Index

Introduction
Reforms in service sector
Growth in service sector
Booming service sector
Will the growth of service sector substained?
Role of service sector in development
Conclusion
Bibliography
Banking Sector
An extensive financial and banking sector supports the rapidly expanding Indian Economy. India boasts
of a wide and sophisticated banking network. The sector also has a number of national and state level
financial institutions. These include foreign and institutional investors, investment funds, equipment
leasing companies, venture capital funds, etc. Further, the Country has a well-established stock market,
comprising 23 stock exchanges, with over 9,000 listed companies. Total market capitalization, on the
two dominant stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange
(NSE), stood at Rs. 6,926 billion and Rs. 7,604 billion respectively, at the end of December 2000. The
Indian capital markets are rapidly moving towards a market that is modern in terms of infrastructure as
well as international best practices such as derivative trading with stock index futures, addition to the
list of compulsory Demat trading and rolling settlement in certain specified shares, commencement of
internet based trading, etc.

Travel and Tourism

Though being a traditional segment of the services sector, development of travel and tourism industry
has been accelerated in the recent past on account of expansion in the business
and trading activities, improved standards of living and changing lifestyles of the masses, and different
kind of fiscal measures. India is becoming increasingly popular for foreign visitors from
the point of medical attendance, cultural activities, historical developments and tourism. This has
resulted in country witnessing increasing number of inbound tourists and thereby excellent
growth in foreign exchange earnings.

Real Estate
The real estate activities in India has remained buoyant in recent times and is also witnessing a number
of changing trends within the country; besides attracting vast interest from foreign
players.

Aviation

The central government has constituted a high powered group of ministers (GoM) headed by External
Affairs minister Pranab Mukherjee to which the proposed new civil aviation policy,
known as ‘Vision 2020’, has been referred as the cabinet ministers could not reach to an unanimous
decision on the crucial aviation policy, which focuses on the revamping of theAirports Authority of India
(AAI) and recommends far-reaching changes in the country’s aviation sector.

CONCLUSION

Services Sector Growth Rate in India GDP registered a significant growth over the past few years. The
Indian government must take steps in order to ensure that Services Sector Growth Rate in India GDP
continues to rise. For this will ensure the growth and prosperity of the country's economy.

BIBLIOGRAPHY
 http://services.indiabizclub.com/info/service_sector

http://business.mapsofindia.com/india-gdp/sectorwise/services-sector-growth-rate.html

file:///C:/Documents%20and%20Settings/Administrator/Desktop/service/index.html

file:///C:/Documents%20and%20Settings/Administrator/Desktop/service/service.shtml

file:///C:/Documents%20and%20Settings/Administrator/Desktop/service/major-economic-sectors.html

Introduction
Service Sector the part of industry or business which deals
with the marketing and selling of intangible products rather than
physical goods.
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. 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 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. 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 liberalization in the regulatory framework that
gave rise to innovation and higher exports from the services
sector.
The boom in the services sector has been
relatively "jobless". The rise in services share in GDP has not
accompanied by proportionate increase in the sector's share of
national employment. Some economists have also cautioned that
service sector growth must be supported by proportionate growth
of the industrial sector, otherwise the service sector grown will not
be sustainable. In the current economic scenario it looks that the
boom in the services sector is here to stay as India is fast
emerging as global services hub.
The companies, organizations, and activities in
an economy that provide services such as banking, transport,
tourism etc, rather than manufacturing goods. Corporate Sector’s
2007 Q4 performance higher than Q4 2006 thanks to a booming
service sector; while agriculture is growing at 3%, industry at
9.4%, services are highest, at 11.2%

Reforms in service sector

IN telecom sector :
Liberalization and reforms in Telecom sector since early 1990's till date are briefed
below:

1991-92:

1. On 24th July 1991, Government announced the New Economic Policy.

2. Telecom Manufacturing Equipment license was delicensed in 1991.
3. Automatic foreign collaboration was permitted with 51 per cent equity by the
collaborator.

1992-93:

Value added services were opened for private and foreign players on franchise or license
basis. These included cellular mobile phones, radio paging, electronic mail, voice mail,
audiotex services, videotex services, data services using VSAT's, and video conferencing.

1994-95:

1. The Government announced a National Telecom Policy 1994 in September 1994. It

opened basic telecom services to private participation including foreign investments.
2. Foreign equity participation up to 49 per cent was allowed in basic telecom services, radio
paging and cellular mobile. For value added services the foreign equity cap was fixed at 51
per cent.
3. Eight cellular licensees for four metros were finalized.
1996-97:

1. TRAI was set up as an autonomous body to separate the regulatory functions from policy
formulations and operational functions.
2. Coverage of the term "infrastructure" expanded to include telecom to enable the sector to
avail of fiscal incentives such as tax holiday and concessional duties.
3. An agreement between Department of Telecommunication (DoT) and financial institutions
to facilitate funding of cellular and basic telecom projects.
4. External Commercial Borrowing (ECB) limits on telecom projects made flexible with an
increased share from 35 per cent to 50 per cent of total project cost.
5. Internet Policy was finalized.

