Page 42 - DMGT522_SERVICES MANAGEMENT

Unit 2: Emergence of the Services Economy

air transport including air freight (0.27 per cent), and retail trading (0.03 per cent) are included Notes
then the total share of cumulative FDI inflows to the services sector would be 58.4 per cent.
Following the general trend in FDI inflows, FDI inflows to the services sector (top five sectors
including construction) have also slowed down in 2009-10 and 2010-11, with negative growths
of –7.5 per cent and –42.5 per cent respectively in rupee terms. In 2011-12 (April-December),
again following the trend of overall FDI inflows, which increased by 50.8 per cent to reach US$
24.19 billion, FDI inflows to the top five service sectors (including construction) also increased
by 36.8 per cent to US$ 9.3 billion Services (financial and non-financial), telecommunications,
and construction, are the leading sectors in FDI inflows to the services sector in 2011-12 (April-
December). The inflows to the other two service sectors are comparatively low (Table 2.2).
The five service sectors are also the sectors attracting the highest cumulative FDI inflows to the
economy with financial and non-financial services topping the list at US$ 31.7 billion during the
period April 2000-December 2011. This is followed by other service sectors – telecommunication,
computer software & hardware and housing & real estate. The top five source countries for FDI
inflows into India in the financial and non-financial services sector (for which break-up data are
available) during April 2000 to December 2011 are Mauritius, which alone accounts for 39.7 per
cent of FDI inflows in the service sector, followed by Singapore (15.4 per cent), the UK (8.6 per
cent), USA (7.1 per cent) and Japan (4.5 per cent). This is more or less similar to the general
sourcing pattern of total FDI with the top five countries remaining the same in the same order
of ranking. The shares of the 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, UK 29.5 per cent,
USA 21.9 per cent and Japan 11.9 per cent.

2.4.4 India’s Services Trade

As per Balance of Payments (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 in the same period. Within the services sector, CAGRs of financial services (52.8 per cent)
and business services (29.2 per cent) were higher, while that of software at 21 per cent was low.
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 services imports, non-software services
(22.6 per cent) and transportation (20.5 per cent) had high CAGRs. The overall openness of the
economy reflected by total trade including services as a percentage of GDP showed a higher
degree of openness at 50.3 per cent in 2010-11 compared to 25.4 per cent in 1997-98. Openness
indicator based only on merchandise trade is at 37.5 per cent in 2010-11 compared to 21.2 per cent
in 1997-98.

2.4.5 Services Employment in India

While agriculture continues to be the primary employment-providing sector, the services sector
(including construction) is in second place. As per the National Sample Survey Organization’s
(NSSO) report on Employment and Unemployment Situation in India 2009-10, on the basis of
usually working persons in the principal status and subsidiary status, for every 1000 people
employed in rural and urban India, 679 and 75 people are employed in the agriculture sector, 241
and 683 in services sector (including construction), and 80 and 242 in the industrial sector,
respectively. State-wise, there are wide differences in the share in employment of different
sectors in rural India. While some north-eastern states like Sikkim, Tripura, and Manipur have
a high share of employment in the services sector, city states like Chandigarh and Delhi also
have very high shares of 826 and 879 out of 1000 employed people. Among the major states,
Kerala has a high share of employment in the services sector at 511 persons per 1000. Construction;

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