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Service sector was having a robust performance in India for the last decade and by 2014-15 its contribution in the GDP had reached the record level of
• In 2016-17 the sector is estimated to have a growth rate of 8.8 per cent (almost same as 2015-16), as per the 1st advance estimates of the CSO, released January 2017.
• India’s commercial services exports increased from US$ 51.9 billion in 2005 to US$ 155.3 billion in 2015 (WTO).
• The share of India’s commercial services to global services exports increased to 3.3 per cent in 2015 from 3.1 per cent in 2014 despite negative growth of 0.2 per cent in 2015 as compared to 5.0 per cent growth in 2014. This was due to the relatively greater fall in world services exports by 6.1 per cent in 2015 (WTO).
• As per RBI’s BoP data, India’s services exports declined by 2.4 per cent in 2015-16 as a result of slowdown in global output and trade. However, in H1 of 2016-17, services exports increased by 4.0 per cent compared to 0.3 per cent growth in the same period of previous year.
• Growth of net services, which has been a major source of financing India’s trade deficit in recent years, was (-) 9.0 per cent in 2015-16 and
(-) 10.0 per cent in H1 of 2016-17 due to relatively higher growth in imports of services.
• Growth of software exports which accounted for 48.1 per cent share in services exports was 1.4 per cent in 2015-16 and 0.1 per cent in H1 of 2016-17.
• India’s tourism sector witnessed a growth of 4.5 per cent in terms of foreign tourist arrivals (FTAs) with 8.2 million arrivals in 2015, and a growth of 4.1 per cent in foreign exchange earnings (FEEs) of US$
21.1 billion. In 2016 (January-December), FTAs were 8.9 million with growth of 10.7 per cent and FEE (US$ terms) were at US$ 23.1 billion with a growth of 9.8 per cent.
A regional differentiation is found in India regarding the sector –
• Out of the 33 states and union territories(UT) for which data was available, the services sector was the dominant sector contributing more than half of the gross state domestic products (GSDP) in 21 states and UTs and more than 40 per cent in all states except Sikkim and Arunachal Pradesh. The major services in most of the states are trade, hotels and restaurants, followed by real estate, ownership of dwellings and business services.
• Out of the 23 states and UTs for which data is available for 2014–15, Delhi is at the top in services GSDP with a share of 87.5 per cent followed by Maharashtra at 63.8 per cent, with growth rates of 8.2 per cent and 5.7 per cent respectively.
• Puducherry had the highest services growth at 16.3 per cent followed by Meghalaya at 13.2 per cent, owing to increase in growth rate of high weighted sectors like trade, hotels and restaurants and real estate and business services in the case of the former and other services in the case of the latter.
• Jammu and Kashmir had the lowest services growth at 2.0 per cent, mainly due to low and negative growth in most of the sectors except public administration. Bihar’s services sector growth was among the
fastest with a consistent double-digit growth in the last seven years due to high growth in the high weighted sectors like trade, hotels and restaurants, and real estate and business services besides transport by other means.
Consultancy services are emerging as one of the fastest growing service segments in India, overlapping. A large number of consultancy firms and individual consultants are operating in India at various levels across the sectors.
Technical consulting constitutes about two-thirds of the total consulting market, while management consulting constitutes about one-third. Technical consulting in India, which mainly consists of engineering consulting, is much stronger than management consulting in terms of the number of players, consulting capabilities and size of consulting firms. The Indian management consulting market, on the other hand, is mainly captured by large size foreign multinational consulting firms. Though there are huge opportunities for the growth of the Indian consulting industry, there are some key inhibitors like low brand equity, inadequate international experience of Indian consultants working abroad, lack of local presence, lack of strategic tie-ups, low competency image, lack of market intelligence on consulting opportunities abroad and lack of a strong competency framework of consultants that improves quality in delivery of consulting assignments. The GoI has taken many initiatives to help the industry –
(i) Marketing Development Assistance and Market Access Initiative schemes;
(ii) Guidelines on broad policies and procedures for selection, contracting and monitoring of consultants; and
(iii) Initiatives aimed towards capacity development of domestic consultants and sensitisation of client organisations.
