[sbinews] Services Sector Growth in India

  • From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Mon, 22 Dec 2003 20:51:18 +0500

Here’s crossing yet another milestone on the global speedway. The Indian 
services sector is now growing the fastest across 130 countries. 

India’s services sector has grown at an average rate of 7.9 per cent over the 
period 1990-01, second only to China, which has grown at 8.9 per cent. 

India’s growth is, however, double the growth of the UK and US, and comfortably 
ahead of East Asian countries as well. 

The day may not be far when India’s growth rates exceed China’s, as China’s 
growth rate is showing signs of decelerating, while India’s growth rates are 
accelerating. (Can India's services sector growth beat China's by the end of 

This growth is even more impressive in the light of two facts: it beats the 
odds of poor agricultural growth, the main propelling force of the Indian 
economy. Also, given the already large size of the services sector, which 
accounts for about half of the country's total GDP , such high growth rates are 
not easy to achieve. 
 During 1980-90, India’s services sector grew 6.9 per cent, and rose one 
percentage point in the next decade. This is despite poor agricultural growth 
and the fact that agricultural production even declined in the 1990-01 period. 

Agriculture, which employs about 70 per cent of the country’s population, is 
the mainstay of the Indian economy and a large proportion of demand stems from 
this sector. In 2002-03, when the world was in the throes of an economic 
depression and when India’s agriculture production actually fell three per cent 
due to a severe drought, services was still growing at 6.7 per cent. 

For the financial year 2000-01, the services sector GDP stood at Rs 5,86,190 
crore. This was about 49 per cent of the country’s overall GDP. 

In 2002-03, this share rose to 51 per cent. That India has the fourth largest 
share of world GDP in purchasing power parity terms, at around 4 per cent, puts 
the size of the services sector into perspective. A high growth rate is 
generally difficult to achieve when the base itself is large. But India’s 
services sector seems to have disproved this. 

The current fiscal holds even greater promise for the sector’s growth. Even 
before the impact of the current global economic upturn could have any effect, 
that is, during the first quarter of the current fiscal, the services sector 
was already growing at 7.6 per cent. The biggest contributor to the services 
sector – trade, hotels, transport and communications – grew 9.6 per cent over 
this period. 

With all these services reporting an increase in demand from higher bookings in 
hotels, growing truck demand and so on, it seems probable that the services 
sector will exceed its previous highs in the future. 


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