Services | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


CHAPTER
09
The services sector as a whole has mostly recovered from the impact of the nationwide 
lockdown imposed during March-May 2020 and localised lockdowns during the second 
covid wave in April-May 2021, although some of the sub-sectors continue to be impacted. 
During the first half of 2021-22, the Services sector grew by 10.8 per cent. The recovery 
is more pronounced given the Gross Value Added (GVA) of Services crossed the pre-
pandemic level in Q2 2021-22. However, being a contact intensive sub-sector, GVA of 
‘Trade, hotels, transport, communication & services related to broadcasting’ still remains 
below its pre-pandemic level. The overall Services sector GVA is expected to grow by 
8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of 
uncertainty for near term, especially in segments that require human contact.
High frequency indicators such as services purchasing managers’ index, air freight and 
rail freight bottomed out in 2020. The impact of second covid wave in April-May 2021 on 
these indicators was much more muted as compared to during the full lockdown in March-
May 2020. During April-December 2021, rail freight crossed its pre-pandemic level while 
air freight and port traffic almost reached their pre-pandemic level. Domestic air and rail 
passenger traffic is also increasing gradually. The global issue of container shortage is 
impacting port traffic.
Services exports, after the initial slump during the first three quarters of 2020-21, 
surpassed its pre-pandemic level in Q4 2020-21. During H1 2021-22, services exports 
grew by 21.6 per cent, deriving strength from global demand for software and IT services 
exports. India’s share in world commercial services exports increased to 4.1 per cent 
in 2020. Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21, 
adding 1.38 lakh employees during the same period. The Government  undertook a major 
reform of removing telecom regulations in the IT-BPO sector. As per a survey conducted 
by NASSCOM, these reforms have reduced compliance burden, enhanced productivity, 
increased global competitiveness and lowered the cost of doing business in India. Similarly, 
the Government has opened up space sector to private players, which will enhance the 
socio-economic use of space assets and activities. During the first half of 2021-22, the 
Services sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of 
the total FDI inflows into India.
Services
Page 2


CHAPTER
09
The services sector as a whole has mostly recovered from the impact of the nationwide 
lockdown imposed during March-May 2020 and localised lockdowns during the second 
covid wave in April-May 2021, although some of the sub-sectors continue to be impacted. 
During the first half of 2021-22, the Services sector grew by 10.8 per cent. The recovery 
is more pronounced given the Gross Value Added (GVA) of Services crossed the pre-
pandemic level in Q2 2021-22. However, being a contact intensive sub-sector, GVA of 
‘Trade, hotels, transport, communication & services related to broadcasting’ still remains 
below its pre-pandemic level. The overall Services sector GVA is expected to grow by 
8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of 
uncertainty for near term, especially in segments that require human contact.
High frequency indicators such as services purchasing managers’ index, air freight and 
rail freight bottomed out in 2020. The impact of second covid wave in April-May 2021 on 
these indicators was much more muted as compared to during the full lockdown in March-
May 2020. During April-December 2021, rail freight crossed its pre-pandemic level while 
air freight and port traffic almost reached their pre-pandemic level. Domestic air and rail 
passenger traffic is also increasing gradually. The global issue of container shortage is 
impacting port traffic.
Services exports, after the initial slump during the first three quarters of 2020-21, 
surpassed its pre-pandemic level in Q4 2020-21. During H1 2021-22, services exports 
grew by 21.6 per cent, deriving strength from global demand for software and IT services 
exports. India’s share in world commercial services exports increased to 4.1 per cent 
in 2020. Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21, 
adding 1.38 lakh employees during the same period. The Government  undertook a major 
reform of removing telecom regulations in the IT-BPO sector. As per a survey conducted 
by NASSCOM, these reforms have reduced compliance burden, enhanced productivity, 
increased global competitiveness and lowered the cost of doing business in India. Similarly, 
the Government has opened up space sector to private players, which will enhance the 
socio-economic use of space assets and activities. During the first half of 2021-22, the 
Services sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of 
the total FDI inflows into India.
Services
314 Economic Survey 2021-22
INTRODUCTION
9.1 Services sector contributes over 50 per cent to India’s GDP . While Covid-19 pandemic has 
had an adverse impact on most sectors of the economy, the services sector has been the worst 
affected as its’ share in India’s GVA declined from 55 per cent in 2019-20 to 53 per cent in 
2021-22.
