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 Page 1


CHAPTER
09
Services
The COVID-19 pandemic, the subsequent lockdown and social distancing measures 
have had a significant impact on the contact-intensive services sector. During the first 
half of the financial year 2020-21, the services sector contracted by almost 16 per 
cent. Air passenger traffic, rail freight traffic, port traffic, foreign tourist arrivals, and 
foreign exchange earnings all contracted sharply following the first lockdown which was 
announced in March, 2020. As the economy gradually entered the unlock phase, most 
of these indicators showed signs of recovery. Services purchasing managers’ index, rail 
freight traffic, and port traffic have bottomed out and are rising steadily now, showing 
a V-shaped recovery. Domestic passenger air traffic is also increasing gradually on a 
monthly basis, although travel remains muted as compared to last year. Interestingly, in 
spite of the global disruptions, FDI inflows into the services sector increased by 34 per 
cent YoY during April-September 2020 to reach US$ 23.61 billion. The year 2020-21 
witnessed many significant 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.
Services sector’ s significance in the Indian economy has been steady, with the sector now 
accounting for over 54 per cent of the economy and almost four-fifths of total FDI inflows. 
Meanwhile, the shipping turnaround time at ports has almost halved from 4.67 days in 
2010-11 to 2.62 days in 2019-20. India is home to 38 unicorns, adding a record number of 
12 start-ups to the unicorn list last year. With the ongoing vaccination drive, the contact 
intensive service sectors can expect to witness revival.
SERVICES SECTOR PERFORMANCE IN INDIA: AN OVERVIEW
Impact of COVID-19 on Services Sector
9.1 The year 2020 was a peculiar year marred by the COVID-19 pandemic and consequent 
nationwide and worldwide lockdown measures implemented since March, 2020. The contact 
intensive services sector was severely impacted, particularly sub-sectors such as tourism, 
aviation, and hospitality. The first half of FY 2020-21 saw services sector contract by almost 16 
per cent YoY (Table 1). This decline was led by a sharp contraction in all sub-sectors particularly 
‘Trade, hotels, transport, communication & services related to broadcasting’, which contracted 
by 31.5 per cent in H1 FY 2020-21. As per the first advance estimates, Gross Value Added (GV A) 
of services sector is estimated to contract by 8.8 per cent in 2020-21, whereas it grew by 5.5 per 
cent in 2019-20 (Table 1). Sub-sectors ‘Trade, hotels, transport, communication & broadcasting 
services’, ‘Financial, real estate & professional services’, and ‘Public administration, defence 
Page 2


CHAPTER
09
Services
The COVID-19 pandemic, the subsequent lockdown and social distancing measures 
have had a significant impact on the contact-intensive services sector. During the first 
half of the financial year 2020-21, the services sector contracted by almost 16 per 
cent. Air passenger traffic, rail freight traffic, port traffic, foreign tourist arrivals, and 
foreign exchange earnings all contracted sharply following the first lockdown which was 
announced in March, 2020. As the economy gradually entered the unlock phase, most 
of these indicators showed signs of recovery. Services purchasing managers’ index, rail 
freight traffic, and port traffic have bottomed out and are rising steadily now, showing 
a V-shaped recovery. Domestic passenger air traffic is also increasing gradually on a 
monthly basis, although travel remains muted as compared to last year. Interestingly, in 
spite of the global disruptions, FDI inflows into the services sector increased by 34 per 
cent YoY during April-September 2020 to reach US$ 23.61 billion. The year 2020-21 
witnessed many significant 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.
Services sector’ s significance in the Indian economy has been steady, with the sector now 
accounting for over 54 per cent of the economy and almost four-fifths of total FDI inflows. 
Meanwhile, the shipping turnaround time at ports has almost halved from 4.67 days in 
2010-11 to 2.62 days in 2019-20. India is home to 38 unicorns, adding a record number of 
12 start-ups to the unicorn list last year. With the ongoing vaccination drive, the contact 
intensive service sectors can expect to witness revival.
