Attributes the reason for rapid growth of service sector in the global as well as Indian Context?

Attributes the reason for rapid growth of service sector in the global as well as Indian Contract?

Ans.    The segment of the economy that provides services to the customer is called ‘service industry’ or ‘tertiary , industry’

            Service sector is the new backbone of the economic growth of any country. It is today the prime and most rapidly growing sector globally. It contributes more to the global output and employs more people than any other sector.

In India, the last decade has witnessed a boom in the service industry encompassing diverse industries such as banking, hospitality, education, travel and tourism etc.

As per the Central Statistical Organization (CSO). Ministry of Statistics and Programme Implementation :

• Trade, hotels, transport and communication grew 12.4 per cent in Jan-March 2010 over the corresponding quarter from a year earlier
• Financing, insurance, real estate and business services grew at 7.9 per cent in the fourth-quarter of 2009-10
• Community, social & personal services grew by 1.6 per cent in the fourth quarter

Let’s now look at some of the reasons of growth of the service sector :

(a)     Paradigm shift : Customer is the king- Service sector is directly concerned with customer satisfaction and retention. So it is important to give the best quality to the customers to differentiate one company from the other. Now companies strive to give their best because they want to make their better services their USP.

(b)     Move from agro based to service based economy : The structural revolution of the Indian economy in the new millennium has been in favour of a service-dominated economy from an agrarian one, thereby increasing the share of the services sector in the total GDP.

(c)     Significant focus in the five year plans : From the first five year plan in 1951-56 to the tenth five year plan 2002-07, development and promotion of sectors like transportation, IT, telecommunications, has received maximum chunk of the budgetary allocation. Considering the revenue generated and contributions made by these sectors to the GDP, the government has made noteworthy provision for them in the national  financial planning.

(d)     According to Adrian Payne, four factors are responsible for the growth of the service sector :

1.      Demographic changes : Increased population. rise in income and greater life expectancy form the demographic pool of India. This leads to an increase in demand of services not just at. the faster rate but that of a premium quality. For e.g.: Need for new residential places, nursing homes, transport facilities etc.

2.      Social changes : The preferences and lifestyle of the people has undergone a significant change in the past decade. Larger women workforce, DINKs (double income no kids), international vacations, mall culture, nuclear families are some of the newer trends that mark the social changes in urban India. The new India is willing to pay for their increased dependency on services that makes life easy to live. There is a wide of variety of services available in market for the same need. that’s why the rate of switching over from one service to another is very high.

3.      Economic changes : India is a big business market and a commercial hub to many local and foreign companies. With the availability of a vast talent pool and increased specialization, new avenues have flourished in the service sector.

4.      Political and legal changes : India has a stable political scenario and the one that favors the growth of the service sector. Steps initiated by Mr. Rajiv Gandhi, Dr. Manmohan Singh have provided a momentum for a major boost of the role of the service industry and a greater integration on India’s economy into the world markets.

5.      Technology & IT : The IT boom has placed India on the world map. It has paved way for new ways of doing business, communication and research.