1
 Within the services sector, the effect of Covid-19 has been varied. While non-contact 
services such as information, communication, financial, professional and business services have 
remained resilient, the impact has been much severe on contact based services such as tourism, 
retail trade, hotel, entertainment and recreation, etc. 
IMPACT OF COVID-19 AND SEQUENTIAL RECOVERY
9.2 The services sector contracted by 8.4 per cent Year on Year (YoY) in 2020-21 (Table 1). 
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’. Owing to its contact 
intensive nature, the services included in this sub-sector had to bear the maximum brunt of the 
disruptions caused by the prevailing pandemic. The sub-sector ‘Public administration, defence 
& other services’ which includes expenditure by the government on one hand and services such 
as health, education, recreation etc, on the other, contracted by 4.6 per cent YoY in 2020-21. 
The relatively less contact intensive sub-sector ‘Financial, real estate & professional services’ 
was the least impacted, with a marginal decline of 1.5 per cent  YoY in its GV A during 2020-21 
(Table 1). 
9.3 During the first half of the current fiscal year, the services sector has registered a steady 
recovery. Overall, the services sector grew by 10.8 per cent YoY in first half (H1) 2021-22 
(Table 1). A closer look at the quarterly estimates shows that Gross Value Added (GVA) in 
services sector (excluding construction) crossed its pre-pandemic level
2
 in Q2 2021-22 (Table 
2, which compares the performance of quarterly GVA over the GVA in Q3 2019-20). The sub-
sector ‘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. However, the quarterly GVA 
of  this sub-sector is still below its pre-pandemic level (Table 2). On the other hand, GVA of 
‘Public administration, defence & other services’ sub-sector witnessed a robust recovery. During 
H1 2021-22, the sub-sector grew by 12 per cent YoY, surpassing its pre pandemic level in 
Q2 2021-22 (Table 2). The ramping up of government expenditure in the wake of Covid-19 has 
contributed to the recovery of this sub-sector. Further, the sub-sector ‘Financial, real estate & 
professional services’ expanded by 5.8 per cent YoY in H1 2021-22, its GV A remained resilient 
throughout (Table 2).
1
As per the Advance Estimates of 2021-22.
2
Pre-pandemic level denotes Q3 2019-20 GV A
Startups in India have grown remarkably over the last six years. The number of new 
recognised starups have increased to over 14,000 in 2021-22 from only 733 in 2016-17. 
As a result, India has become the third largest startup ecosystem in the world after the 
US and China. Further, a record 44 Indian startups have achieved unicorn status in 2021 
taking the overall tally of unicorns in India to 83, most of these are in the services sector. 
Page 3


CHAPTER
09
The services sector as a whole has mostly recovered from the impact of the nationwide 
lockdown imposed during March-May 2020 and localised lockdowns during the second 
covid wave in April-May 2021, although some of the sub-sectors continue to be impacted. 
During the first half of 2021-22, the Services sector grew by 10.8 per cent. The recovery 
is more pronounced given the Gross Value Added (GVA) of Services crossed the pre-
pandemic level in Q2 2021-22. However, being a contact intensive sub-sector, GVA of 
‘Trade, hotels, transport, communication & services related to broadcasting’ still remains 
below its pre-pandemic level. The overall Services sector GVA is expected to grow by 
8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of 
uncertainty for near term, especially in segments that require human contact.
High frequency indicators such as services purchasing managers’ index, air freight and 
rail freight bottomed out in 2020. The impact of second covid wave in April-May 2021 on 
these indicators was much more muted as compared to during the full lockdown in March-
May 2020. During April-December 2021, rail freight crossed its pre-pandemic level while 
air freight and port traffic almost reached their pre-pandemic level. Domestic air and rail 
passenger traffic is also increasing gradually. The global issue of container shortage is 
impacting port traffic.
Services exports, after the initial slump during the first three quarters of 2020-21, 
surpassed its pre-pandemic level in Q4 2020-21. During H1 2021-22, services exports 
grew by 21.6 per cent, deriving strength from global demand for software and IT services 
exports. India’s share in world commercial services exports increased to 4.1 per cent 
in 2020. Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21, 
adding 1.38 lakh employees during the same period. The Government  undertook a major 
reform of removing telecom regulations in the IT-BPO sector. As per a survey conducted 
by NASSCOM, these reforms have reduced compliance burden, enhanced productivity, 
increased global competitiveness and lowered the cost of doing business in India. Similarly, 
the Government has opened up space sector to private players, which will enhance the 
socio-economic use of space assets and activities. During the first half of 2021-22, the 
Services sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of 
the total FDI inflows into India.
