PATUCK GALA COLLEGE OF COMMERCE & MANAGEMENT

Name: Ahmed A.Q. Khatri.

Class: T.Y.B.M.S.

Roll no: 25

Subject: Service sector management.

Assignment on: Service Sector in the future of Indian Economic.

Submit to: Ravindra Sir.

INDEX
Sr no 1. 2. 3. 4. 5. 6. 7. 8. 9.
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TOPIC
What is service sector Issues for service providers What is service sector in India What is Indian Economic Sectoral Shares In GDP
On what Economic development in India still depends on

Page no
1 2 2-4 4-5 6 6-7 7-9 9-12 13 14

Role of Service sector in Indian Economic Service Sector in the future of Indian Economic Conclusion Bibliography

What is service sector:

The tertiary sector of the economy (also known as the service sector or the service industry) is one of the three economic sectors, the others being the secondary sector (approximately the same as manufacturing) and the primary sector (agriculture, fishing, and extraction such as mining). The service sector consists of the soft parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. The basic characteristic of this sector is the production of services instead of end products. Services (also known as intangible goods) include attention, advice, experience, and discussion. The production of information is generally also regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector. The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer, as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods. For the last 30 years, there has been a substantial shift from the primary and secondary sectors to the tertiary sector in industrialised countries. This shift is called tertiarisation. The tertiary sector is now the largest sector of the economy in the Western world, and is also the fastest growing sector. It may surprise you but there has always been a large Service sector before the 20th Century about 1/3 of all people worked in the service sector. The servants in the 'Big Houses' were in the service sector. Anything that provides a service, is the service sector. So Banking, Insurance, cleaning, Education etc.The service sector covers just about all jobs that are NOT related to manufacturing or resource extraction (mining, farming, etc.).
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Issues for service providers:

Service providers face obstacles selling services that goods-sellers rarely face. Services are not tangible, making it difficult for potential customers to understand what they will receive and what value it will hold for them. Indeed some, such as consultants and providers of investment services, offer no guarantees of the value for price paid. Since the quality of most services depends largely on the quality of the individuals providing the services, it is true that "people costs" are a high component of service costs. Whereas a manufacturer may use technology, simplification, and other techniques to lower the cost of goods sold, the service provider often faces an unrelenting pattern of increasing costs. Differentiation is often difficult. For example, how does one choose one investment adviser over another, since they often seem to provide identical services? Charging a premium for services is usually an option only for the most established firms, who charge extra based upon brand recognition. Most service providers who have a manual system cannot analyze the pattern of inflow of work, nor can they differentiate between potentially profitable and inactive sources of project leads. Communication with clients suffers due to inappropriate contact schedules and project status. Different projects have variable costs and billings, which are difficult to accumulate and corelate. Manual billing process is time consuming and prone to errors. Managing Subscription / Registration information on various websites becomes a problem because so many passwords have to be remembered and subscription renewal dates and prices have to be managed. Various stages of development of different projects is difficult to estimate through a manual system.

What is service sector in India:

Service Sector in India today accounts for more than half of India's GDP. According to data for the financial year 2006-2007, the share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively.
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The fact that the service sector now accounts for more than half the GDP marks a watershed in the evolution of the Indian economy 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. The Services Sector constitutes a large part of the Indian economy both in terms of employment potential and its contribution to national income. The Sector covers a wide range of activities from the most sophisticated in the field of Information and Communication Technology to simple services pursued by the iformal sector workers, for example, vegetable sellers, hawkers, rickshaw pullers, etc. The following broad grouping of activities can be considered to form part of the Services Sector. The various sectors that combine together to constitute service industry in India are:

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

There was marked acceleration in services sector growth in the eighties and nineties, especially in the nineties. While the share of services in India's GDP increased by 21 per cent points in the 50 years between 1950 and 2000, nearly 40 per cent of that increase was concentrated in the nineties.
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While almost all service sectors participated in this boom, growth was fastest in communications, banking, hotels and restaurants, community services, trade and

business services. One of the reasons for the sudden growth in the services sector in India in the nineties was the liberalisation in the regulatory framework that gave rise to innovation and higher exports from the services sector. The service industry forms a backbone of social and economic development of a region. It has emerged as the largest and fastest-growing sectors in the world economy, making higher contributions to the global output and employment. Its growth rate has been higher than that of agriculture and manufacturing sectors. It is a large and most dynamic part of the Indian economy both in terms of employment potential and contribution to national income. It covers a wide range of activities, such as trading, transportation and communication, financial, real estate and business services, as well as community, social and personal services. In India, services sector, as a whole, contributed as much as 68.6 per cent of the overall average growth in gross domestic product (GDP).

What is Indian Economic:

The Economy of India is the tenth largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). The country's per capita GDP (PPP) per capita is $3,339 (IMF, 129th) in 2010. Following strong economic reforms from the post-independence socialist economy, the country's economic growth progressed at a rapid pace, as free market principles were initiated in 1991 for international competition and foreign investment. Social democratic policies governed India's economy from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country towards a market-based economy. A revival of economic reforms and better economic policy in first decade of the 21st century accelerated India's economic growth rate. In recent years, Indian cities have continued to liberalise business regulations. By 2008, India had established itself as the world's second-fastest growing major economy.
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However, as a result of the financial crisis of 20072010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to

6.7% in 200809, but subsequently recovered to 7.4% in 200910, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period. Indias current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 20092010, according to the state Labour Bureau, was 9.4% nationwide, rising to 10.1% in rural areas, where two-thirds of the 1.2 billion population live. As of 2010, India's sovereign debt stood at 71.84% of GDP which is highest among BRIC nations. The Services Sector has been the most dynamic sector of the Indian economy, especially over the last ten years. Table shows the changes that have been taking place in the Services Sector over the last few decades. From a low level of 27.52 per cent of GDP in 1950-51, the share of services increased to 47.88 per cent in 1999-2000. Between 1950-51 and 1990-91, the share of Services Sector in GDP rose by only 13.07 percentage points, which is an increase of about 0.33 percentage points per annum. However, between 1990-91 and 1999-2000, the share had increased by 7.29 percentage points, which is an increase of 0.81 percentage points per annum. Clearly, the rate of growth is significantly higher in the 1990s.

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Sectoral Shares In GDP

(in per cent) Year 1950-51 1960-61 1970-71 1980-81 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 Agriculture # 59.19 54.74 48.12 41.82 34.92 34.08 34.17 33.54 32.94 30.58 30.86 29.03 29.03 27.49 Manufacturing 13.29 16.61 19.91 21.59 24.49 23.93 23.74 23.69 24.35 25.47 25.45 25.20 24.51 24.63 Services* 27.52 28.65 31.97 36.59 40.59 41.99 42.09 42.77 42.71 43.95 43.69 45.77 46.46 47.88

On what Economic development in India still depends on:

The various sectors that constitute the Indian economy agriculture, services and manufacturing industries. India is rated as one of the top economies in the world in terms of purchasing power parity (PPP) of the gross domestic product (GDP) by leading financial entities of the world, such as the International Monetary Fund, the World Bank, and the CIA (as referenced in the CIA World Factbook).
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As far as agriculture is concerned, India is the second largest in volume of output. Certain related sectors of agriculture have played a major role in the development of the Indian economy by providing employment to a number of people in the forestry, fishing and logging industries.

Role of Service sector in Indian Economic:

Service Sector of Indian Economy contributes to around 55 percent of India's GDP during 2006-07. This sector plays a leading role in the economy of India, and contributes to around 68.6 percent of the overall average growth in GDP between 2002-03 and 2006-07. There has been a 9.4 percent growth in the Indian economy during 2006-07 as against a rise of 9 percent in the same during 2006-06. During this growth in Indian economy, the service sector witnessed a rise of 11 percent in the year 200607 against the 9.8 percent growth in 2005-06. The service sectors of Indian economy that have grown faster than the economy are as follows:

Information Technology (the most leading service sectors in Indian economy). IT-enabled services (ITES). Telecommunications. Financial Services. Community Services. Hotels and Restaurants.

