SERVICE SECTOR & ITS IMPORTANCE IN NATIONAL INCOME

Service Sector in India today accounts for more than half of India's GDP.

The fact that the service sector now accounts for more than half the GDP and takes it closer to the fundamentals of a developed economy.

Services or the "tertiary sector" of the economy covers a wide gamut of activities like trading, banking & finance, infotainment, real estate, transportation, security, management & technical consultancy among several others.

INTRODUCTION

Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom) Banking Insurance Dwellings, Real Estate Business Services Public Administration; Defence Personal Services Community Services Other Services

The various sectors that combine together to constitute service industry in India are:

GDP Growth: In India, the growth rate of services in 2004-05, 2005-06

and 2006-07were 9.6 percent, 9.8 per cent and 11.0 per cent, respectively and is expected to grow at 9.9% in the 11th Plan.

the share of services in India’s GDP has increased from 37.6% in 1993 to 54.1% in 2005-06 and 54.9% in 2006-07.

If Construction is considered as services, this share will increase to 61.8 per cent. Thus, India is nearing the shares of countries like the US, where the share of services in GDP is 73% (2003).

IMPORTANCE OF SERVICE SECTOR IN NATIONAL INCOME

While there has been a services dominated growth, India is also moving to a services dominated export growth.

While merchandise export growth was 21% in 2006-07, services export growth rate in 2006-07 was 32.5% on top of a 31.7% growth in 2005-06.

While the $ 31.3 billion software services grew by 32.6% in 2006-07, the $31.1 billion non-software miscellaneous services (mainly including business services) neared the value of exports of software services with growth of 39.3% in 2006-07 on top of a 67.0% growth in 2005-06 and 150.3% growth in 2004-05.

SERVICE EXPORT GROWTH

The tertiary sector is the leading sector of growth in the Indian economy not only in terms of output, but also in terms of employment with India’s share of employment growth in the tertiary sector being higher than in manufacturing sector on Usual Principal Status (UPS) basis.

The importance of services in employment creation needs to be noted, particularly when India is competitive in many labor-intensive and skill-intensive services and there is a huge market (both domestic & external) including outsourcing to India, which needs to be tapped further.

EMPLOYMENT AND SERVICES

This growth, employment and export oriented sector in India having a proven competitive advantage needs to be given its due attention. While inflation in some of the categories of services is less, the non-inclusion of services in the inflation index when its share in GDP is the highest is an anomaly which needs to be corrected soon. Tapping the export potential of this sector by suitable policies, negotiating at bilateral, plurilateral and multilateral levels to remove the different visible and invisible market access barriers, while removing our domestic regulations which may have outlined their utility and hinder the growth of this sector, utilising the opportunities thrown open by WTO in services sector, formulating suitable strategies for WTO where the stakes are high for India.

CONCLUSION

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