What is Service Sector

8/3/2019 What is Service Sector

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PATUCK GALA COLLEGE OF COMMERCE &

MANAGEMENT

Name: Ahmed A.Q. Khatri.

Class: T.Y.B.M.S.

Roll no: 25

Subject: Service sector management.

Assignment on: Service Sector in the future of Indian Economic.

Submit to: Ravindra Sir.


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INDEX

Sr no TOPIC Page no

1. What is service sector 1

2. Issues for service providers 2

3. What is service sector in India 2-4

4. What is Indian Economic 4-5

5. Sectoral Shares In GDP 6

6. On what Economic development in India still dependson

6-7

7. Role of Service sector in Indian Economic 7-9

8. Service Sector in the future of Indian Economic 9-12

9. Conclusion 13

10. Bibliography 14


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What is service sector:

The tertiary sector of the economy (also known as the service sector or the serviceindustry) is one of the three economic sectors, the others being the secondarysector (approximately the same as manufacturing) and the primary sector(agriculture, fishing, and extraction such as mining).

The service sector consists of the soft parts of the economy, i.e. activities wherepeople offer their knowledge and time to improve productivity, performance,potential, and sustainability. The basic characteristic of this sector is the productionof services instead of end products. Services (also known as intangible goods)include attention, advice, experience, and discussion. The production ofinformation is generally also regarded as a service, but some economists nowattribute it to a fourth sector, the quaternary sector.

The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport,distribution and sale of goods from producer to a consumer, as may happen inwholesaling and retailing, or may involve the provision of a service, such as inpestcontrol or entertainment. The goods may be transformed in the process of

providing the service, as happens in the restaurant industry. However, the focus ison people interacting with people and serving the customer rather thantransforming physical goods.

For the last 30 years, there has been a substantial shift from the primary andsecondary sectors to the tertiary sector in industrialised countries. This shift iscalled tertiarisation. The tertiary sector is now the largest sector of the economy inthe Western world, and is also the fastest growing sector.

It may surprise you but there has always been a large Service sector before the 20thCentury about 1/3 of all people worked in the service sector. The servants in the'Big Houses' were in the service sector. Anything that provides a service, is theservice sector. So Banking, Insurance, cleaning, Education etc.The service sectorcovers just about all jobs that are NOT related to manufacturing or resourceextraction (mining, farming, etc.).

1.

Issues for service providers:
http://en.wikipedia.org/wiki/Secondary_sectorhttp://en.wikipedia.org/wiki/Secondary_sectorhttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Primary_sectorhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Fishinghttp://en.wikipedia.org/wiki/Mininghttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Quaternary_sectorhttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Distribution_(economics)http://en.wikipedia.org/wiki/Wholesalerhttp://en.wikipedia.org/wiki/Retailerhttp://en.wikipedia.org/wiki/Pest_controlhttp://en.wikipedia.org/wiki/Pest_controlhttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Restauranthttp://en.wikipedia.org/wiki/Western_worldhttp://en.wikipedia.org/wiki/Secondary_sectorhttp://en.wikipedia.org/wiki/Secondary_sectorhttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Primary_sectorhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Fishinghttp://en.wikipedia.org/wiki/Mininghttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Quaternary_sectorhttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Distribution_(economics)http://en.wikipedia.org/wiki/Wholesalerhttp://en.wikipedia.org/wiki/Retailerhttp://en.wikipedia.org/wiki/Pest_controlhttp://en.wikipedia.org/wiki/Pest_controlhttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Restauranthttp://en.wikipedia.org/wiki/Western_world


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Service providers face obstacles selling services that goods-sellers rarely face.Services are not tangible, making it difficult for potential customers to understandwhat they will receive and what value it will hold for them. Indeed some, such asconsultants and providers ofinvestment services, offer no guarantees of the valuefor price paid.

Since the quality of most services depends largely on the quality of the individualsproviding the services, it is true that "people costs" are a high component of servicecosts. Whereas a manufacturer may use technology, simplification, and othertechniques to lower the cost of goods sold, the service provider often faces anunrelenting pattern of increasing costs.

