Wednesday, August 14, 2013

Importance of various Service Sectors in the Indian Economy



The Services Sector inter-alia includes sub-sectors like Trade; Hotels and Restaurants; Transport; Storage & warehousing; Communication; Banking and Insurance; Real Estate; Business services; Public administration and defence; Social and personal services; and Other services including Education, Medical and Health, Religious and Other Community Services, Legal Services, Recreation and Entertainment Services.
The service sector in Indian Economy is contributing more than half to its entire GDP in a year.  Here below we present the share of GDP at constant (2004-05) prices for the various sectors/ sub-sectors for the year 1950-51, 2004-05 (Base Year) and for latest available years 2011-12 (First Revised Estimates i.e. based on current available data) in total GDP of the economy.

Table 1
Sectors
Share of GDP at (2004-05) Prices



(%)
    
1950-51
2004-05
2011-12


RE




6.  trade, hotels & restaurant
8.4
16.1
16.9
     6.1 trade
7.8
14.6
15.5
     6.2 hotels & restaurants
0.6
1.5
1.4
7. transport,storage & communication
2.6
8.4
10.6
     7.1 railways
1.2
1.0
1.0
     7.2 transport by other means
1.7
5.7
5.6
     7.3 storage
0.1
0.1
0.1
     7.4 communication
0.1
1.7
4.0
8. financing,ins.,real estate & bus servs
8.3
14.7
18.1
     8.1 banking & insurance
1.0
5.8
8.8
     8.2 real estate, Ownership of dwellings
7.5
9.0
9.3
9.  community, social & pers. servs
10.2
13.8
12.8
     9.1 Public administration & defence
2.8
5.9
5.7
     9.2 Other Services
7.8
8.0
7.2
GDP of All Service Sectors
29.5
53.0
58.4
GDP of All Sectors
100
100
100

Table 2
Sectors
Percent Share of Service Sub Sectors to All Service Sectors GDP at (2004-05) Prices



(%)
    
1950-51
2004-05
2011-12


RE




6.  trade, hotels & restaurant
28.4
30.3
28.9
     6.1 trade
26.4
27.5
26.5
     6.2 hotels & restaurants
2.1
2.7
2.4
7. transport,storage & communication
8.9
15.9
18.2
     7.1 railways
3.9
1.9
1.7
     7.2 transport by other means
5.8
10.8
9.5
     7.3 storage
0.3
0.1
0.1
     7.4 communication
0.5
3.1
6.9
8. financing,ins.,real estate & bus servs
28.2
27.7
31.0
     8.1 banking & insurance
3.3
10.9
15.0
     8.2 real est, O'ship of dwellings
25.4
16.9
16.0
9.  community, social & pers. servs
34.5
26.1
22.0
     9.1 Public administration & defence
9.5
11.1
9.7
     9.2 Other Services
26.3
15.0
12.3
GDP of All Service Sectors
100.0
100.0
100.0

The Service Sector constitutes a large part of the Indian economy both in terms of employment potential and its contribution to national income now. Its share is around sixty percent in the whole economy and has risen from the share of round thirty percent i.e. its share has doubled since 1950-51. Question naturally comes to mind regarding its sub-sectors.  Are every service sector gaining importance?  Relatively, at the overall GDP level, it can be seen from the data that almost all service – sub-sectors have got increase in its share in GDP except for the services like Railways, storage and other services have lost their share since 1950-51.  But the share reduction is negligible in case of railways and storage.

Within service sectors, trade sector was holding rank one and has maintained its rank as it maintained its share of over one quarter of the total all services’ GDP.  Over the years, the real estate & business services sector has lost its share from 25.4% to 16% and ‘other services’ collectively lost from 26.3% to 12.3%.  Probably the transfer of the share is to the sectors like Banking & Insurance (as its share has increased from 3.3% to 15%), Transport by other means (share is now 9.5% from 5.8% in 1950-51) and Communication (its share is now 6.9% from just 0.5% in 1950-51).   The service sub-sectors of public administration and defence, Hotels and Restaurants etc. have been maintaining their shares within the broad service sector.  The share of railways has been lost from about 4% to just 1.7%.  Out of various sub-sectors of service sector, it is mainly real estate & business services, railways, storage and other services (small ones) collectively which are losing their traditional shine.  Within services, it is mainly banking & insurance and communication followed by transport by other means who at present mainly gaining the importance in the economy.  Trade services are the ones who are maintaining higher level of their importance in the economy. 

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