In this essay we will discuss about the Service Sector of India. After reading this essay you will learn about: 1. Introduction to Services Sector 2. Importance of Services Sector in India 3. Performance.


  1. Essay on the Introduction to Services Sector
  2. Essay on the Importance of Services Sector in India
  3. Essay on the Performance of Services Sector in India

1. Essay on the Introduction to Services Sector:

In the sense of economics, services are any functions or tasks, performed by an individual or a group of individual, for which there is a demand and hence a price is determined if it is available in the relevant market. Services are sometimes referred to as intangible goods.

They are consumed at the point of production and they are usually non-transferable, in the sense that the service cannot be purchased and then resold at a different price.


Services sector is composed of broad spectrum of service providing entities spread throughout the Country. Economic Survey, 2011-12 observed that “The services sector has been a major and vital force steadily driving growth in the Indian economy for more than a decade. The economy has successfully navigated the turbulent years of the recent global economic crisis because of vitality of this sector in the domestic economy and its prominent role in India’s economic interactions”.

In a country like India, having a huge size of population, services sector has its huge potential. Development of services sector can transform this burden of large size of manpower into an asset by its proper utilizations and thereby can generate a huge size of income for the nation as a whole.

The services sector usually covers a wide range activities from the most sophisticated information technology (IT) to simple services provided by the unorganized sector like the services of the plumber, masion, barber etc.

National Accounts classification of the services sector incorporates trade, hotels, and restaurants; transport, storage and communication; financing, insurance, real estate, and business services; and community, social and personal services. In World Trade Organization (WTO) and Reserve Bank of India (RBI) classification, construction is also included in services sector.


Importance of service sector is well recognised everywhere. Tom Peters, a renowned author once said, “When you build a manufacturing plant, it starts depreciating on the day it opens. The well served customer, on the other hand, is an appreciating asset. Every small act on his or her part ups the odds for repeat business, add-on business and priceless word-of-month referral.”

Among the three important sector (viz., agriculture and allied, secondary sector and services sector), contributing to the development of the economy of a country, the contribution of services sector is increasing steadily over the past few years.

In most of th6 developed countries of the world, the services sector is contributing the major portion of its Gross Domestic Product and generates three times more employment than manufacturing sector.

In most of the developing Countries, where agriculture and industry dominated the show In generating employment till a few years ago, but things started to change in recent period. In recent years, services sector experienced a rapid shift in its favour in generating both income and employment. Thus it has been observed that the service sector has become a major player in almost all the countries of the world.

2. Essay on the Importance of Service Sector in India:

In India, the importance of services sector has been increasing continuously decade after decade. With the continuous expansion of services sector, both in terms of volume and diversity, the importance of services sector has been increasing at a high speed.


The following are some of the importance’s of services sector in Indian economy:

(i) Contribution of GDP:

The share of total services sector in India’s GDP (at constant prices), which is constituted by trade, hotels, transport, storage and communications, banking, insurance, real estate, community and personal services, but excluding construction increased from 28.5 per cent in 1950-51 to 31.8 per cent in 1970-71 and then finally to 51.3 per cent in 2013-14.

But the share of total services sector, excluding construction, to India’s GDP at factor cost (at current prices) increased rapidly from 30.5 per cent in 1950- 51 to 50.8 per cent in 2010-11 and then to 55.7 per cent in 2011-12.

If construction is also included, then the same share of services sector increased from 56.8 per cent in 2000-01 to 59.6 per cent in 2013-14. Among the major components of services sector, the share of transport, Communication and trade in India’s GDP (at constant prices) increased from 11.0 per cent in 1950-51 to 18.6 per cent in 2013-14.

The share of community and personal services to GDP (at constant prices) marginally increased from 8.5 per cent in 1950-51 to 12.9 per cent in 2013-14. The share of finance insurance, real estate and business services increased from 9.0 per cent in 1950-51 to 19.8 per cent in 2013-14.

Thus it has been observed that the contribution of services sector into GDP of India has been increasing at considerable proportion and thereby it has proved to be a major sector among all the three sectors of the economy.

(ii) Higher CAGR and Rapid Growth of Services Sector:

The importance of services sector to Indian economy can also be traced from its attainment of higher compound annual growth rate (CAGR). The CAGR of the services sector attained at 10.0 per cent for the period 2004-05 to 2011-12 has been found to be higher than the 8.6 per cent of CAGR of Gross Domestic Product (GDP) of India during the same period, which clearly indicates that the services sector has outgrown both the industry and agriculture sectors, showing its supremacy among all three sectors of the economy in recent years. Such rapid growth of the service sector has resulted considerable changes in the GDP of the country.

Moreover, the growth has been specifically marked in the public services, information technology and financial services. Of late, India has just become a service oriented economy. The country did not follow the traditional growth models and thereby skipped the manufacturing growth stage to directly jump from agricultural growth stage to services growth stage.


However, the growth in services sector will definitely support growth process in agriculture and industrial sector in reasonable proportion and thereby assist the economy in generating employment and raising overall productivity.

The ratcheting up of the overall growth rate (CAGR) of the Indian economy from 5.7 per cent in the 1990s to 8.6 per cent during the period 2004-05 to 2009-10 was to a large measure due to the acceleration of the growth rate (CAGR) in the services sector from 7.5 per cent in the 1990s to 10.3 per cent during the period 2004-05 to 2009-10.

The services sector growth was significantly faster than the 6.6 per cent for the combined agriculture and industry sectors annual output growth during the same period. Although, the agricultural sector has been a dominant player initially, but of late the share of services sector has also been increasing over the years, which has been challenging the dominance of primary sector or agriculture in the later stage of development.

(iii) Horizontally Higher Share of Services in GSDP:

The service sector has been contributing towards the gross state domestic product (GSDP) of different states and union territories (UTs) satisfactorily in recent years. A comparison of the shares of services in the GSDP of different states and union territories in 2011- 12 shows that the services sector is the dominant sector in most states of India.


States and UTs such as Tripura, Nagaland, West Bengal, Mizoram, Maharashtra, Bihar, Tamil Nadu, Kerala, Delhi and Chandigarh have recorded a higher share of services sector to its GSDP which are again higher than all India shares (55.7 per cent) of its services sector.

Chandigarh with an 85 per cent share and Delhi with 81.8 per cent share top the list. This has resulted a horizontal spread of higher share of services sector in GSDP of a number of states.

