Buoyancy check

Contact Counsellor

Last Updated06/05/2023

India’s services sector seems to have had a great start to the financial year, if one were to go purely by the findings of the S&P Global Services PMI Business Activity Index.

It is a survey-based measure that asks the respondents about changes in their perception of key business variables as compared with the previous month. It is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
It is calculated separately for the manufacturing and services sectors and then a composite index is also constructed.
The PMI is a number from 0 to 100. A print above 50 means expansion, while a score below that denotes contraction. A reading at 50 indicates no change.
It is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.

The service sector is the largest and fastest-growing sector in India and has the highest labour productivity.
India’s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction.
The sector grew at 8.4 % (YoY) IN FY 22 and is expected to grow at 9.1 % IN FY 23 according to Economic Survey 2022-23.

Impact of the pandemic: India’s Services sector witnessed a significant setback during the COVID-19 pandemic which was led by a sharp contraction in all sub-sectors particularly ‘Trade, hotels, transport, communication & services related to broadcasting.
Impact of Demonetization: Demonetization, temporarily impacted the services sector as in the case of other sectors.
Employment in Services: Employment has not kept pace with the share of the sector in gross domestic product and has not produced the number or quality of jobs needed.
Lack of Policy: There is no policy leading to inclusive growth, and multiple, uncoordinated governing bodies adversely affect the growth of the sector.
Domestic Regulations and Services Trade Restrictiveness
Market Access Barriers: There are many market access barriers in India’s trading partner countries.

Structural reforms:
- The space sector was opened up, telecom related regulations were removed from the IT-BPO sector, and consumer protection regulations were introduced for e-commerce.
- Health Sector: In October 2021, the Prime Minister of India approved the establishment of 157 new medical colleges to boost the accessibility of affordable health treatments among citizens.
- The Government of India has set up lakhs of Ayushman health and wellness centres to provide affordable treatment of diseases like cancer, diabetes etc and check-up at the primary level.
Production Linked Incentive (PLI) scheme
Mahatma Gandhi National Fellowship
National Broadband Mission:
BharatNet project.
- Real Estate: Some of the recent policy measures taken by the Government include Pradhan Mantri Awas Yojana (PMAY- Urban), Smart Cities Mission etc
- International Collaboration: For e.g India and the UK’s FTA (Free Trade Agreement). India and Australia’s broad-base cooperation in the spheres of the digital economy and cyber-enabled critical technologies.

India is undergoing a structural change in the service sector in the present emerging scenario.
But this structural change has created more opportunities for self-employment and innovation.
The service sector is essential for almost every middle-class family.
The poorest of Indian society also need to improve their living conditions, but it will not be entirely possible without the betterment of the service sector.