Service sector in Indian scenario

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indian scenario of service sector

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Service sector in Indian Scenario:

Service sector in Indian Scenario

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The service sector is also assuming increasing importance in the indian economy. Consider the following headlines , which have appeared in some of the leading magazines and newspapers recently.

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The share of Agriculture sector , which constituted over 50% of GDP in 1960s , has now come down to around 24% in 2005-2006. There has been substantial increase in the manufacturing sector but the bulk of transformation has been in the service sector. The weight age of service sector is an indication that in future , India’s GDP growth will be influenced considerably by the service sector.

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According to a report of the IMF , the service sector in india has consistently outperformed the rest of the economy in recent years , and by a wide margin, since the 1980s in response to the reform programmes undertaken and since 1991 in response to the various liberalization and stabilization measures.

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The service sector dominates the indian economy today , contributing more than half of our national income. It is also the fastest growing sector , with an annual growth rate of 8% per year.

(India Today , Feb.19.2001):

(India Today , Feb.19.2001) An India today-ORG-MARL poll showed that a majority of middle-class families want their children to work in the service sector. With best jobs, best incomes & best talents, the service sector is now the showcase of the indian economy.

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Moreover, Technological advances have made it possible for india to compete on a global basis in areas such as software development & information services (some of the other potential areas for india include Accountancy , Hotels & Restaurants , Education & banking , Insurance , Real estate , Railways , other transport & storage , community services , Business services , etc…

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Reduced restrictions on PRIVATE SECTOR involvement have also played an important role in the growth of this sector as a result of which the real annual growth rates in services have generally outperformed the overall GDP growth rates & the trend is likely to continue in future.

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The Growing importance of service sector in india has also been acknowledged by the STOCK MARKETS . From Aug 15,1996, bombay stock exchange (BSE) has given the service sector a dominant place in the revised 30 share index .

The sensex 30 list:

The sensex 30 list

(Business Today , Sept.7.1996):

(Business Today , Sept.7.1996) In a survey of top 500 firms by Business Today, the industy wise analysis shows that the net profit margins have been highest for Hotels , Info-tech & Financial services. All three belonging to Service sector.

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Though Service sector is India’s number one sector contributing more than 40% of the GDP , yet it contributes less than 1% of the gross tax structure. Services are products as much as manufactured goods, hence it is proposed to extend the service tax to cover a number of well-known services, like :

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Transportation of goods by road. Consulting Engineers. Custom houses, steamer & clearing & forwarding agents. Air travel agents, Tour operators & car rental agencies. Outdoor caterers, pandal contractors & man dap keepers. Manpower recruitment agencies.

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Service tax is fast turning out to be an important tool of revenue collection for the central government. The directorate of service tax, which began with a modest collection of Rs 410 crores in 1994-95 , experts to mop up nearly Rs 5,000 crore in 2001-02, twice the amount collected in 2001-02.

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Interestingly 83% of the total Revenue is contributed by only 5 sectors. Telecom services. (51%) Insurance. Advertising agencies. Courier services. Stock brokers.

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The Export Import policy of 1997 , on the other hand , has extended certain benefits to service sector , which were earlier available only to manufacturing sector. One of the significant provisions included is to extend the ZERO DUTY Export Promotion Capital Goods (EPCG) concessions to the service industy including Hospitals , Air cargo , Hotels land tourism services.

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The higher growth of employment in service sector is partly because with the growth of economy and technological developments. A smaller proportion of work force is needed by the manufacturing sector. Whereas the total employment in the organized sector in the last 25 years has increased by around 57% , the increase in employment in service sector in the corresponding period has been 70%.

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With the changing pattern of indian economy , a shift in employment pattern is bound to happen. The demand for specialized services & professionals like Bankers , Accountants & Lawyers are bound to increase .

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BY: HATIM RAMPURWALA.

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