Service Sector in India

In India the service sector has been emerging as the dominant components of the economy. Agriculture and industry are growing at a lower pace, while services are growing more rapidly. Share of services in the country’s GDP has increased from 36% in 1980-81 to 44% in 1997-98. In the latter year, the share of agriculture and industry in GDP was just 24 and 32% respectively. The share of services was in fact, just 25% in 1955-56 . It increased to 40% in 1987-88 and 46% 1999-2000.

It seems that the notion that the majority of the people need only food, clothing and housing has to be given up. Even the poor seem to need be availing of several services, especially the ones like education, entertainment, information and healthcare. The middle class and the affluent are, of course, availing of a much larger variety of services, including dining out, and travel.

Certain types of services have been growing particularly rapidly. Higher education service is one example. Health care is another. Financial services is yet another. Health care has, in fact, become the fastest growing sector of the economy, growing at compound rate of 26% annually between1993-2000. Entertainment too is now among the fastest growing sectors. Spending on hotels and restaurants has grown at a compound rate of 18%. Services backed by technology and equipment, like vending machines, coffee and sandwich dispensing machines, computerized patient history records etc., have also registered good growth.

Reasons for the rapid Growth:

Several factors have contributed to this big growth in services. Economic socio-cultural and lifestyle changes taking place over the years, especially since the 1990s, have of course been the No 1 factor. We had traced these changes. Increased affluence as well as leisure with select segments of the population is one important aspect here. Women going to work in large numbers are another aspect. The advent of many new and technical products and the new complexities of life are two other relevant aspects. The economic reforms and liberalization has led to the advent and growth of many new services. The explosion in information technology has been another great contributor to the growth of service businesses. In itself, IT has emerged as a mega service business. In addition, it has supported the growth of other service businesses.

More specifically, increased affluence has led to greater demand for service like laundry, interior decoration, care of household products etc. Increased affluence and leisure in combination, has led to growth of recreation and entertainment services, travel services, etc. The phenomenon of more and more women going to work has led to a greater demand for services like fast foods, crèches, baby sitting, domestic help etc. The advent and spread of complex products such as air conditioners, cars, home computers, etc has led to a greater demand for maintenance services. Increasing complexity of life has led to a greater demand for advisory services in income tax, accounting and legal matters. The growing pressure on time has resulted in greater demand for services like ‘home delivery’; people do not to waste their time visiting shops, standing in Qs and waiting for billing and packaging of products bought by them. They place the order over phone and the grocer arranges home delivery. In more recent times, tele-shopping has caught up, especially in urban centers. As for higher education, rising consciousness of its benefits coupled with the growing ability to pay for it has led to an upsurge in the student population seeking higher education, especially technical, management and computer education. Demand for medical service has grown rapidly on account of population growth increased health consciousness.

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