(iv) Employment Generation of Services Sector:

The important of services sector can also be realised from its contribution towards generation of employment in India. Although the primary sector (mainly agriculture) is the dominant employer followed by the services sector, the share of services sector has been increasing over the years and that of the primary sector has been decreasing.

Between 1993-94 to 2009-10, there has been a sharp fall in the share of primary sector in employment from 64.75 per cent in 1993-94 to 53.2 per cent in 2009-10.


But the consequent rise in share of employment of the other two sectors was almost equally divided between secondary and tertiary sectors. However, while agriculture continues to be the primary employment providing sector, the services sector (including construction) is in the second place.

During the same period, the share of services and construction sectors in employment increased from 19.70 per cent to 25.30 per cent and 3.12 per cent to 9.60 per cent respectively.

As per National Sample Survey Organisation (NSSO) report on Employment and Unemployment Situation in India in 2009-10, on the basic usually working persons in the principal and subsidiary statuses, for every 1000 people employed in rural India, 679 people are employed in the agriculture sector, 241 in the services sector (including construction) and 80 persons in the industrial sector.

Again in urban part of India, 75 persons are employed in the agriculture, 683 persons in the services sector (including construction) and 242 persons in the industrial sector. Moreover, construction, trade, hotels and restaurants and public administration, education and community services are the three important employment providing service sectors.

Studies further reveals that the tertiary employment share have strong upward slopes in all the income quintiles covered both in urban and rural areas with higher income quintiles having higher share in each successive NSSO round. Thus tertiary employment growth is steadying moving from being an absorber of low income of labour to providers of high income jobs.

State-wise, there are wide differences in the share in employment of different sectors in rural India. It is found that some work-eastern states like Sikkim, Tripura and Manipur have a high share of employment in the services sector and again some city states like Chandigarh and Delhi also have very high shares of employment in services like 826 and 879 respectively out of 1000 employed people.


Moreover, among the major states, Kerala has a high share of employment in the rural services sector at 511 persons out of 1000 persons. Construction; trade, hotels and restaurant; and public administration, education and community services are the three major employment providing services sectors in all these different states.

In urban India the shares of employment in services in most of the states varied like 833 in Assam, 877 in Meghalaya, 732 in Bihar, 787 in Jharkhand, 711 in Kerala, 716 in Maharashtra, 743 in Rajasthan, 653 in Uttar Pradesh, 641 in Gujarat, 586 in Tamil Nadu and 683 in West Bengal out of 1000 employed people.

(v) Contribution to India’s Services Trade:

The services sector is also playing an important role sector in raising the volume of exports in the country. Thus India is moving towards a services-led export growth in recent years. During 2004-05 to 2008-09 as per the Balance of Payment (BoP) data, merchandise and services exports grew by 22.2 and 25.3 per cent respectively.

Again India’s share of services exports in the world export of services, which increased from 0.6 per cent in 1990 to 1.0 per cent in 2000 and further to 3.3 per cent in 2011, has been increasing faster than the share of merchandise exports in world exports. Services growth slowed in 2009-10 as a result of the global recession, but the decline was less pronounced than the slowdown in merchandise export growth and has recovered rapidly in 2010-11.

As per BoP data of the RBI, India’s services exports grew at a CAGR of 20.6 per cent during the period 2004-05 to 2010-11, compared to the 19.7 per cent CAGR of merchandise exports during the same period. If we enter into the details of services sector, CAGRs of financial services (29.2 per cent) were at higher level while that of software at 21 per cent was at lower level.

In terms of size, software is a major services export category, accounting for 41.7 per cent of total services exports in 2010-11. The CAGR for import of services was 20.2 per cent compared to the CAGR of merchandise imports, at 21.4 per cent. Among the various items of services imports, non-software services (22.6 per cent) and transportation (20.5 per cent had high CAGRs.


Moreover, the overall openness of the economy reflected by total trade including services as a percentage of GDP showed a higher degree of openness at 55.0 per cent in 2011-12 compared to 25.4 per cent in 1997-98 and 38.1 per cent in 2004-05.

(vi) Contribution towards Human Development:

Services sector has a lot of contribution towards human development in our country. Accordingly, services sector has been rendering some valuable services, viz., health services, educational facilities, IT and IT enabled services (ITes), skill development, health tourism, sports, cultural services etc. which are largely responsible for human empowerment and improvement of quality of life of the people in general.

(vii) Services Sector Growth and FDI Inflows:

Modest growth of services sector has made ample scope for the smooth inflow of FDI into the country. FDI also plays a major role in the dynamic growth of the services sector. On the positive side, at global level, medium term prospects for services are generally better than those manufacturing sector with international investment in the services sector expected to grow relatively faster.

Moreover, many transnational companies, which some years ago were mainly focused on their home markets, are now pursuing their internationalization strategies involving ambitious investments abroad. Developing and transition economies particularly in Asia are considered as most attractive destinations. Accordingly, India has been largely considered as favoured destination for increasing flow of FDI.

Although flow of foreign direct investment (FDI) into services sector of the country is maintaining a positive trend but the ambiguity in classifying various activities under the services sector poses differently in the measurement of flow of FDI into this sector.

However, the combined FDI share of financial and non- financial services, computer hardware and software, telecommunications and housing and real estate can be broadly taken as rough estimates of FDI share of services.


Such FDI share of services was 40.5 per cent of cumulative FDI equity in flows during the period April 2000 to December 2012. Including the construction sector (6.5 per cent), the share of services in FDI inflows increases to 47.0 per cent.

If the shares of some other services like hotels and tourism, trading, information and broadcasting, consultancy services, ports, agriculture services, hospital and diagnostic centres, education, air transport including air freights and retail trading are included then the total share of cumulative FDI inflows to the services sector would be around 58.4 per cent.

However, in terms of cumulative FDI equity inflows during April 2000 to December 2011, the financial and non-financial services are found to be the largest recipients with 20.1 per cent, ($ 31.7 billion), which is again followed by telecommunications with 7.9 per cent ($ 12.5 billion), computer hardware and software with 6.9 per cent ($ 10.9 billion), housing and real estates with 6.9 per cent ($ 10.9 billion), and construction activities 6.5 per cent ($ 10.2 billion) share.

The shares of financial and non-financial services sector in total FDI inflows from these sourcing countries are Mauritius 20.1 per cent Singapore 30.6 per cent, U.K 29.5 per cent, USA 21.9 per cent and Japan 11.9 per cent.