SERVICES SECTOR PERFORMANCE IN INDIA: AN OVERVIEW
Impact of COVID-19 on Services Sector
9.1 The year 2020 was a peculiar year marred by the COVID-19 pandemic and consequent 
nationwide and worldwide lockdown measures implemented since March, 2020. The contact 
intensive services sector was severely impacted, particularly sub-sectors such as tourism, 
aviation, and hospitality. The first half of FY 2020-21 saw services sector contract by almost 16 
per cent YoY (Table 1). This decline was led by a sharp contraction in all sub-sectors particularly 
‘Trade, hotels, transport, communication & services related to broadcasting’, which contracted 
by 31.5 per cent in H1 FY 2020-21. As per the first advance estimates, Gross Value Added (GV A) 
of services sector is estimated to contract by 8.8 per cent in 2020-21, whereas it grew by 5.5 per 
cent in 2019-20 (Table 1). Sub-sectors ‘Trade, hotels, transport, communication & broadcasting 
services’, ‘Financial, real estate & professional services’, and ‘Public administration, defence 
306 Economic Survey 2020-21   V olume 2
& other services’ are estimated to contract by 21.41 per cent, 3.68 per cent and 0.82 per cent 
respectively. It is pertinent to note that while the services sector contracted by over 20 per cent 
in the first quarter (Q1) of FY 2020-21, the contraction narrowed to 11.4 per cent in the second 
quarter (Q2) of FY 2020-21. This pace of recovery is broadly aligned with high frequency 
indicators that point to a pick in economic momentum with the measured opening up of the 
economy from June 2020. 
Table 1: Services Sector Performance in India’s GV A
Share in 
GV A (per 
cent)
Growth (per cent Y oY)
Sector
2020-21 
(AE)
2018-19 
(1st RE)
2019-20 
(PE)
2020-21 
(AE)
2020-21 
(H1)
2020-21
Q1 Q2
Total Services        
(Excluding construction)
54.3 7.7 5.5 –?8.8 –?15.9 –?20.6 –?11.4
Trade, hotels, transport, 
communication & services 
related to broadcasting 
15.4 7.7 3.6 –?21.41 –?31.5 –?47.0 –?15.6
Financial, real estate & 
professional services
22.2 6.8 4.6 –?0.82 –?6.8 –?5.3 –?8.1
Public administration, 
defence & other services
16.7 9.4 10.0 –?3.68 –?11.3 –?10.3 –?12.2
Source: Ministry of Statistics and Programme Implementation.
Note: Shares are in current prices and growth in constant 2011-12 prices; RE: Revised Estimates. PE: Provisional 
Estimates. AE: Advance Estimates
9.2 India’s services sector activity, which had contracted for five consecutive months since 
March as the Covid-19 pandemic dented demand, has started to pick up since September 2020. 
The IHS Markit India Services Business Activity Index also known as Services Purchasing 
Managers’ Index (PMI), which was at an 85 month high of 57.5 in February, 2020, fell to its 
lowest level of 5.4 in April, 2020 (Figure 1(a)). As mobility restrictions were lifted and business 
resumed, Services PMI recovered sharply to 54.1 in October 2020. The index softened to 52.3 
in December 2020, although a print above 50 still means expansion. 
9.3 Similarly, rail freight traffic growth nosedived to (-) 35.3 per cent YoY in April 2020 before 
rising back sharply to 15.5 per cent YoY in September 2020, (Figure 1(b)). The growth momentum 
has continued till December 2020. Indian Railways loading was 118.13 million tonnes in December 
2020, which is 8.54 per cent higher YoY compared to last year’s loading (108.84 million tonnes) 
for the same period. It is worth mentioning that a number of concessions/ discounts are also being 
given in Indian Railways to make Railways Freight movement very attractive. 
9.4 Indian airlines were grounded for about two months between March and May, as the 
government then implemented travel restrictions to curb the spread of the pandemic. Air 
passenger traffic, thus, fell sharply in April 2020 (Figure 1(c)). Airlines were allowed to resume 
domestic operations from late May in a calibrated manner. Domestic air passenger traffic has 
been showing a gradual recovery since August on a monthly basis, although travel remains 
Page 3


CHAPTER
09
Services
The COVID-19 pandemic, the subsequent lockdown and social distancing measures 
have had a significant impact on the contact-intensive services sector. During the first 
half of the financial year 2020-21, the services sector contracted by almost 16 per 
cent. Air passenger traffic, rail freight traffic, port traffic, foreign tourist arrivals, and 
foreign exchange earnings all contracted sharply following the first lockdown which was 
announced in March, 2020. As the economy gradually entered the unlock phase, most 
of these indicators showed signs of recovery. Services purchasing managers’ index, rail 
freight traffic, and port traffic have bottomed out and are rising steadily now, showing 
a V-shaped recovery. Domestic passenger air traffic is also increasing gradually on a 
monthly basis, although travel remains muted as compared to last year. Interestingly, in 
spite of the global disruptions, FDI inflows into the services sector increased by 34 per 
cent YoY during April-September 2020 to reach US$ 23.61 billion. The year 2020-21 
witnessed many significant 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.