Differentiation is often difficult. For example, how does one choose oneinvestment adviser over another, since they often seem to provide identicalservices? Charging a premium for services is usually an option only for the mostestablished firms, who charge extra based uponbrand recognition.

Most service providers who have a manual system cannot analyze the pattern ofinflow of work, nor can they differentiate between potentially profitable andinactive sources of project leads.

Communication with clients suffers due to inappropriate contact schedules and project status. Different projects have variable costs and billings, which aredifficult to accumulate and corelate. Manual billing process is time consuming and

prone to errors.

Managing Subscription / Registration information on various websites becomes aproblem because so many passwords have to be remembered and subscriptionrenewal dates and prices have to be managed. Various stages of development ofdifferent projects is difficult to estimate through a manual system.

What is service sector in India:

Service Sector in India today accounts for more than half of India's GDP.

According to data for the financial year 2006-2007, the share of services, industry,and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per centrespectively.

2.

The fact that the service sector now accounts for more than half the GDP marks awatershed in the evolution of the Indian economy and takes it closer to the
http://en.wikipedia.org/wiki/Consultantshttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Brand_recognitionhttp://en.wikipedia.org/wiki/Consultantshttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Brand_recognition


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fundamentals of a developed economy. Services or the "tertiary sector" of theeconomy covers a wide gamut of activities like trading, banking & finance,infotainment, real estate, transportation, security, management & technicalconsultancy among several others.

The Services Sector constitutes a large part of the Indian economy both in terms of

employment potential and its contribution to national income. The Sector covers a

wide range of activities from the most sophisticated in the field of Information and

Communication Technology to simple services pursued by the iformal sector

workers, for example, vegetable sellers, hawkers, rickshaw pullers, etc. The

following broad grouping of activities can be considered to form part of the

Services Sector.

The various sectors that combine together to constitute service industry in Indiaare:

Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom)

Banking Insurance Dwellings, Real Estate Business Services Public Administration; Defence Personal Services Community Services Other Services

There was marked acceleration in services sector growth in the eighties and

nineties, especially in the nineties. While the share of services in India's GDPincreased by 21 per cent points in the 50 years between 1950 and 2000, nearly 40

per cent of that increase was concentrated in the nineties.

3.

While almost all service sectors participated in this boom, growth was fastest incommunications, banking, hotels and restaurants, community services, trade and


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business services. One of the reasons for the sudden growth in the services sectorin India in the nineties was the liberalisation in the regulatory framework that gaverise to innovation and higher exports from the services sector.

The service industry forms a backbone of social and economic development of a

region. It has emerged as the largest and fastest-growing sectors in the worldeconomy, making higher contributions to the global output and employment. Its

growth rate has been higher than that of agriculture and manufacturing sectors. It is

a large and most dynamic part of the Indian economy both in terms of employment

potential and contribution to national income.

It covers a wide range of activities, such as trading, transportation and

communication, financial, real estate and business services, as well as community,

social and personal services. In India, services sector, as a whole, contributed as

much as 68.6 per cent of the overall average growth in gross domestic product

(GDP).

What is Indian Economic:

The Economy of India is the tenth largest in the world by nominal GDP and the

fourth largest by purchasing power parity (PPP). The country's per capita GDP

(PPP) per capita is $3,339 (IMF, 129th) in 2010. Following strong economic

reforms from the post-independence socialist economy, the country's economic

growth progressed at a rapid pace, as free market principles were initiated in 1991

for international competition and foreign investment.

Social democratic policies governed India's economy from 1947 to 1991. Theeconomy was characterised by extensive regulation, protectionism, publicownership, pervasive corruption and slow growth. Since 1991, continuingeconomic liberalisation has moved the country towards a market-based economy.A revival of economic reforms and better economic policy in first decade of the21st century accelerated India's economic growth rate. In recent years, Indian cities

have continued to liberalise business regulations. By 2008, India had establisheditself as the world's second-fastest growing major economy.

4.