(viii) Contribution towards Development of Infrastructure and Communication Services:

Services sector has also been playing an important role in developing expanding and management of infrastructure with a special emphasis on development of transportation and communication services. In a developing country like India the importance of development of infrastructural facilities is quite high.

The contribution of transport, storage and communication to the GDP at factor cost (at current prices) in India ranges from 8.2 per cent in 2006-07 to 7.1 per cent in 2011-12.

(ix) Contribution towards Growth of IT and ITeS:


The services sector has also paved the way for a continuous growth of its IT and IT enabled services (ITeS) sector and thereby helping the economy of the country to attain higher growth both in terms of GDP share, employment, exports etc. which has put India on the global map.

The IT and ITeS sector of the country has developed an image of a young and resilient global knowledge power and has earned a brand identity in this sector.

The IT and ITeS industry has four major sub-components : IT services, business process outsourcing (BPO), engineering services and research and development (R&D), and software products. This IT and ITeS sector has been generating considerable amount of revenues and employment in the economy.

As per NASSCOM estimates, India’s IT and BPM sector (excluding hardware) revenues were to the tune of US $ 95.2 billion in 2012-13 and has been able to generate direct employment for nearly 2.8 million persons and indirect employment of around 8.9 million persons in the country.

Moreover, as a proportion of national GDP, IT and ITeS sector revenues have grown considerably from 1.2 per cent in 1997-98 to an estimated 7.5 per cent in 2011-12.

Software exports from India in 2011-12 stands as US $ 69 billion as compared to US $ 59 billion in 2010-11. It is also observed that exports continue to dominate the IT and ITeS industry and constitute about 78.4 per cent of total industry revenue. Moreover, the CAGR of the domestic sector has also been remained at high level of 12.8 per cent as compared to the 14.2 per cent for exports during the Eleventh Plan period.

The growth rate of the domestic sector of IT-ITeS and exports sector in 2010-11 were 20.6 per cent and 18.8 per cent respectively as compared to that of 9.7 per cent and 16.4 per cent growth rate attained respectively in 2011-12. Consistent and growing demand from US is largely responsible for increasing its share in total exports of India’s IT and ITeS services from 61.5 per cent to 62.0 per cent in 2011-12.

Moreover, emerging markets of Asia Pacific and the rest of the world also contributed to overall growth of IT and ITeS sector of the country. Thus the Twelfth Plan aims to harness the potential of the software and services sector to contribute to country’s development and growth, particularly in terms of investments, exports employment generation and contributive to GDP and to retain India’s leadership position as a global IT-BPO destination.

(x) Contribution towards Development of Some Social Services:

Services sector is also playing an important role in the development and expansion of some social services like sports, cultural services etc. Sports promotes physical fitness and develops human personality which also played an important role in national identity, community bonding and international bonding.

Moreover, cultural activities, or services include recreation and entertainment and radio and TV broadcasting besides other related cultural services. To meet the objective of preserving and promoting all forms of art and culture, a variety of activities are being undertaken by the Government of India.

A total allocation of Rs 3,555 crore was made to this sector during the Eleventh Plan. However, cultural activities are becoming increasing by important in the modern post industrial knowledge based economy.

Throughout the world they have been recognized as an important component of growth and job creation as well as a vehicle of cultural identity. India exported US $ 4 billion worth of creative services in 2010 at a CAGR of 26 per cent.

As per the report of Ernst and young, the Indian media and entertainment industry is valued at US $ 16.3 billion in 2010 and is projected to grow at a CAGR of 12 per cent in the next four years (2011-14) to reach a value of US $ 26 billion.

Thus services sector has been playing an important role in promoting some valuable social services for overall enrichment of the society. Thus services sector has attained a considerable size and dimension in its forms of activities and has been playing an important role in a highly populous country like India.

However, the outlook and status of the services sector which had once fallen due to the global economic slow-down and financial crisis faced by US, but the same sector has turned its heads towards its revival and growth once again. The growing opportunities in this sector has been generating employment to many across the nation and are also attracting FDIs for attaining success in future.

However, the challenge faced by this sector will be to retain India’s competitiveness in those areas where the country has made a mark viz. telecommunications, IT and ITeS etc. Besides, India has to face another challenge to penetrate into some traditional areas such as tourism, shipping where other countries have already established its mark.

However, India’s potential for success in the sector is very high. Thus these challenges faced by India need to be addressed if the country wants to realize its pipe dream of attaining double digit growth and generating large number of employment opportunities for its growing population in the days to come.

Finally, in a country like India, having a large size of population and presently enjoying the merit of population dividend in the form of growing proportion of working age population, the prospect and potential of the services sector in generating income and employment for its people is quite bright.

Moreover, the growing volume of income and employment generated by services of sector has been working as booster or major force for the other two sectors, viz. industry and agriculture by creating new demand for its product which in turn help these two sectors to attain higher growth.

3. Essay on the Performance of Services Sector in India:

It would be important to study the performance of some major services which are playing an important role in Strengthening the economy.

(i) Trade:

By the term trade means exchange of commodities between individuals or groups either directly through barter or indirectly through medium such as money. Thus trade is an important activity providing interface between the producer and consumer. The benefits that can be realised from trade consist of an extension in the range of commodities available for consumption and a specialization in productive activity.

In India, trade is becoming a very important activity within the Service sector and thereby contributes a good portion to GDP. The value of trade (inclusive of wholesale and retail in the organized and unorganized sectors) in India’s GDP at constant prices has grown from Rs 4,33,967 crore in 2004-05 to Rs 8,10,585 crore in 2011-12 at a CAGR of 9.3 per cent. As per CSO’s QE the growth rate of trade in 2010-11 was 9.1 per cent.

Moreover, the share of trade in GDP has been slightly above 15 per cent in the last six years (2005-06 to 2010- 11) and remained at 15.4 per cent in 2010-11. As the country has been experiencing high GDP growth rates during 2005-2011 along with high growth in consuming population, the retail business is now being hailed as one of the sunrise sectors in the economy.

A.T. Kearney, an international management consultancy firm, has identified India as one of the topmost retail destinations. Since 2006, India has been allowing FDI in single brand retail to the extent of 51 per cent.

In January 2012, the government removed restrictions on FDI in the single brand retail sector, allowing 100 per cent FDI into it. Again, allowing FDI in multi-brand retail is one of the major issues in this sector. This could begin in phased manner in the metros, with the cap at lower level.

