Services Sector (IT, Telecom, Tourism)
The services sector is the largest and fastest growing part of the Indian economy and is the main engine of its growth in recent decades. It covers a very wide range of activities, including information technology, telecommunications, tourism, banking, trade, transport and professional services. This topic is important for examinations because it explains the structural shift of the Indian economy from agriculture to services, the rise of the IT and IT-enabled services industry, the telecom revolution, and the role of tourism in jobs and foreign exchange. These notes cover the contribution of services to output, employment, exports and investment, the leading companies and institutions, and the major government programmes in each of the three focus areas.
Importance of the services sector
The services sector contributes about fifty-five per cent of India's gross domestic product, making it by far the largest sector of the economy. In contrast, it contributes only about thirty per cent of total employment, which shows that the sector is highly productive but not yet a mass employer in the way agriculture still is. Services account for about forty per cent of India's total exports and attract the largest share of foreign direct investment inflows into the country. The growth of services has allowed India to grow rapidly without waiting for a full-scale manufacturing transition, a pattern sometimes described as services-led growth. Because services often require skilled labour, this growth has also created a large demand for higher education and technical skills.
Information technology and IT-enabled services
The information technology and business process management industry contributes about seven to eight per cent of India's gross domestic product and is one of the country's most successful global industries. The National Association of Software and Service Companies, or NASSCOM, established in 1988, is the main industry body representing the sector. Tata Consultancy Services, founded in 1968, is India's largest information technology company by revenue. Infosys was founded in 1981 by N. R. Narayana Murthy and six other colleagues, while Wipro was founded in 1945 and later built into a leading information technology firm by Azim Premji. Bengaluru is known as the Silicon Valley of India, and Hyderabad, Pune and the National Capital Region are also major information technology and startup hubs. India is the world's largest outsourcing destination and among the top exporters of information technology services. A global capability centre, or GCC, is an offshore centre set up by a multinational company in India to carry out information technology, engineering and business services, and more than fifteen hundred such centres operate in the country. IT-enabled services, or ITES, include services such as business process outsourcing.
Telecommunications
The telecommunications sector has been transformed by policy reform and by the entry of new private players. The first National Telecom Policy was announced in 1994, setting the stage for wider private participation. The Telecom Regulatory Authority of India, or TRAI, was established in 1997 as the sector regulator. India now has over one point one billion telecom subscribers, making it one of the largest telecom markets in the world. Reliance Jio was launched for the public on 5 September 2016 by the Mukesh Ambani-led Reliance Industries, and it has the largest subscriber base in India. Its entry brought affordable 4G data, massive internet adoption and a digital revolution in Indian telecom. BharatNet is a government project to provide broadband connectivity to all gram panchayats and rural areas, and Digital India is a flagship programme launched on 1 July 2015 to transform India into a digitally empowered society and knowledge economy. The programme is implemented by the Ministry of Electronics and Information Technology, or MeitY.
Tourism
Tourism contributes roughly seven per cent of India's gross domestic product, with estimates varying between about five and nine per cent when the indirect impact is included. It supports about four crore jobs in the country and is one of India's leading sources of foreign exchange earnings. The Union Ministry of Tourism was created as a separate ministry in 1967. The Incredible India campaign was launched by the Ministry of Tourism in 2002 to promote the country as a tourist destination, and the Atithi Devo Bhava campaign was launched in 2010 to promote hospitality towards tourists. The Swadesh Darshan scheme was launched in 2014-15 for the development of theme-based tourism circuits. Tourism has strong links with transport, handicrafts, hospitality and local livelihoods, which makes it an important tool for inclusive growth.
International framework and trade in services
Trade in services at the global level is governed by the General Agreement on Trade in Services, or GATS, a treaty concluded in 1995 and administered by the World Trade Organization. GATS provides the framework through which countries liberalise trade in services across modes such as cross-border supply, consumption abroad, commercial presence and the movement of natural persons. For India, the agreement is significant because the country is a major exporter of services and has an interest in easier movement of skilled professionals across borders.