Services
314 Economic Survey 2021-22
INTRODUCTION
9.1 Services sector contributes over 50 per cent to India’s GDP . While Covid-19 pandemic has 
had an adverse impact on most sectors of the economy, the services sector has been the worst 
affected as its’ share in India’s GVA declined from 55 per cent in 2019-20 to 53 per cent in 
2021-22.
1
 Within the services sector, the effect of Covid-19 has been varied. While non-contact 
services such as information, communication, financial, professional and business services have 
remained resilient, the impact has been much severe on contact based services such as tourism, 
retail trade, hotel, entertainment and recreation, etc. 
IMPACT OF COVID-19 AND SEQUENTIAL RECOVERY
9.2 The services sector contracted by 8.4 per cent Year on Year (YoY) in 2020-21 (Table 1). 
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’. Owing to its contact 
intensive nature, the services included in this sub-sector had to bear the maximum brunt of the 
disruptions caused by the prevailing pandemic. The sub-sector ‘Public administration, defence 
& other services’ which includes expenditure by the government on one hand and services such 
as health, education, recreation etc, on the other, contracted by 4.6 per cent YoY in 2020-21. 
The relatively less contact intensive sub-sector ‘Financial, real estate & professional services’ 
was the least impacted, with a marginal decline of 1.5 per cent  YoY in its GV A during 2020-21 
(Table 1). 
9.3 During the first half of the current fiscal year, the services sector has registered a steady 
recovery. Overall, the services sector grew by 10.8 per cent YoY in first half (H1) 2021-22 
(Table 1). A closer look at the quarterly estimates shows that Gross Value Added (GVA) in 
services sector (excluding construction) crossed its pre-pandemic level
2
 in Q2 2021-22 (Table 
2, which compares the performance of quarterly GVA over the GVA in Q3 2019-20). The sub-
sector ‘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. However, the quarterly GVA 
of  this sub-sector is still below its pre-pandemic level (Table 2). On the other hand, GVA of 
‘Public administration, defence & other services’ sub-sector witnessed a robust recovery. During 
H1 2021-22, the sub-sector grew by 12 per cent YoY, surpassing its pre pandemic level in 
Q2 2021-22 (Table 2). The ramping up of government expenditure in the wake of Covid-19 has 
contributed to the recovery of this sub-sector. Further, the sub-sector ‘Financial, real estate & 
professional services’ expanded by 5.8 per cent YoY in H1 2021-22, its GV A remained resilient 
throughout (Table 2).
1
As per the Advance Estimates of 2021-22.
2
Pre-pandemic level denotes Q3 2019-20 GV A
Startups in India have grown remarkably over the last six years. The number of new 
recognised starups have increased to over 14,000 in 2021-22 from only 733 in 2016-17. 
As a result, India has become the third largest startup ecosystem in the world after the 
US and China. Further, a record 44 Indian startups have achieved unicorn status in 2021 
taking the overall tally of unicorns in India to 83, most of these are in the services sector. 
315 Services
Table 1: Services Sector Performance
Share in GV A 
(per cent)
Growth (YoY) (per cent)
Sector 2021-22 
(AE)
2018-19 
(2
nd 
RE)
2019-20 
(1
st RE)
2020-21 
(PE)
2021-22 
(AE)
2021-22
Q1 Q2 H1
Total Services        
(Excluding construction)
53 7.2 7.2 -8.4 8.2 11.4 10.2 10.8
Trade, hotels, transport, 
communication & services 
related to broadcasting 
16.9 7.1 6.4 -18.2 11.9 34.3 8.2 18.4
Financial, real estate & 
professional services
20.9 7.2 7.3 -1.5 4.0 3.7 7.8 5.8
Public administration, 
defence & other services*
15.2 7.4 8.3 -4.6 10.7 5.8 17.4 12.0
Source: Ministry of Statistics and Programme Implementation. 
Note: Share in GV A is in current prices and growth in GV A is at constant 2011-12 prices; 
*: Other services include Education, Health, Recreation, and other personal services
RE: Revised Estimates. PE: Provisional Estimates. AE: Advance Estimates   
Table 2: Gross Value Added in Services sub-sectors 
Relative To Pre-Pandemic Levels (Q3  2019-20 GV A= 100)
Sector 2020-21 
Q1
2020-21 
Q2
2020-21 
Q3
2020-21 
Q4
2021-22 
Q1
2021-22 
Q2
Trade, hotels, transport, 
communication & services 
related to broadcasting 
52 81 92 108 70 87
Financial, real estate & 
professional services
123 126 107 107 127 136
Public administration, defence 
& other services
78 88 98 103 83 104
Total Services 84 99 99 106 94 109
Total GV A 78 92 101 106 92 100
Source: Ministry of Statistics and Programme Implementation. 