As per A.T. Kearney, Global Retail Development Index 2012 report, India is ranked at 5th place which remains a high potential market with accelerated retail market growth of 15 to 20 per cent expected over the next five years. While the overall retail market in India contributes 14 per cent of India’s GDP but the organized retail penetration still remains a low level thereby indicating room for further growth.

Brazil tops the ranks with retail sales accounting for 70 per cent of consumer spending of Brazil, followed by Chile, China, and Uruguay. In case of India, the food and beverages segment is recording increased activity from foreign players and grocery still remains the largest source of retail sales in India.

Hyper-markets and super­-markets, continue to dominate the organised retail market in India but cash-and-carry is growing fast, with- significant expansion planned from Bharti Wal Mark, Metro Group and Carrefour.

Apparel market is again expected to grow by 9 to 10 per cent annually for next five years. Besides, other players like Zara, Marks and Spencer’s and Mango are actively scouting locations for opening more stores across the country. In 2011-12, the luxury retail sector saw 20 per cent growth with luxury malls becoming entrenchened in Delhi, Mumbai and Bangalore.

Again, allowing FDI in multi-brand retail is one of the major issues in this sector. This could begin in a phased manner in the metro cities, with the cap at lower level coupled with incentivizing the existing ‘mom and pop’ stores (Kirana shops) to modernize and compete effectively with the retail shops, foreign or domestic.

With the improvement in modern retail trade in India, agricultural marketing could improve a lot and the revenue collection of the government could also increase. Presently, the retail sector in India is largely unorganized and has low tax compliance.

The Inter-Ministerial Group (IMG) on inflation of the Government of India has also recently recommended to raise the flow of FDI into multi-brand retail as one of the important measure to address the problems related to high rate of food inflation and low or un-remunerative prices realised by Indian formers, developing a ‘farm-to-fork’ retail supply system and also for addressing the gaps in investment in respect of post harvest infrastructure for agricultural produce of the country.

(ii) Tourism including Hotels and Restaurants:

Tourism is considered as one of the important component of services sector. It is considered as both growth engine and export-growth engine. It is also considered as an effective mechanism of employment generator as it has the capacity to create large scale employment both directly and indirectly for different sections of the society and also for different categories of workforce both specialized as well as skilled and unskilled.

As per UN’s World Tourism Organization (UNWTO), Tourism Highlights (2012), tourism offers 6 to 7 per cent of world’s total jobs directly and also millions of their indirectly through its multiplier effect and 5 per cent of global income. Tourism generates more inclusive growth than other sectors as it is the largest generator of employment across the World and Women account for 70 per cent of the work force in travel and tourism industry.

According to UNWTO, international tourist arrivals surpassed the 1 billion mark for the first time in history in 2012, reading a figure of 1.04 billion from 996 million in 2011 with 4 per cent growth, despite the volatility around the globe. Emerging economics, attaining 4.1 per cent growth regained the lead over advanced economics with 3.6 per cent growth. But Asia and Pacific shows the strongest growth at 7 per cent.

In 2011, international tourism receipts grew by 11 per cent (3.9 per cent in real terms) to an estimated US $1030 billion, which set a new records in most destinations despite economic challenges in many source markets.

According to the UNWTO, total number of international tourist arrivals world-wide is expected to increase by 3.3 per cent a year on an average during the period 2010 to 2030, which would result around 43 million more tourist arrivals every year, so as to reach a total of 1.8 billion arrivals by 2030.

Like the earlier years, emerging economy destinations are set to grow faster than advanced economy destinations. As a results of this trend, the market share of emerging economies which has increased from 30 per cent in 1980 to 47 per cent in 2011, is likely to reach 57 per cent by 2030, equivalent to over one billion international tourist arrivals.

As per Tourist Satellite Account Data, (2009-10) contribution of tourism to GDP and employment in India was 6.80 and 10.20 per cent respectively.

Tourism sector in India has witnessed significant growth in recent years. During the period 2006 to 2011, the CAGRs of foreign tourist arrivals (FTA) and foreign exchange earnings (FEE) from tourism (in rupee terms) were 7.2 per cent and 14.7 per cent respectively.

FTAs in India during 2010 were to the extent of 5.78 million as compared to that of 5.17 million in 2009, recording a growth of 11.8 per cent which is comparatively much higher than the growth of 6.5 per cent for the entire world in 2010.

FEEs from tourism sub-sector (in rupee terms) were Rs 64,889 crore in 2010 as compared to Rs 54,960 crore during 2009 recording a growth rate of 18.1 per cent. Despite continuous slowdown and recessionary trends in the economies of Europe and America, FTAs during 2011 were around 6.29 million with a growth rate of 9.2 per cent over 2010 and FEEs in 2011 were RS77,591 crore recording a growth rate of 16.7 per cent over the previous year.

As per the approach paper of the Twelfth Five Year Plan, India’s travel and tourism sector is estimated to generate 78 jobs per million rupees of investment as compared to 45 jobs per million rupees in the manufacturing sector. Although FTAs in India grew by 9.2 per cent in 2011, but due to Euro-zone crisis and global slowdown, FTA growth moderated to 5.4 per cent only to reach 66.48 lakh arrivals in 2012.

As a result, the foreign exchange earnings (FEEs) growth in dollar-terms declined from 16.7 per cent in 2011 to 7.1 per cent to reach US $ 17.74 billion in 2012. The share of India in international tourist arrivals was just 0.64 per cent (rank 38) in 2011.

India’s share in international tourism receipts was relatively higher at 1.61 per cent in 2011 (rank 17) though it is quite low as compared to countries like US (11.3 per cent) and even China (4.1 per cent).

Domestic tourism has also emerged as an important force to the sector providing much needed resilience. Domestic tourism is therefore, an important contributor to the growth of this sector attaining 14.34 per cent CAGR of domestic tourist visits during the period 1991 to 2011.

During 2011, there were 851 million domestic tourists recording a growth of 14.9 per cent over the previous year. Again the top five states, Uttar Pradesh, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra cumulatively accounting 69 per cent of the total domestic tourists visits in the country.

Hotels and restaurants sector with a 1.5 per cent share in India’s GDP in 2011-12 is also an important sub-component of the tourism sector. As an December 2011, there were 2,895 classified hotels maintaining a capacity of 1, 29,606 rooms in the country. Availability of good quality and affordable hotel rooms along with other related facilities plays an important role in boosting the growth of tourism in the country.

