B.5] Service Sectors in India

1. Historical Aspects

• Pre-Independence Era (1858–1947):

  • The service sector was dominated by British colonial administration, railways, postal services, and telecom.
  • British Railways and Indian Postal Service were key components of the colonial infrastructure.
  • Banking was controlled by British banks like Bank of India, Central Bank of India, and Imperial Bank of India.

• Post-Independence (1947–1991):

  • Planned Economy emphasized agriculture and industrialization, leading to underdevelopment of the service sector.
  • Public sector dominance in telecom, post, and banking.
  • Service sector contributed less than 20% of GDP during this period.
  • White-collar jobs were limited, and service jobs were mostly in government departments.

• Liberalization (1991 onwards):

  • Economic liberalization under P.V. Narasimha Rao led to the growth of private sector services.
  • Foreign Direct Investment (FDI) was allowed in sectors like telecom, IT, and finance.
  • IT and ITES began to emerge as major contributors to the service sector.

2. Current Stage

2.1. Contribution to GDP

• Service sector contributes ~55–60% of India’s GDP (as of 2023).
• Employment: Provides ~35–40% of total employment in India.
• Growth rate: Average ~8–10% annually, higher than agriculture and industry.

2.2. Key Sectors

2.3. Major Players

• IT Companies: TCS, Infosys, Wipro, HCL Technologies, Cognizant.
• Banking: Public Sector Banks (PSBs) like SBI, ICICI Bank, PNB, and private banks like Axis Bank, Kotak Mahindra.
• Telecom: Reliance Jio, Airtel, Vodafone Idea, BSNL.
• Insurance: Life Insurance Corporation (LIC), General Insurance Corporation (GIC), private insurers like ICICI Prudential, SBI Life.

2.4. Emerging Trends

• Digital Economy: Growth of e-commerce, digital payments, and fintech.
• Outsourcing: India is a global hub for BPOs, KPOs, and IT outsourcing.
• Skill Development: Initiatives like Skill India, National Skill Development Corporation (NSDC), and National Skill Qualification Framework (NSQF).
• Startup Ecosystem: Rise of venture capital, incubators, and accelerators.

3. Policies

3.1. Key Policies and Schemes

3.2. Regulatory Framework

• SEBI (Securities and Exchange Board of India): Regulates stock markets, mutual funds, and derivatives.
• RBI (Reserve Bank of India): Regulates banking, financial services, and payment systems.
• TRAI (Telecom Regulatory Authority of India): Regulates telecom services, mobile networks, and internet services.
• FIPB (Foreign Investment Promotion Board): Facilitates FDI in restricted sectors.

3.3. Important Acts and Regulations

3.4. Key Terms and Definitions

• Service Sector: Economic activities that provide intangible services (e.g., IT, banking, education, healthcare).
• FDI: Foreign Direct Investment, investment by foreign entities in Indian companies.
• BPO (Business Process Outsourcing): Outsourcing of business processes to third-party providers.
• KPO (Knowledge Process Outsourcing): Outsourcing of knowledge-based tasks (e.g., legal, research).
• ITES (Information Technology Enabled Services): Services that use IT to deliver business processes.
• NSQF (National Skill Qualification Framework): A framework for skill certification and training.

4. Important Dates and Facts for Competitive Exams

• 1991: Economic liberalization led to the growth of private sector services.
• 2005: Tata Consultancy Services (TCS) became the world’s largest IT services company.
• 2015: Skill India Mission launched to address skill gap in the service sector.
• 2016: Startup India initiative to promote entrepreneurship.
• 2019: Data Protection Bill proposed to regulate digital privacy.
• 2023: Digital India Act proposed to govern digital services and infrastructure.
• 2023: Service sector contributes ~55–60% of India’s GDP.
• Key Sectors: IT, banking, telecom, tourism, education, health.
• Employment: ~35–40% of total workforce in the service sector.
• GDP Contribution: ~55–60% as of 2023.
• Important Policies: Skill India, Digital India, Startup India, Ease of Doing Business.

5. Comparison of Sectors

6. Frequently Asked Questions (FAQs)

• Q: What is the main contribution of the service sector to India’s economy?
  A: ~55–60% of GDP as of 2023.

• Q: Which sector is the largest contributor to the service sector?
  A: IT and ITES (15–20% of GDP).

• Q: What is the role of the government in the service sector?
  A: Regulatory, policy-making, and skill development through schemes like Skill India and Digital India.

• Q: Which policy is most relevant for the service sector?
  A: Skill India Mission and Digital India are key for employment and digital transformation.

• Q: What are the major challenges in the service sector?
  A: Skill gap, digital divide, regulatory hurdles, and global competition.