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Economic Survey 
2019-20
Volume 2 Chapter 9 
“Services Sector”
Page 2


Economic Survey 
2019-20
Volume 2 Chapter 9 
“Services Sector”
Introduction
Service sector accounts for around 55% of the total economy and GVA 
growth, 2/3rds of total FDI inflows in India and 38% of total exports. 
The share of Services sector now exceeds 50% in more than 15 out of 33 
states/UTs. Chandigarh and Delhi top the list(>80%), while Sikkim is last 
in this list. 
However data on GVA growth, high frequency indicators and sectoral 
trends suggest a moderation in service sector activity during 2019-20. 
Bank credit to services, rail freight traffic and  air passenger traffic 
have witnessed a deceleration in 2019-20. 
RBI’s data with respect to bank credit reveals that deceleration in credit 
is driven by : Professional services, shipping, transport operators and 
wholesale trade. 
Though many of these indicators are now showing signs of recovery. For 
example Purchasing Managers’ Index has stabilised in the recent months 
above the threshold of 50.
Page 3


Economic Survey 
2019-20
Volume 2 Chapter 9 
“Services Sector”
Introduction
Service sector accounts for around 55% of the total economy and GVA 
growth, 2/3rds of total FDI inflows in India and 38% of total exports. 
The share of Services sector now exceeds 50% in more than 15 out of 33 
states/UTs. Chandigarh and Delhi top the list(>80%), while Sikkim is last 
in this list. 
However data on GVA growth, high frequency indicators and sectoral 
trends suggest a moderation in service sector activity during 2019-20. 
Bank credit to services, rail freight traffic and  air passenger traffic 
have witnessed a deceleration in 2019-20. 
RBI’s data with respect to bank credit reveals that deceleration in credit 
is driven by : Professional services, shipping, transport operators and 
wholesale trade. 
Though many of these indicators are now showing signs of recovery. For 
example Purchasing Managers’ Index has stabilised in the recent months 
above the threshold of 50.
Purchasing Managers’ Index
It is an indicator of business activity both in manufacturing and services 
sector. 
It is a survey based measure that asks the respondents about changes in 
their perception of some key business variables from the month before. 
Those key business variables are : 
1. New orders 
2. Inventory levels  
3. Production 
4. Supplier Delivery  
5. Employment Environment  
The score is between the range of 0-100, score of >50 means expansion, 
whereas score of <50 is contraction in business activity. 
It is published by MARKIT Ltd and NIKKEI INDIA.
Page 4


Economic Survey 
2019-20
Volume 2 Chapter 9 
“Services Sector”
Introduction
Service sector accounts for around 55% of the total economy and GVA 
growth, 2/3rds of total FDI inflows in India and 38% of total exports. 
The share of Services sector now exceeds 50% in more than 15 out of 33 
states/UTs. Chandigarh and Delhi top the list(>80%), while Sikkim is last 
in this list. 
However data on GVA growth, high frequency indicators and sectoral 
trends suggest a moderation in service sector activity during 2019-20. 
Bank credit to services, rail freight traffic and  air passenger traffic 
have witnessed a deceleration in 2019-20. 
RBI’s data with respect to bank credit reveals that deceleration in credit 
is driven by : Professional services, shipping, transport operators and 
wholesale trade. 
Though many of these indicators are now showing signs of recovery. For 
example Purchasing Managers’ Index has stabilised in the recent months 
above the threshold of 50.
Purchasing Managers’ Index
It is an indicator of business activity both in manufacturing and services 
sector. 
It is a survey based measure that asks the respondents about changes in 
their perception of some key business variables from the month before. 
Those key business variables are : 
1. New orders 
2. Inventory levels  
3. Production 
4. Supplier Delivery  
5. Employment Environment  
The score is between the range of 0-100, score of >50 means expansion, 
whereas score of <50 is contraction in business activity. 
It is published by MARKIT Ltd and NIKKEI INDIA.
FDI Inflows in Services 
The data for FDI comes from Department for Promotion of 
Industry and Internal Trade(Ministry of Commerce and 
Industry). 
The recent data shows that Gross FDI Equity inflows into 
services sector witnessed a strong recovery during April-
September 2019 following a decline in 2018-19. 
The FDI equity inflows jumped by 33% during this period to 
reach USD 17.58 billion. 
FDI equity inflows in services accounted for 2/3rds of the total 
FDI equity inflows in India bring this period. 
This jump was driven by strong inflows into sub-sectors such as 
“Information & Broadcasting”, “Air Transport”, “Telecom”, 
“Consultancy Services” and “Hotel & Tourism”. 
Page 5