The share of hotel and restaurant sector in overall economy increased from 1.46 per cent 2004-05 to 1.53 per cent in 2008-09 and then declined to 1.46 per cent in 2010-11. However, within the service sector, the share of hotel and restaurant sub-sector declined from 2.75 per cent in 2004-05 to 2.64 per cent in 2010-11 as other service sector sub-groups grew faster than this sector.

During the period 2004-05 to 2009-10, the CAGR of this sub sector was 8.44 per cent and the growth rate in 2010-11 was 7.7 per cent. Health tourism, the new area in this sector is a niche area where India has good potential.

According to a study by Organization for Economic Cooperation and Development (OECD), Thailand, Singapore, India, Malaysia, Hungary, Poland and Malta are effectively promoting their comparative advantage as medical tourist destinations.

In respect of health tourism, India is in a better position. Several features like cost-effective health-care solutions, availability of skilled health care professionals, reputation for treatment in advanced health care segments, increasing popularity of India’s traditional wellness systems, and strengths in IT have positioned India as an ideal health-care destination.

While strengthening its capabilities in modern health are systems, India is also leveraging its inherent strengths in traditional health-care systems such as Ayurveda, siddha, Yoga, naturopathy, and faith healing/spiritualism. India has also hold an edge over competitor countries with its mastery over techniques of concentration and mind control and also in the face of its natural resources and remarkable cultural diversity.

In order to promote tourism, the government has taken many policy initiatives including a five year tax holiday for 2, 3 and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai) for hotels which starts operating w.e.f. 1 April 2008 to 31 March, 2013; an investment linked income tax deduction for 2 and 3 star category of hotels located outside cities. A committee has also been formulated to support golf, polo and wellness tourism.

The government has also formulated a set of guidelines on safety and quality norms of adventure tourism. To attract foreign tourists visiting India for medical treatment, a new ‘medical visa’ category has also been introduced. The government has also formulated guidelines for addressing various issues governing wellness centres, covering the entire spectrum of Indian systems of medicine.

However, the tourism sector is facing certain challenges. Some of the challenges still remain as hindrances to the growth of this sector. One of such challenges is the multiple taxes on hospitality and tourism-related activities which make the tourism product expensive in the form of high hotel rates and high fares; another such challenge in the luxury tax which is imposed by the state governments leading high tariffs and low occupancy in hotels.

Tourism infrastructure is another area which needs immediate attention where there is plenty of scope for public-private partnerships (PPP). Thus it is found that significant opportunities still remain relatively untapped and for attaining faster, sustainable, and more inclusive growth, as envisaged by the Twelfth Five Year Plan, the tourism sector holds a lot of promise and prospect.

(iii) Transport Related Services:

Transport related services is considered as an important component of services sector. The share of transportation including railway services category in GDP at factor cost (at current prices) declined slightly from 6.6 per cent in 2006-07 to 6.4 per cent in 2008-09 and then to 6.2 per cent in 2010-11. Railways is an important component within this services category and it share in GDP increased from 0.9 per cent in 2006-07 to 1.0 per cent in 2009-10 and then declined to 2.8 per cent in 2010- 11.

Shipping is also playing an important role in the commodity and services trade to the country. It plays an important position in Indian economy covering around 95 per cent of country’s trade by volume and 68 per cent in terms of value being transported by sea. As on 31 January, 2013, India had a fleet of strength of 1,158 ships with Gross Tonnage (GT) of 10.45 million.

The public sector Shipping Corporation of India is having the largest share of 32.60 per cent. Of this, 356 ships with a capacity of 9.37 million GT cater to India’s overseas trade and the rest to coastal trade. The gross foreign exchange earnings/savings of Indian ships in 2011-12 were to the extent of Rs 10,666.45 crore.

Though India has one of the largest merchant shipping fleets among developing countries, it is ranked eighteenth in the entire world in terms of dead weight tonnage (DWT) with a share of only 1.05 per cent as 1st January, 2012 as compared to China’s ninth rank with a share of 3.79 per cent.

Port services are also an important part of transport services. Ports are vital link in the trade between nations. In order to increase productivity and efficiency of ports, continuous modernization of ports and up gradation of port infrastructure are very important. India has a very long coastline. At present there are 13 major ports and 200 minor operable ports along the coastline. The major ports handle approximately 75 per cent of all India port throughput.

During 2007-08, the total cargo handled at major ports and non-major ports was 723.0 million tonnes. The total capacity of Indian ports has reached approximately 1,245.3 million tonnes as on 31st March 2012. During 2009-10 and 2010-11, traffic at major ports attained a growth of 5.67 per cent and 1.59 per cent respectively over the previous year. During 2011-12 total traffic handled at all ports at 911.7 million tonnes which grew by 3 per cent over the previous year.

Road transport is another important mode of transport services in India as it covers every corner of the country. At present, India has a total road network covering 4.10 million kilometers which makes it one of the largest road networks in the world.

It is estimated that road traffic in India accounts for 80 per cent of passenger traffic and 60 per cent of goods traffic in the country which is expected to grow further in future. This transport services are contributing a lot to the GDP of our country and are also responsible for generation of large number of employment both directly and indirectly.

(iv) Storage Services:

Storage services are also an important component of the services sector. Ware­housing services are considered as an integral part of both inbound and outbound logistics, as goods produced have to be stored in different geographical locations of the country before shipping and dispatch as per demand and order flows received from different destinations.

In India, the most important component of ware­housing is agricultural storage for agri-produce, food-grains, fertilizers, manures etc. Other components include industrial warehousing for industrial goods, import cargo and excisable cargo; inland container depots (ICDs) or container freight stations (CFSs) for facilitating import and export trade; and also special warehouses for cold and temperature-controlled storage.

The warehousing sector usually provides many ancillary services. In India, the Central Warehousing Corporation (CWC) along with 17 State Warehousing Corporations (SWCs) provides scientific storage facilities for agricultural produce and implements and some other notified commodities.

The commercial outreach of CWC along with its social objectives resulted operation of a large network of warehouses across the country. As on 31 December, 2011, CWC was operating 469 warehouses, with total storage capacity of 99.81 lakh MT and average utilisation of 89 per cent of its storage capacity.

The CWC started its operation as public bonded warehouses in the late 1970s and later on diversified its business into CFSs and ICDs and also started container rail transportation from Loni (UP) to the JNPT. In 2010-11, the CWC added its capacity of 1.45 lakh MT with total capital outlay of RS 65 crore. Moreover, at state level, 17 SWCs were operating a network of 1,624 warehouses with its aggregate storage capacity of 230.10 lakh MT as on 1 December, 2011.