However, as a result of the financial crisis of 20072010, coupled with a poormonsoon, India's gross domestic product (GDP) growth rate significantly slowed to
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)http://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)http://en.wikipedia.org/wiki/Per_capita_GDPhttp://en.wikipedia.org/wiki/IMFhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Social_democratichttp://en.wikipedia.org/wiki/Protectionismhttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/Economic_development_in_Indiahttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_ratehttp://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)http://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)http://en.wikipedia.org/wiki/Per_capita_GDPhttp://en.wikipedia.org/wiki/IMFhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Social_democratichttp://en.wikipedia.org/wiki/Protectionismhttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/Economic_development_in_Indiahttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_ratehttp://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010


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6.7% in 200809, but subsequently recovered to 7.4% in 200910, while the fiscaldeficit rose from 5.9% to a high 6.5% during the same period. Indias currentaccount deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previousquarter. The unemployment rate for 20092010, according to the state LabourBureau, was 9.4% nationwide, rising to 10.1% in rural areas, where two-thirds of

the 1.2 billion population live. As of 2010, India's sovereign debt stood at 71.84%of GDP which is highest among BRIC nations.

The Services Sector has been the most dynamic sector of the Indian economy,

especially over the last ten years. Table shows the changes that have been taking

place in the Services Sector over the last few decades.

From a low level of 27.52 per cent of GDP in 1950-51, the share of servicesincreased to 47.88 per cent in 1999-2000. Between 1950-51 and 1990-91, the share

of Services Sector in GDP rose by only 13.07 percentage points, which is anincrease of about 0.33 percentage points per annum. However, between 1990-91and 1999-2000, the share had increased by 7.29 percentage points, which is anincrease of 0.81 percentage points per annum. Clearly, the rate of growth issignificantly higher in the 1990s.

5.

Sectoral Shares In GDP
http://en.wikipedia.org/wiki/Fiscal_deficithttp://en.wikipedia.org/wiki/Fiscal_deficithttp://en.wikipedia.org/wiki/Current_account_deficithttp://en.wikipedia.org/wiki/Current_account_deficithttp://en.wikipedia.org/wiki/Government_debthttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/Fiscal_deficithttp://en.wikipedia.org/wiki/Fiscal_deficithttp://en.wikipedia.org/wiki/Current_account_deficithttp://en.wikipedia.org/wiki/Current_account_deficithttp://en.wikipedia.org/wiki/Government_debthttp://en.wikipedia.org/wiki/BRIC


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(in per cent)

Year Agriculture #Manufacturing

Services*

1950-51 59.19 13.29 27.52

1960-61 54.74 16.61 28.65

1970-71 48.12 19.91 31.97

1980-81 41.82 21.59 36.59

1990-91 34.92 24.49 40.59

1991-92 34.08 23.93 41.99

1992-93 34.17 23.74 42.09

1993-94 33.54 23.69 42.77

1994-95 32.94 24.35 42.71

1995-96 30.58 25.47 43.95

1996-97 30.86 25.45 43.69

1997-98 29.03 25.20 45.77

1998-99 29.03 24.51 46.46

1999-2000 27.49 24.63 47.88

On what Economic development in India still depends on:

The various sectors that constitute the Indian economy agriculture, services andmanufacturing industries. India is rated as one of the top economies in the world in

terms of purchasing power parity (PPP) of the gross domestic product (GDP) byleading financial entities of the world, such as the International Monetary Fund, the

World Bank, and the CIA (as referenced in the CIA World Factbook).

6.

As far as agriculture is concerned, India is the second largest in volume of output.

Certain related sectors of agriculture have played a major role in the developmentof the Indian economy by providing employment to a number of people in the

forestry, fishing and logging industries.


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Role of Service sector in Indian Economic:

Service Sector of Indian Economy contributes to around 55 percent of India's GDP

during 2006-07. This sector plays a leading role in the economy of India, and

contributes to around 68.6 percent of the overall average growth in GDP between

2002-03 and 2006-07.

There has been a 9.4 percent growth in the Indian economy during 2006-07 asagainst a rise of 9 percent in the same during 2006-06. During this growth inIndian economy, the service sector witnessed a rise of 11 percent in the year 2006-07 against the 9.8 percent growth in 2005-06. The service sectors of Indianeconomy that have grown faster than the economy are as follows:

Information Technology (the most leading service sectors in Indian

economy). IT-enabled services (ITES). Telecommunications. Financial Services. Community Services. Hotels and Restaurants.