Services sector’ s significance in the Indian economy has been steady, with the sector now 
accounting for over 54 per cent of the economy and almost four-fifths of total FDI inflows. 
Meanwhile, the shipping turnaround time at ports has almost halved from 4.67 days in 
2010-11 to 2.62 days in 2019-20. India is home to 38 unicorns, adding a record number of 
12 start-ups to the unicorn list last year. With the ongoing vaccination drive, the contact 
intensive service sectors can expect to witness revival.
SERVICES SECTOR PERFORMANCE IN INDIA: AN OVERVIEW
Impact of COVID-19 on Services Sector
9.1 The year 2020 was a peculiar year marred by the COVID-19 pandemic and consequent 
nationwide and worldwide lockdown measures implemented since March, 2020. The contact 
intensive services sector was severely impacted, particularly sub-sectors such as tourism, 
aviation, and hospitality. The first half of FY 2020-21 saw services sector contract by almost 16 
per cent YoY (Table 1). This decline was led by a sharp contraction in all sub-sectors particularly 
‘Trade, hotels, transport, communication & services related to broadcasting’, which contracted 
by 31.5 per cent in H1 FY 2020-21. As per the first advance estimates, Gross Value Added (GV A) 
of services sector is estimated to contract by 8.8 per cent in 2020-21, whereas it grew by 5.5 per 
cent in 2019-20 (Table 1). Sub-sectors ‘Trade, hotels, transport, communication & broadcasting 
services’, ‘Financial, real estate & professional services’, and ‘Public administration, defence 
306 Economic Survey 2020-21   V olume 2
& other services’ are estimated to contract by 21.41 per cent, 3.68 per cent and 0.82 per cent 
respectively. It is pertinent to note that while the services sector contracted by over 20 per cent 
in the first quarter (Q1) of FY 2020-21, the contraction narrowed to 11.4 per cent in the second 
quarter (Q2) of FY 2020-21. This pace of recovery is broadly aligned with high frequency 
indicators that point to a pick in economic momentum with the measured opening up of the 
economy from June 2020. 
Table 1: Services Sector Performance in India’s GV A
Share in 
GV A (per 
cent)
Growth (per cent Y oY)
Sector
2020-21 
(AE)
2018-19 
(1st RE)
2019-20 
(PE)
2020-21 
(AE)
2020-21 
(H1)
2020-21
Q1 Q2
Total Services        
(Excluding construction)
54.3 7.7 5.5 –?8.8 –?15.9 –?20.6 –?11.4
Trade, hotels, transport, 
communication & services 
related to broadcasting 
15.4 7.7 3.6 –?21.41 –?31.5 –?47.0 –?15.6
Financial, real estate & 
professional services
22.2 6.8 4.6 –?0.82 –?6.8 –?5.3 –?8.1
Public administration, 
defence & other services
16.7 9.4 10.0 –?3.68 –?11.3 –?10.3 –?12.2
Source: Ministry of Statistics and Programme Implementation.
Note: Shares are in current prices and growth in constant 2011-12 prices; RE: Revised Estimates. PE: Provisional 
Estimates. AE: Advance Estimates
9.2 India’s services sector activity, which had contracted for five consecutive months since 
March as the Covid-19 pandemic dented demand, has started to pick up since September 2020. 
The IHS Markit India Services Business Activity Index also known as Services Purchasing 
Managers’ Index (PMI), which was at an 85 month high of 57.5 in February, 2020, fell to its 
lowest level of 5.4 in April, 2020 (Figure 1(a)). As mobility restrictions were lifted and business 
resumed, Services PMI recovered sharply to 54.1 in October 2020. The index softened to 52.3 
in December 2020, although a print above 50 still means expansion. 
9.3 Similarly, rail freight traffic growth nosedived to (-) 35.3 per cent YoY in April 2020 before 
rising back sharply to 15.5 per cent YoY in September 2020, (Figure 1(b)). The growth momentum 
has continued till December 2020. Indian Railways loading was 118.13 million tonnes in December 
2020, which is 8.54 per cent higher YoY compared to last year’s loading (108.84 million tonnes) 
for the same period. It is worth mentioning that a number of concessions/ discounts are also being 
given in Indian Railways to make Railways Freight movement very attractive. 
