands as most dynamic sector of the global economy. This sector contributes:

• Around 1/3rd of global Gross Value Added (GVA)
• Around half of employment
• Around 1/5th of global trade
• Around half of the world foreign direct investment flows

However, in last thirteen years, the share of services in world gross value added (GVA) has declined by 2.7 percentage points.

Top service provides of world

Among the world’s top 15 countries in terms of GDP, the US ranks first in both services GVA and overall GDP, and followed by China in second and Japan in third position. India ranked ninth in terms of overall GDP and tenth in terms of services GVA in 2014.

The compound annual growth rate (CAGR) of world services in the post crisis period (2010-14) at 2.5 per cent was lower than the 3.0 per cent in the pre-crisis period (2001-8).

However, India showed the fastest service sector growth with a CAGR of 8.6 per cent. In 2014 India’s service sector growth at 10.3 per cent was noticeably higher than that of China at 8.0 per cent.

As per the latest data estimates, China, India and the US show positive signs for the service sector growth. In India, the growth rate in the sector was at 10.3% in 2014. It continued to be high though there was slight deceleration at 9.2% in 2015-16.

World Services Employment

As per the World Bank, the share of services in global employment has increased by 15 pp from 35.9% in 2001 to 50.9% in 2010. In India, the share of services sector to total employment is lowest at 28.7%. Of the 15 countries, in the last 13-year period between 2001 and 2014, China had the highest increase in the share of services employment (34.3 pp), followed by Brazil (17.2 pp) and Spain (14.3 pp). For India, the increase was by only 4.7 pp.

World Services Trade

The CAGR of world commercial services exports during the post-crisis period decelerated to 6.4%compared to the 15% during the pre-crisis period. In the pre-crisis period, the services export CAGR of India was the fastest at 30.1%, followed by China at 25.9%. However, during the post crisis period, it decelerated in both India and China, with Mexico registering the highest growth at 8.4%, followed by China at 7.9% and India at 7.5%.

Foreign Direct Investment in World Services Sector

As per the World Investment Report 2015, the shift towards services FDI has continued over the past 10 years in response to increasing liberalization in the sector, the increasing tradability of services and the growth of global value chains in which services play an important role. In 2014, services accounted for 51% of global FDI projects. {Source- Economic Survey India 2015-16}