In recent years, major policy initiatives are taken by the government which include—construction of go-downs under the 7 year/10 year guarantee scheme of the Government of India, permission of upto 100 per cent FDI in the construction of warehousing infrastructure; construction of warehouses under the Grameen Bhandaran Yojana of the NABARD and Rashtriya Krishi Vikash Yojana; making the warehouse receipt fully negotiable; and construction of godowns under the Private Entrepreneurs Godown (PEG) Scheme.

The CWC has plan to construct 2.09 lakh MT additional storage capacity of 2.09 lakh MT during 2011-12. However, there is sufficient need to further increase high quality storage capacity and the number of trained samplers and graders in the country.

(v) Communication Services:

Communication services, composed of telecom and related services and postal services are considered as important component of service sectors. Telecommunication is the fastest mode of communication developed in the country.

Telecommunication services include the telephone service, telex service, telegrams, fax service, internet and broad band service, and radio and television. Indian telecom service has proved to be an international success story as the sector has been witnessing commendable growth over the past few years. The Indian telecom network is ranked as second largest in the world, next only to China.

The total number of telephones connections has increased from 206.83 million on 31 March, 2007 to 926.53 million as on 31 December 2011. Within this, the growth in wireless connections has been phenomenal, reaching its number to 893.84 million connections at the end of December 2011, comprising its share to over 96 per cent of total telephones in the country.

Tele-density, which is considered as an important indicator of telecom penetration, has increased from 18.22 per cent in March, 2007 to 73.34 per cent in December 2012. While the urban tele-density in December 2012 reached a high level of 149.55 per cent but the rural tele- density remained low at 39.90 per cent, which signifies its potential for further growth in the rural areas. The liberal policy regime facilitated the growth of the sector and reduced the operational costs to its consumers.

Postal services is the cheapest mode among all communication services. Indian postal services have been growing over the years and has become the largest postal network in the world with 1,54,822 post offices, as on 31 March 2012, spreading across the country.

On an average, each post office serves 7,814 persons with coverage of approximately 21.23 sq. km of area. Out of these post offices, as many as 1,39,040 post offices are located in rural areas and 15,826 post offices are located in urban areas.

In 2008, the government has launched ‘Project Arrow’ to transform the existing India Post infrastructure across the country by upgrading key postal operations such as mail delivery, remittance and banking services. India Post is gradually emerging as a one stop shop for retail products and offers a single window facility for banking money remittances and other financial products.

Moreover, India Post has been given the responsibility of disbursing wages to beneficiaries of MGNREGA through its 96, 895 post offices.

(vi) Real Estate Services:

One of the important component of the services sector is the real estate services. Real estates services provides housing facilities. Housing is a basic need and provides economic and social security to the people. It is also considered as an asset which can have significant leveraging effect in order to support and supplement other means income generation and poverty alleviation.

This is an important employment-intensive sector. From this sub-sector, a host of vocations and professions such as construction workers, builders, developers, architects, engineers, interior decorators, carpenters, masions, plumbers, values, property consultants etc. derive their livelihood both directly and indirectly from such housing projects. As per simple estimate, it is observed that for every rupee that is invested in housing and construction RS 0.78 gets added to GDP.

In terms of the multiplier effect on the economy, housing ranks fourth and it ranks third amongst 14 major industries in terms of total linkage effect. Both directly and indirectly, the real estate industry has been maintaining significant linkages with nearly 300 sub-sector group of industries like cement, steel, paints, and building hardware which contribute extensively not only to capital formation and generation of income and employment opportunities but also catalyze and stimulate economic growth satisfactorily. Thus, investment in housing and real estate activities can be easily considered as a barometer of growth of the entire economy.

In 2010-11, the GDP share of the real estate sector (including ownership of dwellings) along with business services was 10.6 per cent. After attaining a growth of 10.4 per cent in 2008-09, the rate of growth of this sector has decelerated to 7.8 per cent in 2009-10 and then to only 7.2 per cent in 2011-12.

Currently (2011-12) nearly 5.9 per cent of India’s GDP is being contributed by the housing sector. The contribution of housing sector to GDP is likely to increase to 6 per cent as the institutional credit housing investment is growing at a CAGR of nearly 18 to 20 per cent per annum in the next three to five years.

As per the World Bank’s Doing Business 2012 report, India is among the top countries in terms of housing and work space needs but it ranks 181st in respect of construction permission processes. As per the Task Force estimate, requirement of housing during the Twelfth Plan in urban areas is 18.7 million units.

As per Mekinsey Report, the demand for affordable housing will be 38 million by 2030. But this sector is now facing some challenges related to land acquisitions, red tapism, high stamp duty, formalities and costs related to registration and mutation some of which are considered superfluous and unnecessary.

The absence of single window clearance system with standardization of bye-lows and processes are complicating its activities. Recently, some of the urban local bodies (ULBs), development authorities, such as Municipal Corporation of Delhi and Indore have successfully introduced a system of online sanction for building plans and also for issuing completion certificates, which are likely to reduce its approval time and thereby can help this real estate sector to complete their project within stipulated period without facing the problem of cost over-run.

Adoption of similar such measures by other development authorities and urban local bodies are needed to boost the activities of this sub-sector.

(vii) Some Business Services:

There are some business services which are also considered as important component of the services sector.

Some of these important business services are as follows:

(i) IT and ITeS:

IT and ITeS sector has bloomed itself into a full fledged industry along with its own flavour. The Indian ITeS and Business Process Outsourcing (BPO) has demonstrated its superiority, sustained cost advantage and fundamentally-powered value proposition in the international market.

Accordingly IT and ITeS sector are giving India the image of a young and resilient global knowledge power. The IT and ITeS industry has four major sub-components, viz., IT services, business process outsourcing (BPO), engineering services and research and development (R & D) and software products.

As per NASSOCOM estimates, India’s IT and BPO sector (excluding hardware) revenues were to the extent of US $ 95.2 billion in 2012-13, generating direct employment for nearly 2.8 million persons and indirect employment of nearly 8.9 million persons.

As a proportion of national GDP, IT and ITeS sector revenues have grown from 1.2 per cent in 1997- 98 to 8.0 per cent in 2012-13. Software exports are estimated at US $ 76 billion in 2012-13 as compared to that of US $ 69 billion in stet 2011-12.