Economic Survey 
2019-20
Volume 2 Chapter 9 
“Services Sector”
Introduction
Service sector accounts for around 55% of the total economy and GVA 
growth, 2/3rds of total FDI inflows in India and 38% of total exports. 
The share of Services sector now exceeds 50% in more than 15 out of 33 
states/UTs. Chandigarh and Delhi top the list(>80%), while Sikkim is last 
in this list. 
However data on GVA growth, high frequency indicators and sectoral 
trends suggest a moderation in service sector activity during 2019-20. 
Bank credit to services, rail freight traffic and  air passenger traffic 
have witnessed a deceleration in 2019-20. 
RBI’s data with respect to bank credit reveals that deceleration in credit 
is driven by : Professional services, shipping, transport operators and 
wholesale trade. 
Though many of these indicators are now showing signs of recovery. For 
example Purchasing Managers’ Index has stabilised in the recent months 
above the threshold of 50.
Purchasing Managers’ Index
It is an indicator of business activity both in manufacturing and services 
sector. 
It is a survey based measure that asks the respondents about changes in 
their perception of some key business variables from the month before. 
Those key business variables are : 
1. New orders 
2. Inventory levels  
3. Production 
4. Supplier Delivery  
5. Employment Environment  
The score is between the range of 0-100, score of >50 means expansion, 
whereas score of <50 is contraction in business activity. 
It is published by MARKIT Ltd and NIKKEI INDIA.
FDI Inflows in Services 
The data for FDI comes from Department for Promotion of 
Industry and Internal Trade(Ministry of Commerce and 
Industry). 
The recent data shows that Gross FDI Equity inflows into 
services sector witnessed a strong recovery during April-
September 2019 following a decline in 2018-19. 
The FDI equity inflows jumped by 33% during this period to 
reach USD 17.58 billion. 
FDI equity inflows in services accounted for 2/3rds of the total 
FDI equity inflows in India bring this period. 
This jump was driven by strong inflows into sub-sectors such as 
“Information & Broadcasting”, “Air Transport”, “Telecom”, 
“Consultancy Services” and “Hotel & Tourism”. 
Trade in Services
RBI’s BOP data suggests that services exports during April-
September 2019 maintained their momentum from 2018-19, with a 
growth of 6.4%. 
The jump in export growth of travel, software, business and 
financial services offset the contraction in export growth of 
insurance and other services. 
Business Services - Financial Services, Software Services, 
Professional Services, Telecom Services etc. 
The robust growth in business services was driven by higher 
receipts for R&D services, professional and management 
consultancy services, and technical and trade related services. 
Net exports of services has increased in 2019-20 in comparison to 
2018-19. The services trade surplus, largely driven by surplus in 
software services, financed 48% of our Merchandise Trade Deficit.
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FAQs on PPT: Services Sector - Indian Economy for UPSC CSE

1. What is the services sector?
Ans. The services sector refers to the part of the economy that provides intangible goods or services to consumers. It includes a wide range of industries such as hospitality, transportation, healthcare, financial services, and professional services.
2. What are the main components of the services sector?
Ans. The main components of the services sector include business services, communication services, financial services, health services, hospitality and tourism, information services, professional services, and transportation services.
3. How does the services sector contribute to the economy?
Ans. The services sector plays a significant role in the economy by contributing to job creation, economic growth, and overall productivity. It accounts for a large share of the gross domestic product (GDP) in many countries and is often a major source of employment.
4. What are the challenges faced by the services sector?
Ans. The services sector faces various challenges such as intense competition, changing consumer demands, technological advancements, regulatory compliance, and skill shortages. Additionally, global economic downturns or crises can also impact the sector's performance.
5. How has the COVID-19 pandemic affected the services sector?
Ans. The COVID-19 pandemic has had a significant impact on the services sector. Many businesses in the sector, such as restaurants, hotels, and travel agencies, have faced closures or severe disruptions due to lockdown measures and travel restrictions. The sector has experienced job losses and reduced consumer spending, leading to economic challenges. However, certain segments like online services and healthcare have seen increased demand during the pandemic.
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