SERVICE SECTOR AND

ECONOMIC GROWTH

By-
Shashwati Pawar
SERVICE SECTOR
The service sector is also called the tertiary sector.
The basic characteristic of this sector is the
production of services instead of end products.
Service sector produces the products which are know
as services.
SERVICES
A service is an act of performance that one party
can offer to another that is essentially intangible and
does not result in the ownership of anything. Its
production may or may not be tied to a physical
product.
-Philip Kotler
In simple words, Service is an economic activity that
is tangible, cannot be stored and does not result in
ownership. Services are consumed at the point of
sales.
CHARACTERISTICS OF SERVICES
Intangible - It cannot be touched.
Inseparability - Services cannot be separated from the
service providers.
Heterogeneity A service is one-time generated,
rendered and consumed and can never be exactly
repeated.
Perish ability Once a service is consumed then it
cannot be consumed again.
 Financial services
Banking
SERVICE INDUSTRY Insurance
Telecommunication Investment management
Hospitality industry/Tourism FMCG
Mass media Professional services
Healthcare/hospitals Accountancy
Public health Legal services
Information technology Management consulting
Wholesale and Trade Consulting
Transportation Retail sales
Education Real estate
Government services
 ECONOMIC GROWTH
Economic growth is the increase in the market value of the
goods and services produced by an economy over time. It is
conventionally measured as the percent rate of increase
in real gross domestic product.
GDP refers to Gross domestic product , it is the market value of
all officially recognized final goods and services produced within
a country in a given period of time, generally a year. GDP per
capita is often considered as an indicator of countrys standard of
living.
bution to thetotal
SERVICE SECTOR IN
ent would only be
INDIA
Services sector in future providing about 70 per cent of the new job

hus, given the

opportunities in the economy

New employment possibilities in the services sector are

construction, trade, transport, storage, financial services,

s emergingfrom
communication and personal services

Employment in manufacturing would also expand, but its

contribution to the total increase in employment would only be

heemployment
around 17 per cent.

oral levels, it may

HISTORY OF SERVICE SECTOR IN
INDIA
The services sector has played a vital role in the acceleration
of economic growth.
Growth in services picked up in the 1980s and accelerated in
the 1990s. Since then, it has become a dominant contributor to
economic growth.
The share of services in Indias GDP increased from 33.5 per
cent in 1950-1 to 56.5 per cent in 2011-12.
CONTRIBUTION OF SECTORS OF
ECONOMY
SERVICE SECTOR IN INDIA
India is among the top 15 countries with highest
overall GDP in 2011, India ranked 9th in overall GDP
and 10th in services GDP.
Service sector has a share of 57 per cent in the gross
domestic product (GDP) in 2011-2012.
Services sector has been increased by 9.1 per cent.
SERVICE SECTOR IN INDIA
If construction is also included, the service sectors
share increases to 64.4 per cent in 2011-12.
Trade, hotels, and restaurants is the largest
contributor to GDP with an 18 per cent share.
Followed by financing, insurance, real estate, and
business services with a 16.6 per cent share.
Community, social, and personal services (including
salons, spa) with a share of 14.0 per cent is in third
place.
WHERE IS SERVICE-SECTOR GROWTH
CONCENTRATED?
The three groups of services are :
Group I - Traditional services retail and wholesale trade, transport and
storage, public administration and defense which tend to be slow
growing in the sense that their share in GDP has fallen in more advanced
countries.
Group II is a hybrid of traditional and modern services consumed mainly
by households education, health and social work, hotels and restaurants,
and other community, social and personal services whose share in GDP
has risen in step with per capita income.
Group III is made up of modern services financial intermediation,
computer services, business services, communications, and legal and
technical services.
Productivity growth has been highest in Group III.
 REASONS FOR GROWTH OF SERVICE
SECTOR
Both demand and supply factors have led to the growth of service sector.
On the demand side, the high growth of services output was mostly attributed to
factors such as increasing input usage of services by other sectors, mainly
manufacturing sector (i.e. higher domestic demand); higher foreign demand due
to trade demand); liberalization; and high income elasticity for services.
On the supply side, the increased trade in services following trade liberalization
policies and other reforms in 1990s induced this growth.
Economic affluence
Changing role of women
Cultural changes
Conservation of natural resources
Development of markets
Increased consciousness of health care.
CONCLUSION
Finally to conclude that, the service sector is very
important for India, as it is contributing half of the GDP
growth in the Indian economy. Employment is increasing
due to development of service sector. There is a very good
scope to improve further in the services provided by the
companies and government. As India is developing very
fastly there is a need for change in the quality and also the
speediness of the services