Recently, the IT and ITeS sector has been facing some challenges like-increasing competition from other countries with incentivized low costs, rising costs in India with wage-push inflation, increasing cost of relevant talent and skilled personnel, infrastructure constraints, risks from currency fluctuations and security, both physical and data related, and rising protectionist sentiments in key markets. Thus, government her taken some initiatives to promote the growth of this IT and ITeS industry.

(ii) Accounting, Legal and Consultancy Services:

Accounting and auditing, legal and consultancy services are some of the important business services provided by services sector of India. Indian accounting firms are increasingly getting integrated and are providing associated services such as management consultancy, corporate finance, and advisory services in addition to their core business of accounting auditing and tax services.

As per WTO data, it was observed that out of US $ 44.5 billion other business services exports by India in 2010, the share of accounting legal, management consultancy and public relations services was 19.3 per cent and out of US $ 21.03 billion business services imports, their share was 26.2 per cent.

However, there are huge potential for accounting services in India. Out of 48,000 chartered accountancy firms in India, there are only 2,043 firms that have four or more partners.

The remaining are practising as proprietary firms or in their individual names. The chartered accountancy profession in India has globally benchmarked its qualifications and training standards and has entered into qualification-recognition arrangements with accounting bodies of UK, Australia, Canada and Ireland.

The export potential of India in accounting services could be tapped adequate by such mutual recognition and qualifications. Tie-ups to overcome the weakness of small size of domestic accountancy firms could also help accountancy sector of India to grow manifold.

In respect of legal services, India has been maintaining its own strength. India has as estimated 1.2 million legal practitioners and is next only to US in terms of its numbers. In India, there are 950 law schools and about 4 to 5 lakh law students across country. The legal service providers, are individual law-years and small or family based firms.

In India, the practice of law is governed by the Advocates Act of 1961 under which foreign law firms are not allowed to engage in practice of law in India. India is ranked 45, with a score of 4.5 in terms of judicial independence by the Global Competitiveness Report, 2011-12.

As regards efficiency of the legal framework in setting disputes, India is ranked 64 with a score of 3.7. This shows that India needs to improve its ranking through legal and judicial reforms and speed up of disposal of judicial cases. The National Knowledge Commission recommended establishing a separate body to regulate legal education and setting up of centre for Advanced Legal Studies and Research.

The National Legal Services Authority (NALSA) has been constituted under the Legal Services Authorities Act 1987 in order to monitor and evaluate implementation of legal aid programmes and lay down policies and principles for making legal services available under the Act.

There is also need to quickly implement proposals related to commercial disputes and amendments in the Arbitration and Conciliation Act 1996 to make India a favourable destination for international arbitration.

Moreover, consultancy services are emerging as one of the main business are as in India. The volume of revenue earning in the Indian. Consultancy industry on conservative basis has been estimated at around US $ 8.24 billion in 2010-11. Presently, the consultancy services contribute to about 0.47 per cent of the GDR.

The growth rates of consulting industry over the last few years have been extremely promising and its revenue is projected to increase to US $ 9.89 billion in 2012 at a growth rate of 20 per cent.

In India, consulting service providers may be classified into five categories: individual consultants, consulting firms, R&D organizations, academic institutes, and professional bodies. Various client sectors to which consulting services are provided at present include agriculture and rural development, banking and financial services, construction, education, energy, environment, governance and public administration, health and demography, infrastructure, information technology, law and regulation, life sciences, manufacturing, management, science and technology, telecommunications, transport, tourism, urban development and water management. The consultancy service market can be broadly classified into engineering and management consultancy.

As per estimates made in 2006-07, engineering consultancy services comprised around 7,000 individuals and 25,600 firms. India’s emergence as one of the fastest growing consultancy markets in the world has been largely facilitated by the liberalization of FDI policy, entry of many new players, high growth in many key sectors, and India marked as a low cost sourcing destination.

(iii) R&D Services:

Research and Development (R&D) services is another important compound of business services in India. Among business services, R&D occupies the second position in India’s GDF with growth being consistently high at near 20 per cent in the last few years with growth in 2011-12 at 20.5 per cent.

According to Battelle R&D magazine, gross expenditure in R&D (GERD) by India for the year 2012 was projected to be US $ 41 billion in purchasing power parity terms, which is estimated at 0.8 per cent of GDP as compared to USA’s 2.3 per cent and China’s 1.6 per cent of GDP. This can be termed as low both in absolute terms and also as a proportion of GDP compared to other countries.

This may be partly due to the fact that the sizes of R&D base and absorption capacity are not commensurate with its requirements. On the basic of the estimates prepared in 2010-11, it was found that the sectors which attracted largest R&D expenditures were pharmaceuticals, electrical and non-electrical machineries, electronics, plastics, transport equipment’s etc.

It has been found that though developed nations remain the leaders in innovation, there has been a continuous and increasing shift in R&D activities from developed to developing countries. Developing Asian countries, especially China and India, are now driving the growth of global R&D.

Factors which are playing a major role in driving the R&D investments towards these countries include-low cost of production, access to new markets, availability of knowledge oriented suitable manpower, favorable regulatory environment and necessary fiscal benefits.

MNCs from various developed countries are now desiring to expand their R&D activities in these countries through collaborative projects in some areas like electronics and telecommunications, software development, hardware and product design and development drugs and pharmaceuticals.

(viii) Construction Services:

Construction services as a component of services sector has been gaining its importance in Indian economy. The construction industry in India is now considered as an important indicator of growth and development as it creates a lot of investment opportunities and also raises production capacity across various related sectors.

The share of construction services into GDP at factor cost (at current prices) has been increasing from 6.0 per cent in 2000-01 to 8.5 per cent in 2008-09 and then to 8.2 per cent in 2011- 12.

Thus presently with a share of 8.2 per cent of GDP, the construction industry has contributed around Rs 6,70,778 crore (at current prices) to national GDP at factor cost in 2011-12. While its growth rate (at constant prices) in 2010-11 was 8.0 per cent, but in 2011-12 it decelerated to 4.8 per cent due to some external and internal factors such as recession in Europe, hardening of interest rates in India and challenges related to land acquisitions in some places.

As the sector is labour intensive and, including indirect jobs, it provides employment to around 33 million people. It has been estimated that nearly to per cent of these people are employed in the infrastructure segment and the remaining 30 per cent are employed in the real estate segment.

As per industry estimates, this construction industry is expected to generate additional employment around 47 million leading to total number of people employed in this sector reading 83 million persons by 2022.