9.4 Indian airlines were grounded for about two months between March and May, as the 
government then implemented travel restrictions to curb the spread of the pandemic. Air 
passenger traffic, thus, fell sharply in April 2020 (Figure 1(c)). Airlines were allowed to resume 
domestic operations from late May in a calibrated manner. Domestic air passenger traffic has 
been showing a gradual recovery since August on a monthly basis, although travel remains 
307 Services
muted as compared to last year. According to Directorate General of Civil Aviation (DGCA), 
63.54 lakh domestic passengers travelled by air in November, which was 20.54 per cent higher 
than the passenger traffic in October when 52.71 lakh passengers flew. The domestic air traffic, 
however, stands 50.93 per cent lower in November 2020 as compared to November 2019, 
wherein 1.3 crore passengers had flown.
9.5 Bank credit growth YoY to services sector had moderated significantly between September 
2018 and December 2019. However, credit growth to the services sector was stronger in 2020, 
increasing to 8.76 per cent YoY at the end of November 2020 as compared to 4.84 per cent a 
year ago (Figure 1(d)). This was driven by growth in sub-sectors ‘Tourism, Hotels & Restaurants’, 
‘Transport Operators’, and ‘Other Services’. However, bank credit growth to ‘Professional Services’ 
and ‘Shipping’ contracted by 24.66 per cent and 20.51 per cent YoY respectively (Table 2). 
Figure 1(a): Services PMI Index
Figure 1(b): Growth in  
Rail Freight Traffic (YoY)
Source: HIS Markit Economics, Directorate General of Civil Aviation
Figure 1 (c): Growth in  
Air Passenger Traffic (YoY)
Figure 1 (d): Growth in Bank Credit to  
Services Sector (YoY)
Source: RBI, Indian Railways
Page 4


CHAPTER
09
Services
The COVID-19 pandemic, the subsequent lockdown and social distancing measures 
have had a significant impact on the contact-intensive services sector. During the first 
half of the financial year 2020-21, the services sector contracted by almost 16 per 
cent. Air passenger traffic, rail freight traffic, port traffic, foreign tourist arrivals, and 
foreign exchange earnings all contracted sharply following the first lockdown which was 
announced in March, 2020. As the economy gradually entered the unlock phase, most 
of these indicators showed signs of recovery. Services purchasing managers’ index, rail 
freight traffic, and port traffic have bottomed out and are rising steadily now, showing 
a V-shaped recovery. Domestic passenger air traffic is also increasing gradually on a 
monthly basis, although travel remains muted as compared to last year. Interestingly, in 
spite of the global disruptions, FDI inflows into the services sector increased by 34 per 
cent YoY during April-September 2020 to reach US$ 23.61 billion. The year 2020-21 
witnessed many significant 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.
Services sector’ s significance in the Indian economy has been steady, with the sector now 
accounting for over 54 per cent of the economy and almost four-fifths of total FDI inflows. 
Meanwhile, the shipping turnaround time at ports has almost halved from 4.67 days in 
2010-11 to 2.62 days in 2019-20. India is home to 38 unicorns, adding a record number of 
12 start-ups to the unicorn list last year. With the ongoing vaccination drive, the contact 
intensive service sectors can expect to witness revival.
SERVICES SECTOR PERFORMANCE IN INDIA: AN OVERVIEW
Impact of COVID-19 on Services Sector
9.1 The year 2020 was a peculiar year marred by the COVID-19 pandemic and consequent 
nationwide and worldwide lockdown measures implemented since March, 2020. The contact 
intensive services sector was severely impacted, particularly sub-sectors such as tourism, 
aviation, and hospitality. The first half of FY 2020-21 saw services sector contract by almost 16 
per cent YoY (Table 1). This decline was led by a sharp contraction in all sub-sectors particularly 
‘Trade, hotels, transport, communication & services related to broadcasting’, which contracted 
by 31.5 per cent in H1 FY 2020-21. As per the first advance estimates, Gross Value Added (GV A) 
of services sector is estimated to contract by 8.8 per cent in 2020-21, whereas it grew by 5.5 per 
cent in 2019-20 (Table 1). Sub-sectors ‘Trade, hotels, transport, communication & broadcasting 
services’, ‘Financial, real estate & professional services’, and ‘Public administration, defence 
306 Economic Survey 2020-21   V olume 2
& other services’ are estimated to contract by 21.41 per cent, 3.68 per cent and 0.82 per cent 
respectively. It is pertinent to note that while the services sector contracted by over 20 per cent 
in the first quarter (Q1) of FY 2020-21, the contraction narrowed to 11.4 per cent in the second 
quarter (Q2) of FY 2020-21. This pace of recovery is broadly aligned with high frequency 
indicators that point to a pick in economic momentum with the measured opening up of the 
economy from June 2020. 