There has been a 13 percent hike in the service sectors of trade, hotels, transport

and communication in India's economy as compared to the 10.4 percent rise in the

previous year. The financial services that comprise of banks, real estate, insurance,

and business services witnessed a rise of 11.1 percent during 2006-07 against the

10.9 percent growth in the previous year. Service sectors including community,

social, and personal services experienced a growth of 7.8 percent during 2006-07

as against 7.7 percent growth in the previous year.

The service sector of India has also witnessed a remarkable rise in the globalmarket apart from the Indian market. It has experienced a rise of 2.7 percent in2006 from that of 2 percent in 2004. The broad-based service in the trade sectorhas undergone a large-scale rise.

7.

A statistics concerning the growth of India's service sectors are listed below:

The software services in Indian economy increased by 33 percent whichregistered a revenue of USD 31.4 billion.


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Business services grew by 82.4 percent. Engineering services and products exports grew by 23 percent and earned a

revenue of USD 4.9 billion. Services concerning personal, cultural, and recreational had a growth of 96

percent. Financial services had a rise of 88.5 percent. Travel, transport, and insurance grew by 23 percent.

The software services in Indian economy along with the export of products isgrowing at a massive pace and thereby witnessed an alarming rise of 35.5 percentand reached a lumpsome amount of USD 18 billion. The IteS and BPO sectorsgrew by 33.5 percent and earned a revenue of USD 8.4 billion. The service sectorof Indian economy has been the most high-powered sector in India's economy. Ithas also been focusing in various investments of late. As Indian economy is

looking forward for more liberalization, sectors like banking are on its way to loomlarge and occupy a more significant position in India's economy.

Although the Services Sector has a very pivotal role in the countrys economicdevelopment, the database in this Sector is highly disorganised. A major limitationof the existing statistical system in this respect is the absence of a well-organisedmechanism for maintaining a regular and proper database for this Sector. Like theAnnual Survey of Industries (ASI) that is devoted to collection of data frommanufacturing and few other categories of units included in the lists maintained by

the Chief Inspectors of Factories, there is no such scheme in the Services Sector forannual collection of data from the units either having a large number of workers orcontributing significantly in terms of annual turnover.

As stated already, NIC-98 is based on the ISIC (Revision 3), which was broughtout a decade ago. But newer and newer types of services are coming intoexistences that have a parallel in other countries. Clearly, there is an urgent need tohave an inventory of the emerging service areas and have a detailed classificationof these.

8.

It may be desirable to have a classification of services in India such that it iscomparable with other countries. In this context, the World Trade Organisations(WTOs) List of Services sheds important light on the various service areas that


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have been recognised. While it is likely that the importance of many service areasmay differ from country to country, it will be noticed from this List that none ofthe areas seem irrelevant for the Indian context. It is possible that the level ofoperation of some of these services may be very low at present in the Indiancontext, but with progressive development they will tend to change. With

increasing communications and free flow of information, it is very likely thatservices, which seem unimportant today, could acquire significance in the nearfuture. At any rate, the objective to study the WTOs list is to merely provide anindicative list of services. In the WTOs List of Services presented , an indicationis given as to whether the various services listed are provided with specific Codesin the NIC-98 or not.

Service Sector in the future of Indian Economic:

Service sector is the lifeline for the social economic growth of a country. It is todaythe largest and fastest growing sector globally contributing more to the globaloutput and employing more people than any other sector. The real reason for thegrowth of the service sector is due to the increase in urbanization, privatization andmore demand for intermediate and final consumer services. Availability of qualityservices is vital for the well being of the economy. In advanced economies thegrowth in the primary and secondary sectors are directly dependent on the growthof services like banking, insurance, trade, commerce, entertainment etc.

Indian Service Sector:

In alignment with the global trends, Indian service sector has witnessed a majorboom and is one of the major contributors to both employment and nationalincome in recent times. The activities under the purview of the service sector arequite diverse. Trading, transportation and communication, financial, real estate and

business services, community, social and personal services come within the gambitof the service industry.

