India has the second fastest growing services sector with its compound annual growth rate at nine per cent, just below China’s 10.9 per cent, during the last 11-year period from 2001 to 2012, the Economic Survey for 2013-14 said. Russia at 5.4 per cent is a distant third.

Among the world's top 15 countries in terms of GDP, India ranked 10th in terms of overall GDP and 12th in terms of services GDP in 2012, it said, adding that services share in world GDP was 65.9 per cent but its share in employment was only 44 per cent in 2012.

As per the survey, in India, the growth of services-sector GDP has been higher than that of overall GDP between the period FY2001- FY2014. Services constitute a major portion of India’s GDP with a 57 per cent share in GDP at factor cost (at current prices) in 2013-14, an increase of 6 percentage points over 2000-01.

“Despite deceleration, services GDP growth at 6.8 per cent was above the 4.7 per cent overall GDP growth in 2013-14,” it said.

In fact the growth rate of 6.8 per cent for the sector is marginally lower than in 2012-13. “This is due to deceleration in the growth rate of the combined category of trade, hotels, and restaurants and transport, storage, and communications to 3 per cent from 5.1 per cent in 2012-13,” the survey said.

On the other hand, robust growth was seen in financing, insurance, real estate, and business services at 12.9 per cent.

FDI inflows to the services sector (top five sectors including construction) declined sharply by 37.6 per cent to USD 6.4 billion compared to an overall growth in FDI inflows at 6.1 per cent.

India’s share in world services exports, which increased from 0.6 per cent in 1990 to 1.1 per cent in 2000 and further to 3.3 per cent in 2013, has been increasing faster than its share in world merchandise exports, according to the survey.

While exports of software services, accounting for 46 per cent of India’s total services exports, decelerated to 5.4 per cent in 2013-14 from 5.9 per cent in 2012-13, travel, accounting for a nearly 12 per cent share, witnessed negative growth of 0.4 per cent.

However, moving in tandem with global exports of financial services, India’s exports of financial services registered a high growth of 34.4 per cent in 2013-14.

The survey, tabled in the Parliament on Wednesday, said the immediate challenge in services sector is revival of growth.

“While this could be achieved through reforms and speeding up of the policy decision making, a targeted approach with focus on big ticket services could lead to a rebounding of services-sector growth for India,” it stated.

The survey highlighted that some services like software and telecom were big ticket items that gave India a brand image in services. While further focus on these services is needed to retain and further our lead, the time has come to focus on some other high potential big ticket items (such as Tourism and hospitality sector, Ports services and Railways) that have high manufacturing-sector and employment linkages.

Commenting on the outlook of services sector, which was growing at a steady rate of over 10 per cent since 2005-06, has shown subdued performance in the last three years, the survey said the year 2014-15 seems to augur well for the services sector with expansion in business activity in India.

There are also signs of revival in growth of the aviation sector with the announcement of new players like Air Asia and Tata-SIA Airline after a turbulent period of withdrawals and losses by some airlines. There are also indications of revival in world GDP that could help in revival of the tourism and shipping sectors.

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