Table 1: Services Sector Performance in India’s GV A
Share in 
GV A (per 
cent)
Growth (per cent Y oY)
Sector
2020-21 
(AE)
2018-19 
(1st RE)
2019-20 
(PE)
2020-21 
(AE)
2020-21 
(H1)
2020-21
Q1 Q2
Total Services        
(Excluding construction)
54.3 7.7 5.5 –?8.8 –?15.9 –?20.6 –?11.4
Trade, hotels, transport, 
communication & services 
related to broadcasting 
15.4 7.7 3.6 –?21.41 –?31.5 –?47.0 –?15.6
Financial, real estate & 
professional services
22.2 6.8 4.6 –?0.82 –?6.8 –?5.3 –?8.1
Public administration, 
defence & other services
16.7 9.4 10.0 –?3.68 –?11.3 –?10.3 –?12.2
Source: Ministry of Statistics and Programme Implementation.
Note: Shares are in current prices and growth in constant 2011-12 prices; RE: Revised Estimates. PE: Provisional 
Estimates. AE: Advance Estimates
9.2 India’s services sector activity, which had contracted for five consecutive months since 
March as the Covid-19 pandemic dented demand, has started to pick up since September 2020. 
The IHS Markit India Services Business Activity Index also known as Services Purchasing 
Managers’ Index (PMI), which was at an 85 month high of 57.5 in February, 2020, fell to its 
lowest level of 5.4 in April, 2020 (Figure 1(a)). As mobility restrictions were lifted and business 
resumed, Services PMI recovered sharply to 54.1 in October 2020. The index softened to 52.3 
in December 2020, although a print above 50 still means expansion. 
9.3 Similarly, rail freight traffic growth nosedived to (-) 35.3 per cent YoY in April 2020 before 
rising back sharply to 15.5 per cent YoY in September 2020, (Figure 1(b)). The growth momentum 
has continued till December 2020. Indian Railways loading was 118.13 million tonnes in December 
2020, which is 8.54 per cent higher YoY compared to last year’s loading (108.84 million tonnes) 
for the same period. It is worth mentioning that a number of concessions/ discounts are also being 
given in Indian Railways to make Railways Freight movement very attractive. 
9.4 Indian airlines were grounded for about two months between March and May, as the 
government then implemented travel restrictions to curb the spread of the pandemic. Air 
passenger traffic, thus, fell sharply in April 2020 (Figure 1(c)). Airlines were allowed to resume 
domestic operations from late May in a calibrated manner. Domestic air passenger traffic has 
been showing a gradual recovery since August on a monthly basis, although travel remains 
307 Services
muted as compared to last year. According to Directorate General of Civil Aviation (DGCA), 
63.54 lakh domestic passengers travelled by air in November, which was 20.54 per cent higher 
than the passenger traffic in October when 52.71 lakh passengers flew. The domestic air traffic, 
however, stands 50.93 per cent lower in November 2020 as compared to November 2019, 
wherein 1.3 crore passengers had flown.
9.5 Bank credit growth YoY to services sector had moderated significantly between September 
2018 and December 2019. However, credit growth to the services sector was stronger in 2020, 
increasing to 8.76 per cent YoY at the end of November 2020 as compared to 4.84 per cent a 
year ago (Figure 1(d)). This was driven by growth in sub-sectors ‘Tourism, Hotels & Restaurants’, 
‘Transport Operators’, and ‘Other Services’. However, bank credit growth to ‘Professional Services’ 
and ‘Shipping’ contracted by 24.66 per cent and 20.51 per cent YoY respectively (Table 2). 
Figure 1(a): Services PMI Index
Figure 1(b): Growth in  
Rail Freight Traffic (YoY)
Source: HIS Markit Economics, Directorate General of Civil Aviation
Figure 1 (c): Growth in  
Air Passenger Traffic (YoY)
Figure 1 (d): Growth in Bank Credit to  
Services Sector (YoY)
Source: RBI, Indian Railways
308 Economic Survey 2020-21   V olume 2
Table 2 : Growth in Bank Credit to Services Sub-Sectors (YoY)
November  
2020
November  
2019
Services 8.76 4.84
Transport Operators 10.73 8.14
Computer Software 0.36 -0.39
Tourism, Hotels & Restaurants 18.04 13.09
Shipping –?20.51 5.13
Professional Services –?24.66 1.30
Commercial Real Estate 5.69 6.04
NBFCs 5.65 17.60
Retail Trade 7.84 29.06
Wholesale Trade (excl. food procurement) 15.81 -19.53
Other Services –?3.5 11.3
 Source: RBI.