9.4 As per the first advance estimates, Gross V alue Added (GV A) of services sector is estimated 
to grow by 8.2 per cent in 2021-22. Sub-sectors ‘Trade, hotels, transport, communication & 
broadcasting services’, ‘Financial, real estate & professional services’, and ‘Public administration, 
defence & other services’ are estimated to expand by 11.9 per cent, 4 per cent and 10.7 per cent 
respectively in 2021-22. A part of this growth is attributable to the low base in 2020-21. It is, 
however, pertinent to note that at the time of writing the Economic survey, new restrictions were 
being introduced within the country and worldwide due to the Omicron variant, posing fresh 
risk to the ongoing recovery, especially in contact intensive segments. 
Page 4


CHAPTER
09
The services sector as a whole has mostly recovered from the impact of the nationwide 
lockdown imposed during March-May 2020 and localised lockdowns during the second 
covid wave in April-May 2021, although some of the sub-sectors continue to be impacted. 
During the first half of 2021-22, the Services sector grew by 10.8 per cent. The recovery 
is more pronounced given the Gross Value Added (GVA) of Services crossed the pre-
pandemic level in Q2 2021-22. However, being a contact intensive sub-sector, GVA of 
‘Trade, hotels, transport, communication & services related to broadcasting’ still remains 
below its pre-pandemic level. The overall Services sector GVA is expected to grow by 
8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of 
uncertainty for near term, especially in segments that require human contact.
High frequency indicators such as services purchasing managers’ index, air freight and 
rail freight bottomed out in 2020. The impact of second covid wave in April-May 2021 on 
these indicators was much more muted as compared to during the full lockdown in March-
May 2020. During April-December 2021, rail freight crossed its pre-pandemic level while 
air freight and port traffic almost reached their pre-pandemic level. Domestic air and rail 
passenger traffic is also increasing gradually. The global issue of container shortage is 
impacting port traffic.
Services exports, after the initial slump during the first three quarters of 2020-21, 
surpassed its pre-pandemic level in Q4 2020-21. During H1 2021-22, services exports 
grew by 21.6 per cent, deriving strength from global demand for software and IT services 
exports. India’s share in world commercial services exports increased to 4.1 per cent 
in 2020. Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21, 
adding 1.38 lakh employees during the same period. The Government  undertook a major 
reform of removing telecom regulations in the IT-BPO sector. As per a survey conducted 
by NASSCOM, these reforms have reduced compliance burden, enhanced productivity, 
increased global competitiveness and lowered the cost of doing business in India. Similarly, 
the Government has opened up space sector to private players, which will enhance the 
socio-economic use of space assets and activities. During the first half of 2021-22, the 
Services sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of 
the total FDI inflows into India.
Services
314 Economic Survey 2021-22
INTRODUCTION
9.1 Services sector contributes over 50 per cent to India’s GDP . While Covid-19 pandemic has 
had an adverse impact on most sectors of the economy, the services sector has been the worst 
affected as its’ share in India’s GVA declined from 55 per cent in 2019-20 to 53 per cent in 
2021-22.
1
 Within the services sector, the effect of Covid-19 has been varied. While non-contact 
services such as information, communication, financial, professional and business services have 
remained resilient, the impact has been much severe on contact based services such as tourism, 
retail trade, hotel, entertainment and recreation, etc. 
IMPACT OF COVID-19 AND SEQUENTIAL RECOVERY
9.2 The services sector contracted by 8.4 per cent Year on Year (YoY) in 2020-21 (Table 1). 
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’. Owing to its contact 
intensive nature, the services included in this sub-sector had to bear the maximum brunt of the 
disruptions caused by the prevailing pandemic. The sub-sector ‘Public administration, defence 
& other services’ which includes expenditure by the government on one hand and services such 
as health, education, recreation etc, on the other, contracted by 4.6 per cent YoY in 2020-21. 
The relatively less contact intensive sub-sector ‘Financial, real estate & professional services’ 
was the least impacted, with a marginal decline of 1.5 per cent  YoY in its GV A during 2020-21 
(Table 1). 
