Recovery rests on global factors

Services sector growth is expected to recover over the coming months, projects the survey, but only if the global economic situation does not worsen.

A targeted approach has been prescribed for reviving growth, by identifying "big-ticket" items. The sector's growth fell to 6.6 per cent in 2012-13, shows the government's advanced estimates, compared against a growth of 8.2 per cent in the previous year.

Retailing, construction and telecom would perform better, triggered by some reforms and a mild relaxation in monetary and credit policy, it says. Growth in tourism and hotels, however, could remain moderate.

It has named several international chains to drive home the point that foreign direct investment in retailing is a positive for the economy. The food and beverages segment is seeing increased activity from foreign players, it says. The cash-and-carry or wholesale category is growing fast, "with significant expansion planned from Bharti Walmart, Metro Group and Carrefour". Also, Zara, Marks & Spencer and Mango are actively looking for locations to open more stores.

In real estate, India ranks 182nd in construction permission processes, the survey says, citing a World Bank report. "There are 34 procedures and the average time taken is 196 days, which increases the sale value by 40 per cent." The Survey points at procedural delays, along with rapid increase in land prices, absence of long-term funding, low floor to area ratio permitted in cities, high stamp duties and a dearth of affordable housing as issues needing to be addressed. Some of these might find a place in tomorrow's Budget.

  The Survey suggests greater emphasis on super-speciality healthcare as an area with promise. Telemedicine is another.

 

"Tourism is a big-ticket item, which can not only lead to higher growth but also more inclusive growth." With world tourist arrivals expected to increase by 43 million every year, a gold mine of opportunity in tourism is waiting for India, it says. India has a share of just 0.64 per cent in world tourist arrivals.

Indian tourism must go for an image change, along with higher investment in infrastructure through private-public partnerships. User charges could be levied if tourist sites are developed by the private sector or through PPP. Also, there is a need to address issues such as the high luxury taxes on hotels by states. "Refunding VAT (value added tax) as done in Thailand and Singapore can also help the tourism sector," it says.

The share of services (including construction) in gross domestic product in 2012-13, shows the Advance Estimates, is 64.8 per cent.