One of the key service industry in India would be health and education. They arevital for the countrys economic stability. A robust healthcare system helps to

create a strong and diligent human capital, who in turn can contribute productivelyto the nations growth.

9.

Post Liberalization:The Indian economy has moved from agriculture based economy to a knowledge

based economy. Today the IT industry and ITE'S industry are the dominant


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Banking Sector:The three major changes in the banking sector after liberalization are:

Step to increase the cash outflow through reduction in the statutory liquidityand cash reserve ratio.

Nationalized banks including SBI were allowed to sell stakes to privatesector and private investors were allowed to enter the banking domain. Foreign

banks were given greater access to the domestic market, both as subsidiaries andbranches, provided the foreign banks maintained a minimum assigned capital andwould be governed by the same rules and regulations governing domestic banks. Banks were given greater freedom to leverage the capital markets anddetermine their asset portfolios. The banks were allowed to provide advancesagainst equity provided as collateral and provide bank guarantees to the brokingcommunity.

Insurance Sector:The Insurance Regulatory and Development Authority Act 1999 (IRDA Act)allowed the participation of private insurance companies in the insurance sector.The primary role of IRDA was to safeguard the interest of insurance policyholders, to regulate, promote and ensure orderly growth of the insurance industry.The insurance sector could invest in the capital markets and other than traditionalinsurance products, various market link insurance products were available to theend customer to choose from.

Some of the prominent insurance companies are:

Bajaj Allianz Insurance Corporation Birla Sun Insurance Co Ltd HDFC Standard Insurance Co Ltd ICICI Prudential Insurance Co Ltd Max New York Insurance Co Ltd Tata AIG Insurance Co Ltd

Future Trends:

11.

Globally outsourcing industry would continue to grow. Following the success of US and UK, more countries in the European Unionwould outsource their business.


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Technological power shift from the West to the East as India and Chinaemerge as major players. Political backlash over outsourcing would come down as companies reapthe benefit of outsourcing.

Indian Telecom services Sector:The telecom services have been recognized the world-over as an important toolfor socio-economic development for a nation. It is one of the prime supportservices needed for rapid growth and modernization of various sectors of theeconomy. Indian telecommunication sector has undergone a major process oftransformation through significant policy reforms, particularly beginning withthe announcement of NTP 1994 and was subsequently re-emphasized andcarried forward under NTP 1999. Driven by various policy initiatives, theIndian telecom sector witnessed a complete transformation in the last decade. It

has achieved a phenomenal growth during the last few years and is poised totake a big leap in the future also.

Status of Telecom services Sector:The Indian Telecommunications network with 621 million connections (as onMarch 2010) is the third largest in the world. The sector is growing at a speedof 45% during the recent years. This rapid growth is possible due to various

proactive and positive decisions of the Government and contribution of both bythe public and the private sectors. The rapid strides in the telecom sector have

been facilitated by liberal policies of the Government that provides easy market

access for telecom equipment and a fair regulatory framework for offeringtelecom services to the Indian consumers at affordable prices. Presently, all thetelecom services have been opened for private participation.TheGovernmenthas taken followingmain initiatives for the growth of the Telecom Sector.

12.

Conclusion:The service industry forms a backbone of social and economic development of aregion. It has emerged as the largest and fastest-growing sectors in the world


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economy, making higher contributions to the global output and employment. Itsgrowth rate has been higher than that of agriculture and manufacturing sectors. It isa large and most dynamic part of the Indian economy both in terms of employment

potential and contribution to national income. It covers a wide range of activities,such as trading, transportation and communication, financial, real estate and

business services, as well as community, social and personal services. In India,services sector, as a whole, contributed as much as 68.6 per cent of the overallaverage growth in gross domestic product (GDP) between the years 2002-03 and2006-07. Because of this above information we can say that service sector is now adays very important in Indian economy & if there is no service sector there will beno development in the country & its economy.

13.


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Bibliography:

Google.com

Wikepediea.com

Indian economy.com

Yahoo answers.co.in

14.


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Thank You.

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What is Service Sector