1998-99:

FDI up to 49 per cent of total equity, subject to license, permitted in companies providing
Global Mobile Personal Communication (GMPC) by satellite services.

1999-00

1. National Telecom Policy 1999 was announced which allowed multiple fixed Services
operators and opened long distance services to private operators.
2. TRAI reconstituted: clear distinction was made between the recommendatory and
regulatory functions of the Authority.
3.  DOT/MTNL was permitted to start cellular mobile telephone service.
4. To separate service providing functions from policy and licensing functions, Department
of Telecom Services was set up.
5. A package for migration from fixed license fee to revenue sharing offered to existing
cellular and basic service providers.
6. First phase of re-balancing of tariff structure started. STD and ISD charges were reduced
by 23 per cent on an average.
7. Voice and data segment was opened to full competition and foreign ownership increased
to 100 per cent from 49 per cent previously.

2000-01:

1. TRAI Act was amended. The Amendment clarified and strengthened the recommendatory
power of TRAI, especially with respect to the need and timing of introduction of new
services provider, and in terms of licenses to a  services provider.
2. Department of Telecom Services and Department of Telecom operations corporatized by
creating Bharat Sanchar Nigam Limited.
3. Domestic long distance services opened up without any restriction on the number of
operators.
4. Second phase of tariff rationalization started with further reductions in the long distance
STD rates by an average of 13 per cent for different distance slabs and ISD rates by 17 per
cent.
5. Internet Service Providers were given approval for setting up of International Gateways
for Internet using satellite as a medium in March 2000.
6. In August 2000, private players were allowed to set up international gateways via the
submarine cable route.
7. The termination of monopoly of VSNL in International Long Distance services was
antedated to March 31, 2002 from March 31, 2004.
2001-02:

1. Communication Convergence Bill, 2001 was introduced in August 2001.

2. Competition was introduced in all services segments. TRAI recommended opening up of
market to full competition and introduction of new services in the telecom sector. The
licensing terms and conditions for Cellular Mobile were simplified to encourage entry for
operators in areas without effective competition.
3. Usage of Voice over Internet Protocol permitted for international telephony service.
4. The five-year tax holiday and 30 per cent deduction for the next five years available to
the telecommunication sector till 31st March 2000 was reintroduced for the units
commencing their operations on or before 31st  March 2003. These concessions were also
extended to internet services providers and broadband networks.
5. Thirteen ISP's were given clearance for commissioning of international gateways for
Internet using satellite medium for 29 gateways.
6. License conditions for Global Mobile Personal Communications by Satellite finalized in
November 2001.
7. National Long Distance Service was opened up for unrestricted entry with the
announcement of guidelines for licensing NLD operators. Four companies were issued Letter
of Intent (LOI) for National Long Distance Service of which three licenses have been signed.
8. The basic services were also opened up for competition. 33 Basic Service licenses (31
private and one each to MTNL and BSNL) were issued up to 31stDecember 2001.
9. Four cellular operators, one each in four metros and thirteen were permitted with 17
fresh licenses issued to private companies in September/October 2001. The cell phone
providers were given freedom to provide, within their area of operation, all types of mobile
services equipment, including circuit and/or package switches that meet the relevant
International Telecommunication Union (ITU)/ Telecom Engineering Centre (TEC) standards.
10. Wireless in Local Loop (WLL) was introduced for providing telephone  connection in
urban, semi-urban and rural areas.
11. Disinvestment of PSU's in the telecom sector was also undertaken during the year. In
February 2002, the disinvestment of VSNL was completed by bringing down the government
equity to 26 per cent and the management of the company was transferred to Tata Group,
a strategic partner. During the year, HTL was also disinvested.
12. Government allowed CDMA technology to enter the Indian market.
13. Reliance, MTNL and Tata were issued licenses to provide the CDMA based services in the
country.
14. TRAI recommended deregulating regulatory intervention in cellular tariffs, which meant
that operators need no longer have prior approval of the regulator for implementing tariff
plans except under certain conditions.

2002-03

1.  International long distance business opened for unrestricted entry.

2.  Telephony on internet permitted in April 2002.
3.  TRAI finalized the System of Accounting Separation (SAS) providing detailed accounting
and financial system to be maintained by telecom service providers.