Service sector share at the State and UT level
9.6 The services sector accounts for more than 50 per cent of the Gross State Value Added 
(GSV A) in 15 out of the 33 states and UTs (Table 3). In eight states, services sector accounts 
for more than 60 per cent of GSV A. Chandigarh and Delhi stand out with a particularly high 
share of services in GSV A of over 85 per cent while Sikkim’s share remains the lowest at 27.02 
per cent. It must be noted that even states with relatively lower share of services in GSV A, such 
as Tripura, Uttarakhand Andhra Pradesh, Gujarat, Madhya Pradesh, Jharkhand, Odisha, and 
Arunachal Pradesh have witnessed strong services sector growth in the recent years.
Table 3: Services Sector Performance at the State and UT Level
State
Services Sector Share in GV A 
in 2019-20 (per cent)*
Services Sector 5-year Average 
Growth (per cent Y oY)**
Chandigarh* 88.29 6.48
Delhi 85.16 7.79
Andaman and Nicobar Islands* 68.12 8.62
Karnataka 66.19 9.93
Telangana 65.19 10.25
Kerala* 63.73 6.91
Manipur* 62.64 5.85
Jammu and Kashmir* 60.08 6.00
Maharashtra* 59.75 8.04
Bihar 59.45 8.97
Meghalaya 58.48 8.90
Nagaland* 56.39 5.97
West Bengal 55.97 6.94
Tamil Nadu 53.67 6.29
Page 5


CHAPTER
09
Services
The COVID-19 pandemic, the subsequent lockdown and social distancing measures 
have had a significant impact on the contact-intensive services sector. During the first 
half of the financial year 2020-21, the services sector contracted by almost 16 per 
cent. Air passenger traffic, rail freight traffic, port traffic, foreign tourist arrivals, and 
foreign exchange earnings all contracted sharply following the first lockdown which was 
announced in March, 2020. As the economy gradually entered the unlock phase, most 
of these indicators showed signs of recovery. Services purchasing managers’ index, rail 
freight traffic, and port traffic have bottomed out and are rising steadily now, showing 
a V-shaped recovery. Domestic passenger air traffic is also increasing gradually on a 
monthly basis, although travel remains muted as compared to last year. Interestingly, in 
spite of the global disruptions, FDI inflows into the services sector increased by 34 per 
cent YoY during April-September 2020 to reach US$ 23.61 billion. The year 2020-21 
witnessed many significant 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.
Services sector’ s significance in the Indian economy has been steady, with the sector now 
accounting for over 54 per cent of the economy and almost four-fifths of total FDI inflows. 
Meanwhile, the shipping turnaround time at ports has almost halved from 4.67 days in 
2010-11 to 2.62 days in 2019-20. India is home to 38 unicorns, adding a record number of 
12 start-ups to the unicorn list last year. With the ongoing vaccination drive, the contact 
intensive service sectors can expect to witness revival.
SERVICES SECTOR PERFORMANCE IN INDIA: AN OVERVIEW
Impact of COVID-19 on Services Sector
9.1 The year 2020 was a peculiar year marred by the COVID-19 pandemic and consequent 
nationwide and worldwide lockdown measures implemented since March, 2020. The contact 
intensive services sector was severely impacted, particularly sub-sectors such as tourism, 
aviation, and hospitality. The first half of FY 2020-21 saw services sector contract by almost 16 
per cent YoY (Table 1). This decline was led by a sharp contraction in all sub-sectors particularly 
‘Trade, hotels, transport, communication & services related to broadcasting’, which contracted 
by 31.5 per cent in H1 FY 2020-21. As per the first advance estimates, Gross Value Added (GV A) 
of services sector is estimated to contract by 8.8 per cent in 2020-21, whereas it grew by 5.5 per 
cent in 2019-20 (Table 1). Sub-sectors ‘Trade, hotels, transport, communication & broadcasting 
services’, ‘Financial, real estate & professional services’, and ‘Public administration, defence 
306 Economic Survey 2020-21   V olume 2
& other services’ are estimated to contract by 21.41 per cent, 3.68 per cent and 0.82 per cent 
respectively. It is pertinent to note that while the services sector contracted by over 20 per cent 
in the first quarter (Q1) of FY 2020-21, the contraction narrowed to 11.4 per cent in the second 
quarter (Q2) of FY 2020-21. This pace of recovery is broadly aligned with high frequency 
indicators that point to a pick in economic momentum with the measured opening up of the 
economy from June 2020. 