9.3 During the first half of the current fiscal year, the services sector has registered a steady 
recovery. Overall, the services sector grew by 10.8 per cent YoY in first half (H1) 2021-22 
(Table 1). A closer look at the quarterly estimates shows that Gross Value Added (GVA) in 
services sector (excluding construction) crossed its pre-pandemic level
2
 in Q2 2021-22 (Table 
2, which compares the performance of quarterly GVA over the GVA in Q3 2019-20). The sub-
sector ‘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. However, the quarterly GVA 
of  this sub-sector is still below its pre-pandemic level (Table 2). On the other hand, GVA of 
‘Public administration, defence & other services’ sub-sector witnessed a robust recovery. During 
H1 2021-22, the sub-sector grew by 12 per cent YoY, surpassing its pre pandemic level in 
Q2 2021-22 (Table 2). The ramping up of government expenditure in the wake of Covid-19 has 
contributed to the recovery of this sub-sector. Further, the sub-sector ‘Financial, real estate & 
professional services’ expanded by 5.8 per cent YoY in H1 2021-22, its GV A remained resilient 
throughout (Table 2).
1
As per the Advance Estimates of 2021-22.
2
Pre-pandemic level denotes Q3 2019-20 GV A
Startups in India have grown remarkably over the last six years. The number of new 
recognised starups have increased to over 14,000 in 2021-22 from only 733 in 2016-17. 
As a result, India has become the third largest startup ecosystem in the world after the 
US and China. Further, a record 44 Indian startups have achieved unicorn status in 2021 
taking the overall tally of unicorns in India to 83, most of these are in the services sector. 
315 Services
Table 1: Services Sector Performance
Share in GV A 
(per cent)
Growth (YoY) (per cent)
Sector 2021-22 
(AE)
2018-19 
(2
nd 
RE)
2019-20 
(1
st RE)
2020-21 
(PE)
2021-22 
(AE)
2021-22
Q1 Q2 H1
Total Services        
(Excluding construction)
53 7.2 7.2 -8.4 8.2 11.4 10.2 10.8
Trade, hotels, transport, 
communication & services 
related to broadcasting 
16.9 7.1 6.4 -18.2 11.9 34.3 8.2 18.4
Financial, real estate & 
professional services
20.9 7.2 7.3 -1.5 4.0 3.7 7.8 5.8
Public administration, 
defence & other services*
15.2 7.4 8.3 -4.6 10.7 5.8 17.4 12.0
Source: Ministry of Statistics and Programme Implementation. 
Note: Share in GV A is in current prices and growth in GV A is at constant 2011-12 prices; 
*: Other services include Education, Health, Recreation, and other personal services
RE: Revised Estimates. PE: Provisional Estimates. AE: Advance Estimates   
Table 2: Gross Value Added in Services sub-sectors 
Relative To Pre-Pandemic Levels (Q3  2019-20 GV A= 100)
Sector 2020-21 
Q1
2020-21 
Q2
2020-21 
Q3
2020-21 
Q4
2021-22 
Q1
2021-22 
Q2
Trade, hotels, transport, 
communication & services 
related to broadcasting 
52 81 92 108 70 87
Financial, real estate & 
professional services
123 126 107 107 127 136
Public administration, defence 
& other services
78 88 98 103 83 104
Total Services 84 99 99 106 94 109
Total GV A 78 92 101 106 92 100
Source: Ministry of Statistics and Programme Implementation. 
9.4 As per the first advance estimates, Gross V alue Added (GV A) of services sector is estimated 
to grow by 8.2 per cent in 2021-22. Sub-sectors ‘Trade, hotels, transport, communication & 
broadcasting services’, ‘Financial, real estate & professional services’, and ‘Public administration, 
defence & other services’ are estimated to expand by 11.9 per cent, 4 per cent and 10.7 per cent 
respectively in 2021-22. A part of this growth is attributable to the low base in 2020-21. It is, 
however, pertinent to note that at the time of writing the Economic survey, new restrictions were 
being introduced within the country and worldwide due to the Omicron variant, posing fresh 
risk to the ongoing recovery, especially in contact intensive segments. 
316 Economic Survey 2021-22
TRENDS IN HIGH FREQUENCY INDICATORS
9.5 The upturn in Services GVA, when seen with the trend in high frequency indicators such 
as Purchasing Managers Index (PMI) Services Index, freight and passenger traffic point to a 
pickup in economic momentum.
