The main author of the chapter on the services sector, brought out in the Economic Survey for the first time, has exuded confidence the tertiary sector would do better in the coming years, despite a slight moderation in its likely growth this financial year.
He prescribed that India should devise a strategy for exports of business (non-software) and financial services to put the sector on a sustained growth path.
He said current controversies in the telecom sector would not prevent the sector from growing. The sector would see a continued growth story with the government’s focus on financial inclusion relying on this sector of communication.
“Despite controversies, the telecom sector has done well. These controversies have not affected the sector per se. 3G services have been rolled by many players,” he said.
The survey said sales growth of the telecom industry saw just 2.2 per cent growth during 2009-10, but it turned around in the first half of this financial year.
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“During 2010-11 and 2011-12, sales are expected to rise by 11.4 per cent and 14.5 per cent respectively driven by an increase in the subscriber base and a deceleration in the fall of both, average revenue per user and the minutes of usage per user,” it said.
During April 2000-December 2010, the telecom sector has drawn $10,258 million of foreign direct investment (FDI), which is eight per cent of the total FDI received by India.
However, India would have to maintain its hold over competitiveness in information technology and telecom sectors, that will also give a boost to other goods and services, Prasad said. The telecom sector, in particular, required removal of multiplicity of taxes, he added.
Prasad attributed a likely fall in services sector growth this financial year to deceleration in mainly community, social and personal segment due to high base effect of the last two years on stimulus given by the government. India’s services sector is likely to post 9.6 per cent growth this financial year (advance estimates), compared to 10.1 per cent growth last year. Community, social and personal sector growth is likely to more than halve to 5.7 per cent from 11.8 per cent last financial year.
He said going forward, the services sector was going to pick up and the deceleration was not a cause for concern.
However, to keep the momentum going, efforts have to be made to make inroads into exports of many of services like financial services, he said. “We have not even looked at exports of financial services like insurance,” he added.
Besides, the survey also made a case for opening the retail sector for FDI in a phased manner, beginning with metros.
Prasad said each segment in the sector was a unique and there could not be one fit approach for all. “Strategies will have to be devised uniquely for each of these segments like tourism, shipping etc,” he added.
Services contribute over 55 per cent to India’s gross domestic product (GDP). If construction is also included in services, this sector chips in around 63 per cent to the GDP.
As such, the Economic Survey for 2010-11 has a separate chapter on services for the first time.