2003-04

1. Unified Access Service Licenses regime for basic and cellular services was introduced in
October 2003. This regime enabled services providers to offer fixed and mobile services
under one license. Consequently 27 licenses out of 31 licenses converted to Unified Access
Service Licenses.
2. Interconnection Usage Charge regime was introduced with the view of providing
termination charge for cellular services and enable introduction of Calling Party Pays regime
in voice telephony segment.
3. The Telecommunication Interconnection Usage Charges Regulation 2003 was introduced
on 29th October 2003 which covered arrangements among service providers for payment of
Interconnection Usage Charges for Telecommunication Services and covered Basic Service
that includes WLL (M) services, Cellular Mobile Services, and Long Distance Services
(STD/ISD) throughout the territory of India
4. The Universal Service Obligation fund was introduced as a mechanism for transparent
cross subsidization of universal access in telecom sector. The fund was to be collected
through a 5 per cent levy on the adjusted gross revenue of all telecom operators.
5. Broadcasting notified as Telecommunication services under Section 2(i)(k) of TRAI Act.

2004-05:

1. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to 74 per cent
as an incentive to the cellular operators to fall in line with the new unified licensing norm.
2. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's for establishing
their own last mile to their customers.
3.  Indoor use of low power equipments in 2.4 GHz band de-licensed from August 2004.
4. Broadband Policy announced on 14th October 2004. In this policy, broadband had been
defined as an "always-on" data connection supporting interactive services including internet
access with minimum download speed of 256 kbps per subscriber.
5. The Telecommunications (Broadcasting and Cable Services) Interconnection Regulation
2004 was introduced on 10th December 2004.
6.  BSNL and MTNL launched broadband services on 14th January 2005.
7. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per cent on ISD calls
and by 61 per cent on STD calls which were applicable from 1st February 2005.

2005-2006

1. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per cent from the earlier limit of 49
per cent. 100 per cent FDI was permitted in the area of telecom equipment manufacturing
and provision of IT enabled services.
2.  Annual license fee for National Long Distance (NLD) as well as International Long
Distance (ILD) licenses reduced to 6 per cent of Adjusted Gross Revenue (AGR) with effect
from 1st January 2006.
3. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March 2006 which
enable the customers of BSNL and MTNL to call from one end of India to other at the cost of
Rs. 1 per minute, any time of the day to phone.
4. TRAI fixed Ceiling Tariff for International Bandwidth, Ceiling Tariff for higher capacities
reduced by about 70 per cent and for lower capacity by 35 per cent.
5.  Regulation on Quality of Service of Basic and Cellular Mobile Telephone Services 2005
introduced on 1st July 2005.
6.  BSNL announced 33 per cent reduction in call charges for all the countries for
international calls.
7. Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulation 2006
introduced on 21st March 2006.

11th plan (2007-20012)

FDI in Telecom sector has increased in recent years with value of 81.62 billion with share of
10% in total inflow during January 2000 to June 2005. This is mainly in telecom services
and not in telecom manufacturing sector. Therefore, it is essential to enhance the prospect
for inflow of increased funds. The NTP 1999 sought to promote exports of telecom
equipments and services. But till date export of telecom equipment remains minimal. Most
of the state-of-the-art telecom equipments including mobile phones are imported from
abroad. There is thus immense potential for indigenous manufacturing in India. Certain
measures like financial packages, formation of a telecom export promotion council, creation
of integrated facilities for telecom equipment through SEZ and encouraging overseas
vendors to set up facilities in India, are required for making India a hub for telecom
equipment manufacturing and attract FDI. The telecom sector has shown robust growth
during the past few years. It has also undergone a substantial change in terms of mobile
versus fixed phones and public versus private participation. The following table and
discussions from the report of the  working report on the telecom sector for the 11th plan
(2007-2012)will show the growth of  telecom sector since 2003:

Conclusion

Telecommunications is one of the fastest-growing areas of technology in the world. Because

of its rapid growth, businesses and individuals can access information at electronic speed
from almost anywhere in the world. By including telecommunications in their operations,
businesses can provide better services and products to their customers. For individuals,
telecommunications provides access to worldwide information and services.

IN Transport :

India Transport Sector

India’s transport sector is large and diverse; it caters to the needs of 1.1 billion people. In 2007, the sector
contributed about 5.5 percent to the nation’s GDP, with road transportation contributing the lion’s share.

Good physical connectivity in the urban and rural areas is essential for economic growth. Since the early
1990s, India's growing economy has witnessed a rise in demand for transport infrastructure and services.

However, the sector has not been able to keep pace with rising demand and is proving to be a drag on
the economy. Major improvements in the sector are required to support the country's continued economic
growth and to reduce poverty.

Railways. Indian Railways is one of the largest railways under single management. It carries some 17
million passengers and 2 million tonnes of freight a day in year 2007 and is one of the world’s largest
employers. The railways play a leading role in carrying passengers and cargo across India's vast territory.
However, most of its major corridors have capacity constraint requiring capacity enhancement plans.
 

