Service sector and economic growth

Service sector and economic growth

• 1.
  By- Shashwati Pawar
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   The servicesector is also called the tertiary sector.  The basic characteristic of this sector is the production of services instead of end products.  Service sector produces the products which are know as services.
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   “ Aservice is an act of performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.” -Philip Kotler  In simple words, Service is an economic activity that is tangible, cannot be stored and does not result in ownership. Services are consumed at the point of sales.
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   Intangible -It cannot be touched.  Inseparability - Services cannot be separated from the service providers.  Heterogeneity – A service is one-time generated, rendered and consumed and can never be exactly repeated.  Perish ability – Once a service is consumed then it cannot be consumed again.
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   Telecommunication  Hospitalityindustry/Tourism  Mass media  Healthcare/hospitals  Public health  Information technology  Wholesale and Trade  Transportation  Education  Government services  Financial services  Banking  Insurance  Investment management  FMCG  Professional services  Accountancy  Legal services  Management consulting  Consulting  Retail sales  Real estate
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  •Economic growth isthe increase in the market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product. •GDP refers to Gross domestic product , it is the market value of all officially recognized final goods and services produced within a country in a given period of time, generally a year. GDP per capita is often considered as an indicator of country’s standard of living.
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  •Services sector infuture providing about 70 per cent of the new job opportunities in the economy •New employment possibilities in the services sector are construction, trade, transport, storage, financial services, communication and personal services •Employment in manufacturing would also expand, but its contribution to the total increase in employment would only be around 17 per cent.
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   The servicessector has played a vital role in the acceleration of economic growth.  Growth in services picked up in the 1980’s and accelerated in the 1990’s. Since then, it has become a dominant contributor to economic growth.  The share of services in India’s GDP increased from 33.5 per cent in 1950-1 to 56.5 per cent in 2011-12.
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   India isamong the top 15 countries with highest overall GDP in 2011, India ranked 9th in overall GDP and 10th in services GDP.  Service sector has a share of 57 per cent in the gross domestic product (GDP) in 2011-2012.  Services sector has been increased by 9.1 per cent.
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  • If constructionis also included, the service sector’s share increases to 64.4 per cent in 2011-12. • Trade, hotels, and restaurants is the largest contributor to GDP with an 18 per cent share. • Followed by financing, insurance, real estate, and business services with a 16.6 per cent share. • Community, social, and personal services (including salons, spa) with a share of 14.0 per cent is in third place.
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   The threegroups of services are :  Group I - Traditional services – retail and wholesale trade, transport and storage, public administration and defense – which tend to be slow growing in the sense that their share in GDP has fallen in more advanced countries.  Group II is a hybrid of traditional and modern services consumed mainly by households – education, health and social work, hotels and restaurants, and other community, social and personal services – whose share in GDP has risen in step with per capita income.  Group III is made up of modern services – financial intermediation, computer services, business services, communications, and legal and technical services.  Productivity growth has been highest in Group III.
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  REASONS FOR GROWTHOF SERVICE SECTOR •Both demand and supply factors have led to the growth of service sector. •On the demand side, the high growth of services output was mostly attributed to factors such as increasing input usage of services by other sectors, mainly manufacturing sector (i.e. higher domestic demand); higher foreign demand due to trade demand); liberalization; and high income elasticity for services. •On the supply side, the increased trade in services following trade liberalization policies and other reforms in 1990s induced this growth. •Economic affluence •Changing role of women •Cultural changes •Conservation of natural resources •Development of markets •Increased consciousness of health care.
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  Finally to concludethat, the service sector is very important for India, as it is contributing half of the GDP growth in the Indian economy. Employment is increasing due to development of service sector. There is a very good scope to improve further in the services provided by the companies and government. As India is developing very fastly there is a need for change in the quality and also the speediness of the services