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Service Sector in India’s Economy: Performance, Problems and Prospects. Country Paper Presentation In The Study Meeting on Expansion and Development of the Service Industry in Asia 17-20 June, 2008 At Seoul, Republic of Korea By :

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Presentation Transcript
slide1

Service Sector in India’s Economy: Performance, Problems and Prospects

Country Paper Presentation

In

The Study Meeting on Expansion and Development of the Service Industry in Asia

17-20 June, 2008

At

Seoul, Republic of Korea

By :

Dr Seema Joshi

Sir RatanTata Senior Fellow

Institute of Economic Growth

Delhi

questions raising
Firstly, what are the constituents of service sector in India?

Secondly, how this sector performed on growth and employment fronts?

Thirdly, what happened to service sector productivity in post 1980 period?

Fourthly, what are the policies adopted by the government of India to promote the services sector?

Fifthly, what are the problems or challenges ahead in this sector?

Lastly, what are the prospects /potential for growth in this sector?

Questions Raising
organization of the presentation
Composition of Service Sector in India

Performance of Services Sector in India

a. Sectoral Composition of GDP Growth

b. Employment Scenario

c .Productivity Growth in Service Sector --Post-1980 Scenario

Policy Measures for the Development of the Services Sector

Problems/Challenges Ahead

Prospects for Growth in the Services Sector

Conclusion

Organization of the Presentation
composition of service sector in india
Trade, hotels and restaurants

Trade

Hotels and restaurants

Transport, storage and communication

Railways

Transport by other means

Storage

Communication

Financing, Insurance, Real Estate and Business Services

Banking and Insurance

Real Estate, Ownership of Dwellings and Business Services

Community, Social and Personal services

Public Administration and defence

Other services

Composition of Service Sector in India
a snapshot of changes in structure of production in indian economy
A Snapshot of Changes in Structure of Production in Indian Economy

‘Tertiarization’ of the Indian Economy

structure of employment
Structure of Employment

Slow Changes in the Structure of Employment

changes in the structure of employment
Changes in the Structure of Employment

Servicization of the Structure of Employment

shares of different sectors in increase of employment
Shares of Different Sectors in Increase of Employment

Emergence of two patterns of employment generation

Pre reform period : Primary Sector the main source of additional employment

Post reform Period :Tertiary Sector main driver of additional employment generated

sectoral employment elasticities
Sectoral Employment Elasticities

A sharp drop in the labour absorptive capacity of growth in the economy during the post -reform period.

output growth per cent per annum
Output Growth (per cent per annum)

Acceleration in the Growth Rate of Output

growth rate in output per worker per cent per annum
Growth Rate in Output per Worker (per cent per annum)

Marked increase in Output per Worker in the Services Sector

growth rates in total factor productivity per cent per annum
Growth Rates in Total Factor Productivity (per cent per annum)

Surge in TFP Growth Rates in the Services Sector

policy measures for the development of the services sector
Extent of Permissible Foreign Equity in Sub Sectors of Services

Sector in India

100% FDI in BPOs

100% in E-commerce activities

100% FDI in trading companies

100% FE in hotels, tourist related areas

100% FE in Infrastructure

100% in Hospitals, drugs & pharmaceuticals

100% in Advertising

100% in Film sector

100% in Air transport services by NRIs

100% FDI in printing technical and scientific magazines, periodicals & journals

74% in TELECOM

74% in Private sector banks

51% in Organized retail

49% in Insurance

26 per cent in Print media

Policy Measures for the Development of the Services Sector
problems challenges ahead
Lack of social infrastructure

Lack of physical infrastructure

Lack of IT infrastructure

Lack of Agricultural and Industrial sector reforms

Rupee appreciation and US sub-prime crisis

Challenges in the field of IT and ITES like

-- rising labour costs,

-- rapid growth in demand for talented manpower/quality staff

-- high attrition rate,

-- outsourcing backlash

-- social, economic, health, ethical and environmental

implications

Lack of conducive business environment

Need for Good governance

Problems/Challenges Ahead
problems challenges ahead1
Problems in the measurement of output , productivity

Non-availability of data

Availability of data after a time lag

Entry of new species of services (like IT, ITES etc ) and lack of development of concepts

Non-inclusion of unpaid households on the other

Variation in the quality of each unit of the same service from the other

Difficulty in achieving the same level of output in terms of quality

Problems in measuring quality improvements

Problems/Challenges Ahead
prospects for growth in the services sector
Growth Potential of IT and BPO industries

Employment Generation Potential

Revenue Generation Potential from total software and services segment

Realization of 10 % of the potentially addressable global IT/ ITES market

Increase in disposable income

Increasing urbanization

Growing middle class

A population “bulge” in the working age groups

Emergence of a wide array of unconventional /new services

Prospects for Growth in the Services Sector
slide18
“…. The question for CEOs the world over is no longer “should my company go to India?”, but rather “can my company afford not to be in India?”. On the tourism front, it is Incredible India, but on the economic front, it is clearly Opportunity India….”.

(Kamal Nath, Minister of Commerce and Industry)

Conclusion

slide20

About Dr. Seema Joshi

  • Merit-cum Brilliance Scholarship in B.A.
  • Gold Medal in M.A.
  • Qualified UGC Test for eligibility for Lecturership in January
  • 1991.
  • Fellowships in M.A., M.Phil. & PhD
  • Beginning of teaching Career from S.R.C.C., University of
  • Delhi, Delhi.
  • Worked as Reader of Economics, Kirori Mal College ,
  • University of Delhi, Delhi.
  • Associate Professor-Urban Management (on deputation),
  • Indian Institute of Public Administration, New Delhi
  • from September 1, 2005 to May 8,2007
  • First Recipient of Sir Ratan Tata Senior Fellowship
  • Areas of Research Interest :
  • Tertiary Sector , Social Sector and Gender Issues