Table 1: Services Sector Performance in India’s GV A
Share in 
GV A (per 
cent)
Growth (per cent Y oY)
Sector
2020-21 
(AE)
2018-19 
(1st RE)
2019-20 
(PE)
2020-21 
(AE)
2020-21 
(H1)
2020-21
Q1 Q2
Total Services        
(Excluding construction)
54.3 7.7 5.5 –?8.8 –?15.9 –?20.6 –?11.4
Trade, hotels, transport, 
communication & services 
related to broadcasting 
15.4 7.7 3.6 –?21.41 –?31.5 –?47.0 –?15.6
Financial, real estate & 
professional services
22.2 6.8 4.6 –?0.82 –?6.8 –?5.3 –?8.1
Public administration, 
defence & other services
16.7 9.4 10.0 –?3.68 –?11.3 –?10.3 –?12.2
Source: Ministry of Statistics and Programme Implementation.
Note: Shares are in current prices and growth in constant 2011-12 prices; RE: Revised Estimates. PE: Provisional 
Estimates. AE: Advance Estimates
9.2 India’s services sector activity, which had contracted for five consecutive months since 
March as the Covid-19 pandemic dented demand, has started to pick up since September 2020. 
The IHS Markit India Services Business Activity Index also known as Services Purchasing 
Managers’ Index (PMI), which was at an 85 month high of 57.5 in February, 2020, fell to its 
lowest level of 5.4 in April, 2020 (Figure 1(a)). As mobility restrictions were lifted and business 
resumed, Services PMI recovered sharply to 54.1 in October 2020. The index softened to 52.3 
in December 2020, although a print above 50 still means expansion. 
9.3 Similarly, rail freight traffic growth nosedived to (-) 35.3 per cent YoY in April 2020 before 
rising back sharply to 15.5 per cent YoY in September 2020, (Figure 1(b)). The growth momentum 
has continued till December 2020. Indian Railways loading was 118.13 million tonnes in December 
2020, which is 8.54 per cent higher YoY compared to last year’s loading (108.84 million tonnes) 
for the same period. It is worth mentioning that a number of concessions/ discounts are also being 
given in Indian Railways to make Railways Freight movement very attractive. 
9.4 Indian airlines were grounded for about two months between March and May, as the 
government then implemented travel restrictions to curb the spread of the pandemic. Air 
passenger traffic, thus, fell sharply in April 2020 (Figure 1(c)). Airlines were allowed to resume 
domestic operations from late May in a calibrated manner. Domestic air passenger traffic has 
been showing a gradual recovery since August on a monthly basis, although travel remains 
307 Services
muted as compared to last year. According to Directorate General of Civil Aviation (DGCA), 
63.54 lakh domestic passengers travelled by air in November, which was 20.54 per cent higher 
than the passenger traffic in October when 52.71 lakh passengers flew. The domestic air traffic, 
however, stands 50.93 per cent lower in November 2020 as compared to November 2019, 
wherein 1.3 crore passengers had flown.
9.5 Bank credit growth YoY to services sector had moderated significantly between September 
2018 and December 2019. However, credit growth to the services sector was stronger in 2020, 
increasing to 8.76 per cent YoY at the end of November 2020 as compared to 4.84 per cent a 
year ago (Figure 1(d)). This was driven by growth in sub-sectors ‘Tourism, Hotels & Restaurants’, 
‘Transport Operators’, and ‘Other Services’. However, bank credit growth to ‘Professional Services’ 
and ‘Shipping’ contracted by 24.66 per cent and 20.51 per cent YoY respectively (Table 2). 
Figure 1(a): Services PMI Index
Figure 1(b): Growth in  
Rail Freight Traffic (YoY)
Source: HIS Markit Economics, Directorate General of Civil Aviation
Figure 1 (c): Growth in  
Air Passenger Traffic (YoY)
Figure 1 (d): Growth in Bank Credit to  
Services Sector (YoY)
Source: RBI, Indian Railways
308 Economic Survey 2020-21   V olume 2
Table 2 : Growth in Bank Credit to Services Sub-Sectors (YoY)
November  
2020
November  
2019
Services 8.76 4.84
Transport Operators 10.73 8.14
Computer Software 0.36 -0.39
Tourism, Hotels & Restaurants 18.04 13.09
Shipping –?20.51 5.13
Professional Services –?24.66 1.30
Commercial Real Estate 5.69 6.04
NBFCs 5.65 17.60
Retail Trade 7.84 29.06
Wholesale Trade (excl. food procurement) 15.81 -19.53
Other Services –?3.5 11.3
 Source: RBI.