This sector is critical for enhancing the productive capacity of the overall economy as on an average it accounts for more than half the investment required for setting up very critical infrastructure such as power projects, railways, ports, air ports, roads, and bridges.

As the sector got industry status in 2000, more initiatives are being taken by the government to undertake projects on PPP basis. As a result of these initiatives, more private ownership of build-operate-transfer (BOT), build-operate-own-transfer (BOOT), and build-operate-lease-transfer (BOLT) projects being taken up in this sector.

Moreover, FDI up to 100 per cent under the automatic route is allowed in townships, housing, built-up infrastructure and construction of development projects (which broadly include housing, commercial premises, educational institutions and recreational facilities).

This sector is fragmented with a number of major companies involved in construction activities across all segments. Which medium sized companies are specialising in niche activities, small and medium contractors are actually working on sub-contract basis and finally carry out the work in the field.

The construction sector has major linkages with the building materials industry since they account for sizeable share of construction costs ranging between 40 to 50 per cent. As the Twelfth Plan has envisaged to enhance infrastructure investment to US $ 1 trillion, thus the construction sector is all set to become one of the powerful growth engines of Indian economy in the near future.

As the Government has taken initiatives to develop mass rapid transport systems (MRTS) in cities with 20 lakh population thus it will also boost the demand for construction activities further. Thus the potential of the construction sector is very high in urban infrastructure, especially in MRTS and water management.

Moreover, undertaking new projects like dedicated freight corridors in railways and construction of new airports in Tier II and Tier III cities, clearing pending projects in ports, and development of real estate projects in urban infrastructure are likely to generate huge opportunities for the construction sector of India.

(ix) Some Social Services: Sports and Cultural Services:

Some social services like sports, cultural services, creating industry, media and entertainment industry etc. are some of the important segment of services sector which are also contributing a lot to the socio-economic development of the nation.

Sports is one of the important mode of activities and entertainment. Apart from being a means of entertainment, physical fitness, and development of human personality, sports have also been playing an important role in national identity, image building, community bonding and international bonding.

As sports in modern times highly competitive, the use of modern infrastructure and equipment and advanced scientific support has no alternative and these in turn are changing the scenario at international level.

In order to face such changing situation, the Government of India has been taking several initiatives in order to help sports persons with scientific and equipment support as well as providing them training and exposure in international competitions.

In the mean time, the Government of India have been announcing several schemes aiming at promotion of drug free sports, sports infrastructure development both for urban and rural India separately, promotion of excellence in sports, incentives to sport persons, assistance to sports-support institutions, and promotion of sports among persons with disabilities. Indian athletes showed a commendable and impressive performance at the Commonwealth Games 2010 and Asian Games 2010.

Cultural services is another important area which include ‘recreation and entertainment’ and ‘radio and TV broadcasting’ besides other related cultural services. In a modern post industrial knowledge based economy, cultural activities are becoming increasingly important. There is positive correlation between culture and employment which is growing year after year.

In India, a large number of people are getting viable employment by engaging themselves in various cultural activities as writers, publishers, librarians, musicians, painters, sculptors, singers, dancers, choreographers, photographers, actors etc. cultural activities also support other economic activities like cultural tourism.

In India, the major part of tourism, both national and international, can be classified as cultural tourism because it is geared to achcheological sites, monuments, museums, and cultural heritage including traditional fairs and festivals. Such cultural tourisms are generating huge number of employment opportunities and preserves ethnic culture and activities satisfactorily.

In order to meet the objective of preserving and promoting all forms of art and culture, a variety of activities are being undertaken by the Government of India. Accordingly, under the patronage of Ministry of culture, a network of 41 organizations is functioning for protection, development and promotion of both tangible and intangible heritage and knowledge heritage. A total allocation of RS 3,555 crore was allocated to this sector during the Eleventh Plan period.

Besides, creative industry includes cultural heritage, printed matter and literature, music and performing arts, visual aids, audio-visual media including cinema, television, radio and photography, and socio-cultural activities, museum and archives. Moreover, trade in creative industry can also be broadly classified into goods and services.

As per UNCTAD estimatic, world exports of creative services stand at US $176 billion in 2010 which was growing at a CAGR of 15.4 per cent. Among all these countries, India is ranked 13th with a share of 2.3 per cent in world exports of creative services. Accordingly, India exported US $ 4 billion worth of creative services in 2010 which was increasing at a CAGR of 26 per cent.

As per one report prepared by Ernst and young, the Indian media and entertainment industry is valued at US $16.3 billion in 2010 and is projected to grow at a CAGR of 12 per cent in the next four years (2011- 14) in order to reach a value of US $ 26 billion.

Moreover, the rapid convergence of networks, devices, and content is expected to dramatically alter the dynamics of Indian media and entertainment industry. Besides, there are 245 private FM Radio stations, along with the government controlled All India Radio, operating in 237 radio stations.

Again Indian film industry is the largest in the world with the production of over 1,000 films a year in more than 20 languages. The film industry is also contributing to outsourcing of services such as animation, Visual aids, conversion of 3D, and post production services, to the ICT sector, thus contributing adequately to its growth.

The Indian film industry is also generating additional revenue through collaboration with the ICT sector, like DVDs, music CDs, mobile downloads, and online gaming.

But the growth of the film industry is inhibited by factors like high rate of entertainment of tax, and lades of uniformity in tax structure across states. Thus adoption of the goods, and services tax (GST), subsuming service tax and entertainment tax could promote the development of Indian film industry.

In respect of publishing sub-segment India has been maintaining about 77,348 news-papers/magazines (registered) in circulation in 23 scheduled languages (including English) and several other non-scheduled languages. The low readership penetration (about 30 per cent) as compared to a literacy rate of 75 per cent underscore the potential for growth of publishing sector.

About 42 per cent of advertising amount spent in the country is made through the print media. Presently, foreign investment up to the limit of 100 per cent is permitted in case of foreign publishing houses for bringing out facsimile editions of their own newspapers through their wholly owned subsidiary.

Thus considering the wide diversity of the sector and taking into account of its huge potential, the services sector of the country should be given due importance for attaining further growth in the years to come.

In this connection it needs to be mentioned here that the importance of services sector in India can be realised from the fact that it is now contributing the major portion of Country’s GDP and the amount of revenue realised by the government by imposing services tax has become very much significant and the tax become very much productive within the shortest span of time.

Thus the prospect and potential of the services sector is quite rich considering its capacity to generate income, employment and tax revenue to the government.