There has been a 13 percent hike in the service sectors of trade, hotels, transport and communication in India's economy as compared to the 10.4 percent rise in the previous year. The financial services that comprise of banks, real estate, insurance, and business services witnessed a rise of 11.1 percent during 2006-07 against the 10.9 percent growth in the previous year. Service sectors including community, social, and personal services experienced a growth of 7.8 percent during 2006-07 as against 7.7 percent growth in the previous year. The service sector of India has also witnessed a remarkable rise in the global market apart from the Indian market. It has experienced a rise of 2.7 percent in 2006 from that of 2 percent in 2004. The broad-based service in the trade sector has undergone a large-scale rise.
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A statistics concerning the growth of India's service sectors are listed below:

The software services in Indian economy increased by 33 percent which registered a revenue of USD 31.4 billion.

Business services grew by 82.4 percent. Engineering services and products exports grew by 23 percent and earned a revenue of USD 4.9 billion. Services concerning personal, cultural, and recreational had a growth of 96 percent. Financial services had a rise of 88.5 percent. Travel, transport, and insurance grew by 23 percent.

The software services in Indian economy along with the export of products is growing at a massive pace and thereby witnessed an alarming rise of 35.5 percent and reached a lumpsome amount of USD 18 billion. The IteS and BPO sectors grew by 33.5 percent and earned a revenue of USD 8.4 billion. The service sector of Indian economy has been the most high-powered sector in India's economy. It has also been focusing in various investments of late. As Indian economy is looking forward for more liberalization, sectors like banking are on its way to loom large and occupy a more significant position in India's economy. Although the Services Sector has a very pivotal role in the countrys economic development, the database in this Sector is highly disorganised. A major limitation of the existing statistical system in this respect is the absence of a well-organised mechanism for maintaining a regular and proper database for this Sector. Like the Annual Survey of Industries (ASI) that is devoted to collection of data from manufacturing and few other categories of units included in the lists maintained by the Chief Inspectors of Factories, there is no such scheme in the Services Sector for annual collection of data from the units either having a large number of workers or contributing significantly in terms of annual turnover. As stated already, NIC-98 is based on the ISIC (Revision 3), which was brought out a decade ago. But newer and newer types of services are coming into existences that have a parallel in other countries. Clearly, there is an urgent need to have an inventory of the emerging service areas and have a detailed classification of these.

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It may be desirable to have a classification of services in India such that it is comparable with other countries. In this context, the World Trade Organisations (WTOs) List of Services sheds important light on the various service areas that

have been recognised. While it is likely that the importance of many service areas may differ from country to country, it will be noticed from this List that none of the areas seem irrelevant for the Indian context. It is possible that the level of operation of some of these services may be very low at present in the Indian context, but with progressive development they will tend to change. With increasing communications and free flow of information, it is very likely that services, which seem unimportant today, could acquire significance in the near future. At any rate, the objective to study the WTOs list is to merely provide an indicative list of services. In the WTOs List of Services presented , an indication is given as to whether the various services listed are provided with specific Codes in the NIC-98 or not.

Service Sector in the future of Indian Economic:

Service sector is the lifeline for the social economic growth of a country. It is today the largest and fastest growing sector globally contributing more to the global output and employing more people than any other sector. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the economy. In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment etc. Indian Service Sector: In alignment with the global trends, Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times. The activities under the purview of the service sector are quite diverse. Trading, transportation and communication, financial, real estate and business services, community, social and personal services come within the gambit of the service industry. One of the key service industry in India would be health and education. They are vital for the countrys economic stability. A robust healthcare system helps to create a strong and diligent human capital, who in turn can contribute productively to the nations growth.
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Post Liberalization: The Indian economy has moved from agriculture based economy to a knowledge based economy. Today the IT industry and ITE'S industry are the dominant