Service sector share at the State and UT level
9.6 The services sector accounts for more than 50 per cent of the Gross State Value Added 
(GSV A) in 15 out of the 33 states and UTs (Table 3). In eight states, services sector accounts 
for more than 60 per cent of GSV A. Chandigarh and Delhi stand out with a particularly high 
share of services in GSV A of over 85 per cent while Sikkim’s share remains the lowest at 27.02 
per cent. It must be noted that even states with relatively lower share of services in GSV A, such 
as Tripura, Uttarakhand Andhra Pradesh, Gujarat, Madhya Pradesh, Jharkhand, Odisha, and 
Arunachal Pradesh have witnessed strong services sector growth in the recent years.
Table 3: Services Sector Performance at the State and UT Level
State
Services Sector Share in GV A 
in 2019-20 (per cent)*
Services Sector 5-year Average 
Growth (per cent Y oY)**
Chandigarh* 88.29 6.48
Delhi 85.16 7.79
Andaman and Nicobar Islands* 68.12 8.62
Karnataka 66.19 9.93
Telangana 65.19 10.25
Kerala* 63.73 6.91
Manipur* 62.64 5.85
Jammu and Kashmir* 60.08 6.00
Maharashtra* 59.75 8.04
Bihar 59.45 8.97
Meghalaya 58.48 8.90
Nagaland* 56.39 5.97
West Bengal 55.97 6.94
Tamil Nadu 53.67 6.29
309 Services
State
Services Sector Share in GV A 
in 2019-20 (per cent)*
Services Sector 5-year Average 
Growth (per cent Y oY)**
Haryana 50.44 8.98
Puducherry 49.67 6.22
Uttar Pradesh* 48.95 7.05
Mizoram* 47.60 7.09
Punjab 46.71 6.90
Tripura 46.71 10.50
Rajasthan 46.63 7.51
Assam* 46.57 5.68
Jharkhand 45.28 7.69
Himachal Pradesh 43.88 7.01
Arunachal Pradesh* 43.23 8.22
Uttarakhand 43.23 9.47
Andhra Pradesh 41.80 7.56
Odisha 40.84 7.20
Goa* 38.53 6.01
Chhattisgarh 36.86 7.02
Madhya Pradesh 36.77 8.01
Gujarat* 35.62 8.66
Sikkim 27.02 6.22
Source: MoSPI.
Note: *2018-19 data; **Average from 2015-16 to 2019-20, or average from 2014-15 to 2018-19 where the data for 
2019-20 is unavailable.
FDI Inflows into Services Sector
9.7 India improved its position from 12
th
 in 2018 to 9
th
 in 2019 in the list of the world’s largest FDI 
recipients according to the latest World Investment Report 2020 by United Nations Conference 
on Trade and Development (UNCTAD). FDI into India recorded almost 17 per cent jump during 
April-September 2020 over the corresponding period last year, despite the global slowdown, the 
COVID-19 pandemic, lockdown measures and supply chain disruptions. Services sector
1
, being 
the largest recipient of FDI in India, witnessed a strong growth during April-September 2020. 
The gross FDI equity inflows (excluding re-invested earnings) into the services sector jumped 
34 per cent YoY during April-September 2020 to reach US$ 23.61 billion, accounting for almost 
four-fifth of the total gross FDI equity inflows into India during this period (Table 4). The jump 
in FDI equity inflows was driven by strong inflows into the ‘Computer Software & Hardware’ 
sub-sector, wherein FDI inflows increased to US$ 17.55 billion which is over 336  per cent higher 
over the corresponding period last year. High growth in FDI inflows was also present in sub-
sectors such as ‘Retail Trading’, ‘Agriculture Services’, and ‘Education’. 
 
1
  Estimated as gross FDI equity inflows into financial services, business services, outsourcing, R&D, technology 
testing & analysis, courier, telecommunications, trading, computer hardware & software, hotels & tourism, 
hospital & diagnostic centres, consultancy services, sea transport, information & broadcasting, retail trading, 
agriculture services, education, and air transport.