Services PMI
9.6 India’s services sector activity, gauged by PMI services, which had contracted for five 
consecutive months since March 2020, recovered sharply in October 2020. It dropped again for 
three consecutive months (May, June and July 2021) as a consequence of the second Covid-19 
wave. Notably, the contraction during May-July 2021 was not as sharp as seen during the first 
lockdown.
9.7 With the easing of restrictions, PMI Services started to grow once again from August 2021 
recording strongest jump in over 10 years to 58.4 in October 2021
3
 (Figure 1(a)). PMI  index 
moderated to 55.5 in December 2021. 
Freight traffic
9.8 The freight traffic (rail, air and port) had fallen sharply as a consequence of the complete 
lockdown in March 2020 (Figure 1(b, c and d)). As the economy gradually opened up from June 
2020, freight traffic also started to improve. Freight traffic registered strong growth in during 
April- June 2021, partly reflecting the rebound from the low base during the same period last 
year. The impact of second covid wave in April-May 2021 on these indicators was much more 
muted as compared to during the full lockodwn in March-May 2020.
9.9 In 2021-22 (till December), total freight loading by Indian railways was 1,029.94 Million 
Tonnes (MT) which is 18.37 per cent higher than 870.08 MT during the same period in 2020-
21. Infact, Indian railways recorded almost 16 per cent increase in freight loading as compared 
to the corresponding period during the pre-pandemic year (2019-20), where the freight loading 
was 888.88 MT. 
9.10 Indian airports handled 20.97 lakh tonnes of freight in 2021-22 (till November) as compared 
to 14.44 lakh tonnes during the same period last year recording a growth of 45.25 per cent. This 
is slightly lower than the air freight loading of 22.88 lakh tonnes during the pre-pandemic period 
of April-November 2019. 
9.11 Between April- November 2021, Indian ports handled total traffic of 857.3 MT as compared 
to 779.1 MT handled during the same period in 2020, registering a growth of over 10 per cent. 
The cargo traffic recorded so far in 2021 has almost reached the pre-pandemic level of 864.3 
MT during April- November 2019. 
3
A reading above 50 indicates expansion in economic activity.
Page 5


CHAPTER
09
The services sector as a whole has mostly recovered from the impact of the nationwide 
lockdown imposed during March-May 2020 and localised lockdowns during the second 
covid wave in April-May 2021, although some of the sub-sectors continue to be impacted. 
During the first half of 2021-22, the Services sector grew by 10.8 per cent. The recovery 
is more pronounced given the Gross Value Added (GVA) of Services crossed the pre-
pandemic level in Q2 2021-22. However, being a contact intensive sub-sector, GVA of 
‘Trade, hotels, transport, communication & services related to broadcasting’ still remains 
below its pre-pandemic level. The overall Services sector GVA is expected to grow by 
8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of 
uncertainty for near term, especially in segments that require human contact.
High frequency indicators such as services purchasing managers’ index, air freight and 
rail freight bottomed out in 2020. The impact of second covid wave in April-May 2021 on 
these indicators was much more muted as compared to during the full lockdown in March-
May 2020. During April-December 2021, rail freight crossed its pre-pandemic level while 
air freight and port traffic almost reached their pre-pandemic level. Domestic air and rail 
passenger traffic is also increasing gradually. The global issue of container shortage is 
impacting port traffic.
Services exports, after the initial slump during the first three quarters of 2020-21, 
surpassed its pre-pandemic level in Q4 2020-21. During H1 2021-22, services exports 
grew by 21.6 per cent, deriving strength from global demand for software and IT services 
exports. India’s share in world commercial services exports increased to 4.1 per cent 
in 2020. Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21, 
adding 1.38 lakh employees during the same period. The Government  undertook a major 
reform of removing telecom regulations in the IT-BPO sector. As per a survey conducted 
by NASSCOM, these reforms have reduced compliance burden, enhanced productivity, 
increased global competitiveness and lowered the cost of doing business in India. Similarly, 
the Government has opened up space sector to private players, which will enhance the 
socio-economic use of space assets and activities. During the first half of 2021-22, the 
Services sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of 
the total FDI inflows into India.
Services
314 Economic Survey 2021-22
INTRODUCTION
9.1 Services sector contributes over 50 per cent to India’s GDP . While Covid-19 pandemic has 
had an adverse impact on most sectors of the economy, the services sector has been the worst 
affected as its’ share in India’s GVA declined from 55 per cent in 2019-20 to 53 per cent in 
2021-22.
