Page 52 - DMGT522_SERVICES MANAGEMENT

Unit 2: Emergence of the Services Economy

credit for housing investment growing at a CAGR of about 18 to 20 per cent per annum in the Notes
next three-five years, the housing sector’s contribution to GDP is likely to increase to 6 per cent.
While India is among the top countries in terms of housing and work space needs, it ranks 181st
in construction permission processes according to the World Bank’s Doing Business 2012 report.
There are 34 procedures and the average time taken is 227 days. Some of the issues related to this
sector include the hardening of interest rates and possible defaults; challenges associated with
land acquisitions; high stamp duty; formalities and costs related to registration and mutation,
some of which are unnecessary and superfluous; the Urban Land Ceiling Regulations Act (ULCRA)
and existing lower floor area ratio in cities; and absence of a single window clearance system
with standardization of bye-laws and processes. Recently, some of the urban local bodies (ULBs)/
development authorities, like the Municipal Corporations of Delhi and Indore have introduced
online sanction for building plans and for issuing completion certificates, which is likely to
reduce the approval time. Similar measures by other development authorities are needed.

2.5.7 Some Business Services

IT and ITeS

The IT and IT enabled Services (ITeS) sector are giving India the image of a young and resilient
global knowledge power. The IT-ITeS industry has four major sub-components: IT services,
business process outsourcing (BPO), engineering services and research and development (R&D),
and software products. As per the estimates of NASSCOM, India’s IT and BPO sector (excluding
hardware) revenues were US$ 87.6 billion in 2011-12, generating direct employment for nearly
2.8 million persons and indirect employment of around 8.9 million. As a proportion of national
GDP, IT and ITeS sector revenues have grown from 1.2 per cent in 1997-98 to an estimated 7.5 per
cent in 2011-12. Software exports in 2011-12 are estimated at US$69 billion compared to US$59
billion in 2010-11. While exports continue to dominate the IT-ITeS industry and constitute about
78.4 per cent of total industry revenue, the CAGR of the domestic sector has also been high at
12.8 per cent compared to the 14.2 per cent for exports during the Eleventh Five Year Plan period.
The growth rate of the domestic sector in 2010-11 was 20.6 per cent as compared to 18.8 per cent
for the export sector; in 2011-12 it was 9.7 per cent for domestic sector and 16.4 per cent for export
sector. In 2012-13, as per NASSCOM estimates, export revenues are expected to grow by 11-14
per cent and domestic revenues by 13-16 per cent. These estimates are a pointer to the possibilities
of making further forays into the untapped domestic sector for IT and ITeS (Table 2.8). Consistent
demand from the US, which increased its share in total exports of India’s IT and ITeS services
from 61.5 per cent to 62 per cent, characterized 2011-12.
Emerging markets of Asia Pacific and the rest of the world also contributed to overall growth.
While the industry’s vertical market mix is well balanced across several mature and emerging
sectors, there was broad-based demand not only across traditional segments such as Banking,
Financial Services, and Insurance (BFSI), but also new emerging verticals of retail, health care,
media, and utilities. Sub-sector-wise in 2011-12, as per the provisional estimates of NASSCOM,
in the export sector, IT services were the major component with a 58 per cent share and CAGR of
15.7 per cent for the Eleventh Plan period; followed by BPO with a 23.1 per cent share and 12.5
per cent CAGR; and software products/engineering with a 18.9 per cent share and 11.8 per cent
CAGR. Indian IT service offerings have evolved from application development and maintenance
to emerge as full service players providing testing and infrastructure services, consulting and
system integration. The year also witnessed the next phase of BPO-sector evolution, characterised
by greater breadth and depth of services, process re-engineering across the value chain, increased
delivery of analytics and knowledge-based services through platforms, strong domestic market
focus, and Small and Medium-sized Business (SMB) centric delivery models. In the engineering
design and products development segments, there was increasing use of electronics, adoption of

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