Awaaz Desh Ki: Global Service Export | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

India's Service Sector Overview

• India's service sector has been making significant strides, as evidenced by a recent WTO report indicating a doubling of India's share in global service exports, with an 11.4% surge in service exports in 2023.
• Forecasted Growth: Goldman Sachs predicts a substantial increase in India's services exports to $800 billion by 2030, compared to $340 billion in the previous year, aiming to bolster the external sector against supply-side shocks and reduce rupee volatility.
• Export Destinations: North America and Europe are key markets for India's services, with burgeoning opportunities in Asia, Africa, and Latin America.
• Current Account Deficit: Projections suggest a 1.1% average deficit of GDP from 2024 to 2030, with 2024 estimates at 1.3% of GDP, impacted by geopolitical tensions and reduced agricultural exports to Iran.
• Contribution to Global Services Exports: India's global services exports contribution has more than doubled in 18 years, surpassing the growth rate of goods exports and outpacing China's decline in service exports.
• Growth Trends in Service Segments:
  • Professional Consulting: Fastest-growing segment in India's services exports.
  • Travel Services: Slowest growth among service segments.
  • Financial Services: Potential significant growth, particularly with developments like GIFT City in Gujarat.

Understanding the Service Sector

• The service sector comprises industries offering intangible services like finance, banking, insurance, real estate, telecommunications, healthcare, education, tourism, hospitality, IT, and BPO.
• Contribution to GDP and GVA: India ranks as the fifth-largest services exporter globally, with the sector contributing 54% to the total Gross Value Added (GVA) in FY21 and attracting 53% of total FDI between 2000 and 2021.

Significance of the Service Sector for India

• Balancing Trade Deficit: The surplus in services trade helps offset India's merchandise export deficit, fostering economic stability.
• Potential for Growth: Strategic interventions can lead to further growth in services trade surplus, enhancing economic performance.
• Transition to Knowledge-Based Economy: Emphasis on IT, finance, and education signifies India's shift to an innovation-driven economy.
• Employment Generation: The sector is a major driver of economic growth, offering employment to millions and contributing significantly to India's global exports.
• Global Competitiveness: India's reputation for high-quality, cost-effective services attracts global businesses, boosting exports and foreign exchange earnings.
• Diversification of Revenue Streams: The sector provides revenue diversification, reducing dependency on specific industries or markets.
• Enhancing Standard of Living: Growth in the service sector improves access to essential services like healthcare, education, and finance, enhancing the quality of life for citizens.

Potential Opportunities in India's Service Sector

• Tourism Sector: A key driver of economic growth, contributing significantly to GDP, foreign exchange earnings, and employment opportunities.
• Ports, Shipping, and Waterways Services: India's ports handle a substantial volume of export-import cargo, with consistent growth in port traffic.
• Space: India's space programme has witnessed significant growth, with applications in launch vehicles, earth observation satellites, telecommunications, navigation, and space science.
• Logistics & Transportation: India benefits from its extensive coastline and river network, providing a competitive edge in transportation services.
• Information Technology/BPM: The IT-BPM industry has been a major export contributor, generating substantial revenues with a focus on Software & Engineering Services.

Government Initiatives to Promote Service Exports

• Service Exports from India Scheme: Introduced to incentivize service exporters, promoting services export from India.
• Skill India Initiative: Aims to provide market-relevant training to enhance employment prospects across various sectors, including services.
• Purchasing Managers Index (PMI): Offers insights into business activities in manufacturing and services, aiding in decision-making and policy formulation.
• Free-Trade Agreements (FTAs): Pursued with key economies to facilitate market access for Indian service providers and enhance competitiveness globally.

Challenges for India's Service Sector

• Global Competition: Intense global competition impacts sectors like IT and BPO, necessitating continuous innovation and cost-effectiveness to maintain market share.
• Skills Mismatch: Despite Skill India initiatives, there exists a gap between required workforce skills and those available in the industry, posing challenges for sectors like IT.
• Infrastructure Deficit and Digital Divide: Inadequate infrastructure, especially in healthcare and rural areas, hampers sectoral growth, alongside persistent digital disparities impacting service quality.
• Regulatory Complexities: Complex regulations hinder business operations, limiting market access and hindering growth, especially in legal services due to stringent regulations.

Way Forward

• Investment Imperative: Prioritize sustained, large-scale investment in the service industry, recognizing its potential and fostering crucial linkages with the rest of the economy.
• Reforming Domestic Regulations: Reforms in regulations are vital for facilitating domestic production and service exports without creating trade barriers.
• Enhancing Employment Opportunities: Focus on enhancing employment prospects in the services sector, aligning initiatives like Skill India with sectoral requirements.