1
 Within the services sector, the effect of Covid-19 has been varied. While non-contact 
services such as information, communication, financial, professional and business services have 
remained resilient, the impact has been much severe on contact based services such as tourism, 
retail trade, hotel, entertainment and recreation, etc. 
IMPACT OF COVID-19 AND SEQUENTIAL RECOVERY
9.2 The services sector contracted by 8.4 per cent Year on Year (YoY) in 2020-21 (Table 1). 
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’. Owing to its contact 
intensive nature, the services included in this sub-sector had to bear the maximum brunt of the 
disruptions caused by the prevailing pandemic. The sub-sector ‘Public administration, defence 
& other services’ which includes expenditure by the government on one hand and services such 
as health, education, recreation etc, on the other, contracted by 4.6 per cent YoY in 2020-21. 
The relatively less contact intensive sub-sector ‘Financial, real estate & professional services’ 
was the least impacted, with a marginal decline of 1.5 per cent  YoY in its GV A during 2020-21 
(Table 1). 
9.3 During the first half of the current fiscal year, the services sector has registered a steady 
recovery. Overall, the services sector grew by 10.8 per cent YoY in first half (H1) 2021-22 
(Table 1). A closer look at the quarterly estimates shows that Gross Value Added (GVA) in 
services sector (excluding construction) crossed its pre-pandemic level
2
 in Q2 2021-22 (Table 
2, which compares the performance of quarterly GVA over the GVA in Q3 2019-20). The sub-
sector ‘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. However, the quarterly GVA 
of  this sub-sector is still below its pre-pandemic level (Table 2). On the other hand, GVA of 
‘Public administration, defence & other services’ sub-sector witnessed a robust recovery. During 
H1 2021-22, the sub-sector grew by 12 per cent YoY, surpassing its pre pandemic level in 
Q2 2021-22 (Table 2). The ramping up of government expenditure in the wake of Covid-19 has 
contributed to the recovery of this sub-sector. Further, the sub-sector ‘Financial, real estate & 
professional services’ expanded by 5.8 per cent YoY in H1 2021-22, its GV A remained resilient 
throughout (Table 2).
1
As per the Advance Estimates of 2021-22.
2
Pre-pandemic level denotes Q3 2019-20 GV A
Startups in India have grown remarkably over the last six years. The number of new 
recognised starups have increased to over 14,000 in 2021-22 from only 733 in 2016-17. 
As a result, India has become the third largest startup ecosystem in the world after the 
US and China. Further, a record 44 Indian startups have achieved unicorn status in 2021 
taking the overall tally of unicorns in India to 83, most of these are in the services sector. 
315 Services
Table 1: Services Sector Performance
Share in GV A 
(per cent)
Growth (YoY) (per cent)
Sector 2021-22 
(AE)
2018-19 
(2
nd 
RE)
2019-20 
(1
st RE)
2020-21 
(PE)
2021-22 
(AE)
2021-22
Q1 Q2 H1
Total Services        
(Excluding construction)
53 7.2 7.2 -8.4 8.2 11.4 10.2 10.8
Trade, hotels, transport, 
communication & services 
related to broadcasting 
16.9 7.1 6.4 -18.2 11.9 34.3 8.2 18.4
Financial, real estate & 
professional services
20.9 7.2 7.3 -1.5 4.0 3.7 7.8 5.8
Public administration, 
defence & other services*
15.2 7.4 8.3 -4.6 10.7 5.8 17.4 12.0
Source: Ministry of Statistics and Programme Implementation. 
Note: Share in GV A is in current prices and growth in GV A is at constant 2011-12 prices; 
*: Other services include Education, Health, Recreation, and other personal services
RE: Revised Estimates. PE: Provisional Estimates. AE: Advance Estimates   
Table 2: Gross Value Added in Services sub-sectors 
Relative To Pre-Pandemic Levels (Q3  2019-20 GV A= 100)
Sector 2020-21 
Q1
2020-21 
Q2
2020-21 
Q3
2020-21 
Q4
2021-22 
Q1
2021-22 
Q2
Trade, hotels, transport, 
communication & services 
related to broadcasting 
52 81 92 108 70 87
Financial, real estate & 
professional services
123 126 107 107 127 136
Public administration, defence 
& other services
78 88 98 103 83 104
Total Services 84 99 99 106 94 109
Total GV A 78 92 101 106 92 100
Source: Ministry of Statistics and Programme Implementation. 
