Press Information Bureau
Government of India
Ministry of Finance

Sector-Wise Performance of Major Services and Some Recent Government Policies to Boost the Growth of the Sector

Services Sector Contributed Almost 72.5 Per Cent of GVA Growth in 2017-18

The Services sector, with a share of 55.2 per cent in India’s Gross Value Added (GVA), continued to be the key driver of India’s economic growth contributing almost 72.5 per cent of GVA growth in 2017-18, as stated in the Economic Survey 2017-18 tabled in the Parliament today by the Union Minister for Finance and Corporate Affairs, Shri Arun Jaitely. While the growth of Service Sector as a whole is expected to be at 8.3 per cent in 2017-18, the growth in Services exports was 16.2 per cent in H1 of 2017-18. The Government has taken many initiatives in the different Services which include digitization, e-visas, infrastructure status to Logistics, Start-up India, Schemes for the housing sector, etc. which could give a further fillip to the Services Sector.

Major Services’ Sector-wise performance and some recent Government policies to boost the growth of the sector are as follows:

TOURISM

India’s Tourism sector has been performing well with Foreign Tourist Arrivals (FTAs) growing by 9.7 per cent to 8.8 million and Foreign Exchange Earnings (FEEs) at 8.8 per cent to US$ 22.9 billion in 2016. FTAs during 2017 were 10.2 million, with a growth of 15.6 per cent, while FEEs from tourism were US$ 27.7 billion, with a growth of 20.8 per cent over 2016. Domestic tourist visits grew by 12.7 per cent to 1,614 million in 2016 from 1,432 million in 2015. Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Karnataka were the Top 5 Destination States in 2016.

Various initiatives have been taken by the Government to promote tourism include the introduction of the e-Visa facility under three categories of Tourist, Medical and Business for the citizens of 163 countries; launch of Global Media Campaign for 2017-18 on various Channels; launch of ‘The Heritage Trails’ to promote the World Heritage Sites in India; launch of International Media Campaign on various international TV channels; Celebration of ‘Paryatan Parv’ having 3 components namely ‘Dekho Apna Desh’ to encourage Indians to visit their own country, ‘Tourism for All’ with tourism events at sites across all states in the country, and ‘Tourism & Governance’ with interactive sessions & workshops with stakeholders on varied themes. FTAs on e-Tourist Visa grew by 143 per cent to 10.8 lakh in 2016, and further grew by 57.2 per cent to 17.0 lakh during 2017.

IT-BPM

India’s Information Technology – Business Process Management (IT-BPM) industry grew by 8.1 per cent in 2016-17 to US$ 139.9 billion (excluding e-commerce and hardware) from US$129.4 billion in 2015-16, as per NASSCOM data. IT-BPM exports grew by 7.6 per cent to US$ 116.1 billion from US$ 107.8 billion during the same period. E-commerce market is estimated at US$ 33 billion, with a 19.1 per cent growth in 2016-17.

To further promote this sector, many initiatives have been taken, which include the establishment of BPO Promotion and Common Services Centres to help create digital inclusion and equitable growth and provide employment to 1.45 lakh persons, mostly in the small towns; setting up a separate Northeast BPO promotion Scheme with 5000 seats and having employment potential of 15000 persons; preparing the draft Open Data Protection Policy law; besides long-term initiatives like Digital India, Make in India, Smart Cities, e-Governance, push for digital talent through Skill India, drive towards a cashless economy and efforts to kindle innovation through Start-up India.

REAL ESTATE

The Indian Real Estate sector has begun to show signs of improvement with the total FDI of US$ 257 million in H1 2017, which is more than double the total FDI in 2016 full year.

Some of the recent reforms and policies taken by the Government of India related to Real Estate Sector include the Pradhan Mantri Awas Yojana (PMAY) with the government sanctioning over 3.1 million houses for the affordable housing segment in urban regions till November 2017. Of this, about 1.6 million houses have been grounded and are at various stages of construction, and about 0.4 million houses have been built under the mission. PPP policy for affordable housing was also announced on 21st September 2017 for affordable housing segment to provide further impetus to the ambitious ‘Housing for all by 2022’ mission. Credit Linked Subsidy Scheme (CLSS) under PMAY was extended to the Middle Income Group (MIG) segment, which got included in the scheme from 1st January 2017. With the enactment of Real Estate (Regulation & Development) Act, 2016, it is anticipated that accountability would lead to higher growth across the real estate value chain, while compulsory disclosures and registrations would ensure transparency.

R&D

The professional Scientific & Technical activities which include R&D services grew by 17.5 per cent and 41.1 per cent in 2014-15 and 2015-16 respectively. India-based R&D services companies, which account for almost 22 per cent of the global market, grew at 12.7 per cent. However, India’s gross expenditure on R&D has been at around 1 per cent of GDP. India ranks 60th out of 127 on the Global Innovation Index (GII) 2017, improving from 66th rank in 2016.

Buoyed by the Government’s support which includes important Schemes of different Ministries/Departments, the R&D sector in India is all set to witness robust growth in the coming years. According to a study, engineering R&D market in India is estimated to grow at a CAGR of 14 per cent to reach US$ 42 billion by 2020. India is also expected to witness strong growth in its agriculture and pharmaceutical sectors as the Government is investing large sums to set up dedicated research centres for R&D in these sectors.

SPACE

In the case of Satellite Launching, as on March 2017, PSLV successfully launched 254 satellites. Foreign exchange earnings of India from export of satellite launch services increased noticeably in 2015-16 and 2016-17 to ₹ 394 crore and ₹ 275 crore from ₹ 149 crore in 2014-15.

India’s share in global satellite launch services revenue has also increased to 1.1 per cent in 2015-16 from 0.3 per cent in 2014-15. Antrix foresees greater utilization of PSLV, GSLV and GSLV-Mk-III launch services by the international community for launching their Low Earth Orbit (LEO) satellites.

Services sector growth supported by policy initiatives to boost exports, digitalisation, housing and sectoral competitiveness. The Services sector was the principal driver of GVA growth, and the Government has deployed a range of policy initiatives-digitization, e visa expansion, logistics infrastructure classification, start up support and housing schemes-to boost services performance and exports. Targeted sectoral measures include tourism promotion via e visa and media campaigns, IT BPM support through BPO promotion and digital skills programmes, real estate reforms for affordable housing and regulatory transparency, R&D investment and schemes to spur scientific and technical services, and expanded commercial satellite launch services to increase export earnings.