Services

Services sector contributes over 50 per cent to India’s GDP. It has been the worst affected among all the sectors due to COVID.

Contraction and Recovery

The sector contracted by 8.4 per cent Year on Year in 2020-21.
This decline was driven by a sharp contraction of 18.2 per cent YoY in the sub-sector ‘Trade, hotels, transport, communication & services related to broadcasting’.
During the first half of the current fiscal year, the services sector has registered a steady recovery. The subsector ‘Trade, hotels, transport, communication & services related to broadcasting’, which was the worst hit last year, grew by 18.4 per cent YoY in H1 2021-22.

Trends in High Frequency Indicators

Service PMI: PMI services grew once again from August 2021 recording strongest jump in over 10 years to 58.4 in October 2021.
Freight Traffic: With opening up of the economy, freight traffic also started to improve.Indian railways recorded almost 16 per cent increase in freight loading as compared to the corresponding period during the pre-pandemic year (2019-20).

Bank Credit to Service Sector

Bank credit to services sector registered a growth (YoY) of 3.6 per cent in November 2021, as compared to the 8.2 per cent a year ago.
The slowdown in growth is largely on account of the lower growth in credit to ‘Tourism, Hotel & Restaurants’, ‘Transport Operators’ and Trade- Retail as well as Wholesale.

Service Sector in States and UTs

The services sector accounts for more than 50 per cent of the Gross State Value Added (GSVA) in 12 out of the 33 states and UTs.
Chandigarh stands out with a particularly high share of services in GSVA at 74 per cent while Sikkim’s share remains the lowest at 24.25 per cent.
Maharashtra and Karnataka are the top two contributors to services GSVA.

FDI Inflows

Service sector is the largest recipient of FDI inflows in India. According to the World Investment Report 2021 by the UN Conference on Trade and Development (UNCTAD), India was the fifth-largest recipient of Foreign Direct Investment (FDI) in 2020 improving its rank by four places, from ninth position in 2019.

Exports

India remained among the top ten services exporter countries in 2020, with its share in world commercial services exports increasing from 3.4 per cent in 2019 to 4.1 per cent in 2020.
India’s software exports, with a share of 48.5 per cent in total services exports, remained relatively resilient during Covid-19 period with higher demand for digital support, cloud services and infrastructure modernisation catering to the new pandemic challenges.

Imports

Services imports exhibited sharper decline of 8.4 per cent in 2020-21 in comparison with services exports primarily on account of fall in travel and transportation.

Tourism

The pandemic has had a debilitating impact on travel and tourism in India. International Tourist Arrivals (ITA) declined by 74 per cent globally in 2020 over the previous year, with restrictions on travel, low consumer confidence and a global struggle to contain the Covid-19 spread.

IT/BPM

During 2020-21, according to NASSCOM’s provisional estimates, IT-BPM revenues (excluding e-commerce) reached US$ 194 billion, growing by 2.26 per cent YoY, adding 1.38 lakh employees.
United States remained the biggest source of exports revenues amounting US$ 92.1 billion in 2020-21, followed by UK.

Ports, Shipping and Waterways

Over the last seven years, Shipping Turnaround (TRT) at major ports has declined consistently from almost 3.64 days in 2015-16 to 2.25 days in 2021 (April-December). Shipping Turnaround Time is a key indicator of efficiency of the ports sector.

Space

As a part of Space sector reforms, New Space India Limited (NSIL) was empowered to “own” the operational launch vehicles and space assets of ISRO.
The present supply-based model was changed to demand-driven model, wherein NSIL shall act as aggregator of user requirements and obtain commitments.
An Independent nodal agency under the Department of Space, Indian National Space Promotion and Authorization Centre (IN-SPACe) was created, which shall act as the promotor and regulator of space activities in India by NGPEs (Nongovernment/private entities).
In the last three years number of startups in the space sector has increased from 11 in 2019 to 47 in 2021.
India accounts for only about 2 per cent of the space economy, much behind the major players – USA and China.

Startups

During 2021, the Government recognised over 14,000 new startups as compared to only, only 733 new startups during 2016-17.
Delhi has replaced Bangalore as the startup capital of India. Over 5,000 recognised startups were added in Delhi while 4,514 startups were added in Bangalore during April 2019 to December 2021.
With a total of 11,308 startups, Maharashtra has the highest number of recognised startups. As of January 14, 2022, India has 83 unicorns with a total valuation of US$ 277.77 billion.

Patents

The number of patents filed in India has gone up from 39,400 in 2010-11 to 45,444 in 2016-17 to 58,502 in 2020-21 and the patents granted in India has gone up from 7,509 to 9,847 to 28,391 during the same time period.
Further, the number of patents application is increasingly coming from Indian residents rather than MNCs.

Still India accounts for low patents as compared to USA, China, etc.

It is because-

India’s low expenditure on Research and Development (R&D) activities, which was 0.7 per cent of its GDP in 2020.
The procedural delays and complexity of the process.
Delay in India’s patent application is also due to the low number of patent examiners in India.