9.4 As per the first advance estimates, Gross V alue Added (GV A) of services sector is estimated 
to grow by 8.2 per cent in 2021-22. Sub-sectors ‘Trade, hotels, transport, communication & 
broadcasting services’, ‘Financial, real estate & professional services’, and ‘Public administration, 
defence & other services’ are estimated to expand by 11.9 per cent, 4 per cent and 10.7 per cent 
respectively in 2021-22. A part of this growth is attributable to the low base in 2020-21. It is, 
however, pertinent to note that at the time of writing the Economic survey, new restrictions were 
being introduced within the country and worldwide due to the Omicron variant, posing fresh 
risk to the ongoing recovery, especially in contact intensive segments. 
316 Economic Survey 2021-22
TRENDS IN HIGH FREQUENCY INDICATORS
9.5 The upturn in Services GVA, when seen with the trend in high frequency indicators such 
as Purchasing Managers Index (PMI) Services Index, freight and passenger traffic point to a 
pickup in economic momentum.
Services PMI
9.6 India’s services sector activity, gauged by PMI services, which had contracted for five 
consecutive months since March 2020, recovered sharply in October 2020. It dropped again for 
three consecutive months (May, June and July 2021) as a consequence of the second Covid-19 
wave. Notably, the contraction during May-July 2021 was not as sharp as seen during the first 
lockdown.
9.7 With the easing of restrictions, PMI Services started to grow once again from August 2021 
recording strongest jump in over 10 years to 58.4 in October 2021
3
 (Figure 1(a)). PMI  index 
moderated to 55.5 in December 2021. 
Freight traffic
9.8 The freight traffic (rail, air and port) had fallen sharply as a consequence of the complete 
lockdown in March 2020 (Figure 1(b, c and d)). As the economy gradually opened up from June 
2020, freight traffic also started to improve. Freight traffic registered strong growth in during 
April- June 2021, partly reflecting the rebound from the low base during the same period last 
year. The impact of second covid wave in April-May 2021 on these indicators was much more 
muted as compared to during the full lockodwn in March-May 2020.
9.9 In 2021-22 (till December), total freight loading by Indian railways was 1,029.94 Million 
Tonnes (MT) which is 18.37 per cent higher than 870.08 MT during the same period in 2020-
21. Infact, Indian railways recorded almost 16 per cent increase in freight loading as compared 
to the corresponding period during the pre-pandemic year (2019-20), where the freight loading 
was 888.88 MT. 
9.10 Indian airports handled 20.97 lakh tonnes of freight in 2021-22 (till November) as compared 
to 14.44 lakh tonnes during the same period last year recording a growth of 45.25 per cent. This 
is slightly lower than the air freight loading of 22.88 lakh tonnes during the pre-pandemic period 
of April-November 2019. 
9.11 Between April- November 2021, Indian ports handled total traffic of 857.3 MT as compared 
to 779.1 MT handled during the same period in 2020, registering a growth of over 10 per cent. 
The cargo traffic recorded so far in 2021 has almost reached the pre-pandemic level of 864.3 
MT during April- November 2019. 
3
A reading above 50 indicates expansion in economic activity.
317 Services
Figure 1(a): Services PMI Index Figure 1(b): Rail Freight
 
 
 
0
10
20
30
40
50
60
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Index (50= neutral)
Lockdown 1
2
nd
Covid-19 
wave
 
 
 
0
20
40
60
80
100
120
140
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Million Tonnes 
Lockdown 1
2
nd
Covid-19
wave
Figure 1(c): Air Freight Figure 1(d): Cargo Traffic
 
0
50
100
150
200
250
300
350
May-19
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
May-21
Aug-21
Nov-21
Thousand Tonnes
Lockdown 1
2
nd
Covid-19 
wave
 
 
 
 
70
80
90
100
110
120
130
May-19
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
May-21
Aug-21
Nov-21
Million Tonnes
Lockdown 1
2
nd
Covid-19 
wave
Figure 1(e):  Domestic Air Passenger Traffic Figure 1(f): Rail Passenger Traffic
 
 
-10
40
90
140
190
240
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Lakhs
Lockdown 1
2
nd
Covid-19 
wave
 
 
-50
50
150
250
350
450
550
650
750
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Lakhs
Lockdown 1
2
nd
Covid-19 
wave
Source: IHS Markit Economics, Indian Railways, Airports Authority of India, Ministry of Ports, Shipping and 
Waterways.