Key facts at a glance
- Services contribute about 55 per cent of India's GDP.
- Services contribute about 30 per cent of total employment.
- Services account for about 40 per cent of India's exports.
- The services sector attracts the largest share of FDI inflows.
- GATS is a WTO treaty concluded in 1995.
- NASSCOM was established in 1988.
- TCS was founded in 1968 and is India's largest IT company by revenue.
- Infosys was founded in 1981 by N. R. Narayana Murthy and six colleagues.
- Wipro was founded in 1945 and built up by Azim Premji.
- The IT-BPM industry contributes about 7 to 8 per cent of GDP.
- Bengaluru is called the Silicon Valley of India.
- Reliance Jio was launched for the public on 5 September 2016.
- India has over 1.1 billion telecom subscribers.
- Jio has the largest subscriber base in India.
- TRAI was established in 1997; the first National Telecom Policy came in 1994.
- Digital India was launched on 1 July 2015 and is implemented by MeitY.
- BharatNet aims to connect all gram panchayats with broadband.
- Tourism contributes roughly 7 per cent of GDP and supports about 4 crore jobs.
- Ministry of Tourism became a separate ministry in 1967.
- Incredible India was launched in 2002; Atithi Devo Bhava in 2010.
- Swadesh Darshan was launched in 2014-15.
Quick revision points
- Services lead in output and FDI, but not yet in employment.
- IT-BPM is the flagship services export industry.
- Jio's 2016 entry triggered the data revolution.
- TRAI regulates telecom; GATS governs global trade in services.
- Tourism is a major source of foreign exchange and jobs.
How to prepare this topic
- Memorise the share of services in GDP, employment and exports.
- Learn the founding years of NASSCOM, TCS, Infosys and Wipro.
- Remember the launch dates of Jio, Digital India and the tourism campaigns.
- Note the roles of TRAI, MeitY and BharatNet.
- Understand what GATS and a GCC are.
- Learn the tourism contribution figures and schemes.
Common exam traps
- Confusing the services share of GDP (about 55 per cent) with its share of employment (about 30 per cent).
- Mixing up the founding years of TCS, Infosys and Wipro.
- Getting the Jio launch date or Digital India launch date wrong.
- Confusing Incredible India with Atithi Devo Bhava.
- Attributing GATS to the wrong organisation; it is administered by the WTO.
- Mixing up TRAI's establishment year (1997) with the National Telecom Policy year (1994).
Frequently Asked Questions
What is the contribution of the services sector to India's economy?
The services sector contributes about fifty-five per cent of India's gross domestic product and about thirty per cent of total employment. It accounts for about forty per cent of total exports and attracts the largest share of foreign direct investment inflows into the country.
What is NASSCOM and when was it established?
NASSCOM stands for the National Association of Software and Service Companies. It was established in 1988 and is the main industry body representing India's information technology and business process management sector. It works with the government on policy and promotes the growth of the industry.
What was the significance of Reliance Jio's launch?
Reliance Jio was launched for the public on 5 September 2016 by the Mukesh Ambani-led Reliance Industries. It brought affordable 4G data, massive internet adoption and a digital revolution in Indian telecom, and it now has the largest subscriber base in India. Its entry sharply lowered data prices and expanded digital access.
What is GATS and who administers it?
GATS is the General Agreement on Trade in Services, a treaty concluded in 1995 that provides the framework for liberalising international trade in services. It is administered by the World Trade Organization. It is important for India because the country is a major exporter of services and benefits from easier movement of skilled professionals.
What are the major government campaigns and schemes for tourism?
The Incredible India campaign was launched by the Ministry of Tourism in 2002 to promote the country as a tourist destination. The Atithi Devo Bhava campaign was launched in 2010 to promote hospitality towards tourists. The Swadesh Darshan scheme was launched in 2014-15 for developing theme-based tourism circuits. Tourism contributes roughly seven per cent of GDP and supports about four crore jobs.