industry in the service sector. Media and entertainment have also seen tremendous growth in the past few years. Indian Sub Service sectors: Information Technology Industry: The Information Technology industry has achieved phenomenal growth after liberalization. The industry has performed exceedingly well amidst tough global competition. Being knowledge based industry; India has been able to leverage the global markets, because of the huge pool of engineering talent available and the proficiency in English language among the middle class. ITES sector: The ITES sector has also leveraged the global changes positively to emerge as one of the prominent industries. Some of the services covered by the ITES industry would be:

Customer interaction services -Non voice and Voice. Back office, revenue accounting, data entry, data conversion, HR services. Medical Transcription. Content development and animation. Remote education, market research and GIS

Retailing: Prior to liberalization, India had one of the most underdeveloped retail sectors in the world. After liberalization the scenario changed dramatically. Organized retailing with prominence on self service and chain stores has changed the dynamics of retailing. In most of the tier I and tier II cities supermarket chains mushroomed, catering to the needs of vibrant middle class. This indirectly contributed to the growth of the packaged food industry and other consumer goods. Financial Services-Banking And Insurance: Prior to liberalization these two sectors were controlled and regulated by the government. Nationalized banks and insurance companies had a firm grip over the market.
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After liberalization the banking and insurance domain opened up for private participation.

Banking Sector: The three major changes in the banking sector after liberalization are: Step to increase the cash outflow through reduction in the statutory liquidity and cash reserve ratio. Nationalized banks including SBI were allowed to sell stakes to private sector and private investors were allowed to enter the banking domain. Foreign banks were given greater access to the domestic market, both as subsidiaries and branches, provided the foreign banks maintained a minimum assigned capital and would be governed by the same rules and regulations governing domestic banks. Banks were given greater freedom to leverage the capital markets and determine their asset portfolios. The banks were allowed to provide advances against equity provided as collateral and provide bank guarantees to the broking community.

Insurance Sector: The Insurance Regulatory and Development Authority Act 1999 (IRDA Act) allowed the participation of private insurance companies in the insurance sector. The primary role of IRDA was to safeguard the interest of insurance policy holders, to regulate, promote and ensure orderly growth of the insurance industry. The insurance sector could invest in the capital markets and other than traditional insurance products, various market link insurance products were available to the end customer to choose from. Some of the prominent insurance companies are:

Bajaj Allianz Insurance Corporation Birla Sun Insurance Co Ltd HDFC Standard Insurance Co Ltd ICICI Prudential Insurance Co Ltd Max New York Insurance Co Ltd Tata AIG Insurance Co Ltd

Future Trends:
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Globally outsourcing industry would continue to grow. Following the success of US and UK, more countries in the European Union would outsource their business.

Technological power shift from the West to the East as India and China emerge as major players. Political backlash over outsourcing would come down as companies reap the benefit of outsourcing.

Indian Telecom services Sector: The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. Status of Telecom services Sector: The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest in the world. The sector is growing at a speed of 45% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation. The Government has taken following main initiatives for the growth of the Telecom Sector.
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Conclusion:
The service industry forms a backbone of social and economic development of a region. It has emerged as the largest and fastest-growing sectors in the world

economy, making higher contributions to the global output and employment. Its growth rate has been higher than that of agriculture and manufacturing sectors. It is a large and most dynamic part of the Indian economy both in terms of employment potential and contribution to national income. It covers a wide range of activities, such as trading, transportation and communication, financial, real estate and business services, as well as community, social and personal services. In India, services sector, as a whole, contributed as much as 68.6 per cent of the overall average growth in gross domestic product (GDP) between the years 2002-03 and 2006-07. Because of this above information we can say that service sector is now a days very important in Indian economy & if there is no service sector there will be no development in the country & its economy.

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Bibliography:
Google.com Wikepediea.com Indian economy.com Yahoo answers.co.in

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Thank You.