Roads. Roads are the dominant mode of transportation in India today. They

carry almost 90 percent of the country’s passenger traffic and 65 percent of
its freight. The density of India’s highway network -- at 0.66 km of highway
per square kilometer of land – is similar to that of the United States (0.65) and
much greater than China's (0.16) or Brazil's (0.20). However, most highways
in India are narrow and congested with poor surface quality, and 40 percent
of India’s villages do not have access to all-weather roads.

Rural Roads- A Lifeline for Villages in India: Connecting Hinterland to Social Services and markets

Ports. India has 12 major and 187 minor and intermediate ports along its more than 7500 km long
coastline. These ports serve the country’s growing foreign trade in petroleum products, iron ore, and coal,
as well as the increasing movement of containers. Inland water transportation remains largely
undeveloped despite India's 14,000 kilometers of navigable rivers and canals.

Aviation. India has 125 airports, including 11 international airports. TIndian airports handled 96 million
passengers and 1.5 million tonnes of cargo in year 2006-2007, an increase of 31.4% for passenger and
10.6% for cargo traffic over previous year. The dramatic increase in air traffic for both passengers and
cargo in recent years has placed a heavy strain on the country's major airports.
Passenger traffic is projected to cross 100 million and cargo to cross 3.3 million tonnes by year 2010.

Transport infrastructure in India is better developed in the southern and southwestern parts of the country.

MAJOR challenges of Transport sector

Challenges

The major challenges facing the sector are:

 
 India’s roads are congested and of poor quality. Lane capacity is low - most national
highways are two lanes or less. A quarter of all India's highways are congested. Many roads are
of poor quality and  road maintenance remains under-funded - only around one-third of
maintenance needs are met. This leads to the deterioration of roads and high transport costs for
users. 
 Rural areas have poor access. Roads are significant for the
development of the rural areas - home to almost 70 percent of  India's
population. Although the rural road network is extensive, some 33
percent of India’s villages do not have access to all-weather roads and
remain cut off during the monsoon season. The problem is more acute
in India's northern and northeastern states which are poorly linked to
the country’s major economic centers.
 The railways are facing severe capacity constraints. All the country’s high-density rail
corridors face severe capacity constraints. Also, freight transportation costs by rail are much
higher than in most countries as freight tariffs in  India have been kept high to subsidize
passenger traffic. 
  Urban centres are severely congested. In Mumbai, Delhi  and other metropolitan centers,
roads are often severly congested during the rush hours. The dramatic growth in vehicle
ownership during the past decade - has reduced rush hour speeds especially in the central areas
of major cities.
 Ports are congested and inefficient. Port traffic has more than doubled during the 1990s,
touching 650 million tons in 2006-07. This is expected to grow further to about 900 million tons by
2011-12. India's ports need to significantly ramp up their capacity and efficiency to meet this
surging demand.

Airport infrastructure is strained. Air traffic has been growing rapidly leading to severe strain
on infrastructure at major airports, especially in the Delhi and Mumbai airports which account
for more than 40 percent of nation’s air traffic.

Growth in service sector

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
country’s economic stability. A robust healthcare system helps to create a strong and diligent
human capital, who in turn can contribute productively to the nation’s growth.

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.

Subsectors

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. 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

 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.

Role of services in development

• While high-end services are a key driver of economic growth,

other services have a critical role to play.

• Broadly speaking, the services driving economic growth in India

have either not been subject to significant amounts of regulation
(notably IT–ITES) or have been deregulated and opened to
competition (most prominently, telecommunications).
• Growth in high-end services like IT–ITES has the potential to
generate significant spin-offs, including productivity growth in
other services and in agriculture; technological improvements in
manufacturing; and the emergence of a large consumer base with
the discretionary spending power to spur demand and
employment growth in key labour-intensive sectors.

• Financial services and transport infrastructure can be expected

to face further pressure to expand capabilities and improve
productivity through reform if these sectors are to play their critical
role in facilitating economic expansion.

• The services sector has a major role to play in absorbing India’s

rapidly growing labour force.
– Retail and wholesale trade and housing and construction in
particular have the potential to employ large numbers of less
skilled workers.

• Restrictive labour laws and a raft of other regulations provide a

strong disincentive to small Indian companies growing above a
certain size, and prevent modernisation and inhibit productivity
growth in a number of sectors, including retail, logistics, and legal
and accountancy services.
• Improvements in the delivery of education and healthcare
services, particularly in rural areas, are vital for sustainable
growth.

• Services sector developments are facilitating modernisation in

India’s relatively capital-intensive manufacturing industries and in
agriculture, and services inputs should enable India to derive
maximum benefit from mineral exploitation once an investment-
friendly platform is established for the mining sector.