Services sector could transform Indian economy

Deepak Kumar | The Dollar Business

President Pranab Mukherjee on Wednesday referred to the service sector’s exponential growth in the past, and its absolute potential in future, to transform India from a developing to a developed economy. He, however, stressed this would require a services-driven development strategy in line with the government’s policies and overall national development objectives.

“Services sector has emerged as an agent of change for the country. This sector drives the Indian economy in an inclusive and equitable manner. It is the ‘sector of the current millennium’, in terms of generating employment, skill development, bringing in FDI, enhancing trade and boosting strategic partnerships,” the President said on Wednesday.

The President was speaking at the inauguration of the second edition of Global Exhibition on Services – 2016, which was attended by the Communication & Information Technology Minister Ravi Shankar Prasad, Commerce Minister Nirmala Sitharaman, Minister for State (Independent Charge) for Culture, Tourism and Civil Aviation Mahesh Sharma and Confederation of Indian Industry (CII) President Naushad Forbes, at the India Expo Centre & Mart, Greater Noida.

The President cited India’s service sector as one of the fastest growing sectors in the world and said the GES, which is being attended by delegates and dignitaries from about 70 countries, could contribute to various geographical regions in providing skills and expanding trade.  

He highlighted that India’s service sector has achieved an annual growth rate of over 9% since 2001; and its contribution to the country’s GDP has escalated from 41% in 1990–91 to 66% in 2014–15.

“There exists a positive correlation between the extent of liberalisation and growth in different service subsectors in India. The services that have been liberalised the most in terms of trade and FDI policies have experienced higher growth rates and employment creation opportunities,” the President said in his speech.

Mukherjee also unveiled a report, jointly published by Confederation of Indian Industry (CII) and KPMG, which highlighted India's services sector contribution to India's Gross Domestic Product (GDP) at close to 10% in 2015-16.

The report indicated that the government is betting big on India’s services exports, which on average, accounts for 53% of the country's GDP, 51% for foreign direct investment (FDI) and 28% for employment, to balance the country’s merchandise exports crisis, as the outbound shipments contracted for the 16th straight month in March at 5.47%.

The services sector, comprises of education, entertainment, finance, healthcare, informational technology (IT), logistics, professional services, retail, telecommunication, tourism & hospitality. The government is confident  that this sector alone will establish India as a global services hub and put the economy on a path of unprecedented growth rate.