Recent initiatives taken by the GoI such as Make in India, development of smart cities, skill development, along with the focus on improving industrial policies and procedures, have opened up a plethora of opportunities for
consultants.
The key areas with enormous potential for Indian consultancy firms are: building of urban & transport infrastructure, power generation, renewable energy, electricity transmission & distribution, roads & bridges, water supply & sewerage, IT & telecom, health care and manufacturing. Emerging sectors such as bio-technology, nano-technology and other advanced disciplines also offer tremendous opportunities to consultants. Consultancy services can also look forward to deriving revenues from newer services and newer geographies with Big Data, cloud, M2M and Internet of Things becoming a reality.
It refers to the movement of goods and services across different geographical regions in the country. It includes self-employed and persons engaged in both wholesale and retail trade. Presently internal trade is governed by a diversity of controls, multiple organizations and a plethora of orders. This has resulted in a fragmented market, hindering the free flow of goods within the country, higher transportation costs and in general a lower level of efficiency and productivity. Unhindered flow of goods and services is an essential pre- requisite for building a common market that will promote growth, trade across regions and also enable specialization and higher levels of economic efficiency. Major highlights of the sector are as follows:
• The trade and repair services sector grew by 10.7 per cent in 2014–15.
• A report by KPMG-FICCI – late 2015, put the overall size of the Indian retail sector at Rs. 40 trillion in 2014 and projected it to reach Rs. 70 trillion by 2020 with a compound annual growth rate (CAGR) of 9.6 per cent.
• The penetration of modern retail is expected to reach 18 per cent from the current 9.8 per cent in this period, driven by the increasing appeal of modern retail among shoppers as well as changes in shoppers’ expectations and behaviour.
• It will be a key sector for skill of 58 million people by 2022 and accounting for 14 per cent of the incremental human resource and skill
requirement from 2013 to 2022. With organized retail penetrating the smaller towns and cities, there would be a need for skilled manpower in this sector.
• As per the AT Kearney’s Global Retail Development Index (GRDI) report, India’s retail trade ranking has risen to 15 from 20 in 2014, mainly due to solid expansion in retail sales and strong prospects for future GDP growth. India’s retail market is expected to grow to US$1.3 trillion by 2020, making India the world’s fastest-growing major developing market.
• Real estate availability could be the biggest barrier to retail expansion in India since it has four times the population of the United States but just one-tenth of the mall space. This market still has a long way to go as online remains just 0.5 per cent of the total retail market, internet penetration is just 20 per cent of the population, and infrastructure needs to improve significantly.
• As per the ASSOCHAM-Deloitte report (April 2015), E-commerce market has grown steadily from US$ 4.4 billion in 2010 to US$ 13.6 billion in 2014. Online travel accounts for nearly 61 per cent of e- commerce business while e-tailing constitutes about 29 per cent. Some estimates indicate that companies will spend between US $1 billion and US $2 billion on e-commerce-related infrastructure over the next five years.
• No official data is available on the direct selling/multi-level marketing (MLM) sector. According to a KPMG-FICCI study (December 2015), the direct selling market in India has grown at a CAGR of 16 per cent over the last five years from Rs. 41 billion in 2009–10 to Rs. 75 billion in 2013–14. Total employment in this sector is around 5.8 million. There is at present no separate legislation for regulation of direct selling activities, hence they come directly under the purview of the Prize Chits & Money Circulation Schemes (Banning) Act 1978, administered by the Department of Financial Services. As it is a banning act, there is no provision for differentiating the genuine direct selling business from banned pyramid/money circulation schemes, and this has resulted in alleged harassment/ criminal action against the industry. An inter-
ministerial committee was constituted on 12 November 2014 to examine the need for a separate legislation for this sector. Based on the decision taken in the last meeting, a draft guidelines is under examination.