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Rebooting Service Sector for real Atmanirbhar Bharat

The rise in digital economy; a large pool of skilled manpower and rapidly increasing work force migrating from agriculture and other sectors to services; young population make it a perfect setting to catapult India into being a global service destination.

Photo Credit : Reuters

Service sector is dominant in India in terms of its contribution to the GDP. A key driver of economic growth in India, this sector contributed to 55.39% of India’s GVA (Gross Value Added) at the current price in FY20. GVA of the service sector grew at a CAGR of 1.45%  in the period 2016-20. As per the RBI data, exports from service sector stood at US$ 17.06 billion in April 2020. A good start, but a lot more need to be done. The Atma Nirbhar Bharat Abhiyan can get wind on its sail with an equal thrust on service excellence. 

The ‘Make in India’ scheme was launched in 2014 to boost Indian manufacturing sector. The objective was to convert India into a manufacturing hub. It aimed at creating 100 million new jobs by 2025 and increasing the share of manufacturing to 25% of GDP. But, even after six years of its launch, the scheme made little impact on the economy. On the backdrop of Covid pandemic, the announcement of ‘Atma Nirbhar Bharat Abhiyan’ in 2020, seeks to eliminate some of the anomalies and focus its attention on a few labour intensive industries in manufacturing sector, like Electronics, Pharmaceuticals, and Defence, exploring import substitution in addition to improving export earnings. As per OECD-WTO Trade in Value Added ( TiVA) database, 50% of world exports come from the service sector. Progressive incorporation of foreign value added component from the service sector in manufacturing goods meant for export, add competitiveness to the manufacturing sector. With the Covid induced zero touch paradigm; integration of product, service and technology, it’s now time to turn the leaf to a new mission: winning through service excellence. 

India followed a  model of development which is unique in nature. Decline in contribution of the agricultural sector to the GDP was picked up by the service sector and not the manufacturing sector. India’s growth story has been different from the rest of the fast growing developing nations because of the role played by service sector. Having missed the manufacturing bus once and leaving the space to China that went on to become the global manufacturing hub, can India now afford to miss the services bus? Rise of exponential technology pivots us to a new paradigm that sees gradual integration of product and service; new business rules like resource sharing, platform business; and a move towards an experience economy, with knowledge and service excellence replacing traditional levers of competitive advantage. It’s time now to take a fresh look at how India can become a global service destination riding the technology led disruptions in the new age.  

Acknowledged as the export hub for software services, Indian IT outsourcing service market is expected to witness a growth of 6-8% in 2021-24. Being the largest recipient of FDI in India, service sector witnessed an inflow of US$ 83.14 Billion between 2000-2020. However, the service sector has contracted for five consecutive months since March 2020 as per HS Markit India Services Index reports. Most of the service sectors like aviation, hospitality, tourism have been badly affected due to the pandemic. Having understood the importance of growth in the service sector, the Government of India provided incentives to a number of sectors like Banking, Heath, Information Technology among others. In September 2020 the Government announced its intention to infuse Rs 200 billion to the public sectors banks. It will be done through recapitalisation of bonds. Contribution of digital economy is expected to be 20% of GDP in the next five years. Broadband access is expected to be provided to all villages by 2022. National Digital Health Mission (NDMH) will be providing unique health ID to all the Indians. This will revolutionise the healthcare system in the country by making health accessible to everyone. Goods and Services Tax (GST) has been able to create a common national market. Availability of GST input credit will reduce the cost in the long run. This will result in reduction in prices of services.

These are all encouraging, but not enough. To attain an exponential growth in service sector, one needs to look beyond just the traditional sectors, and tap into digital economy led opportunities, and exporting services beyond Information Technology.  Post Covid, in the new normal, India’s digital economy itself is estimated to reach US$ 1 trillion by 2025. Are we ready? Does India Inc enjoy the credibility as a world class service provider?

By its inherent nature, service has unique characteristics as opposed to goods. It’s intangible, cannot be easily patented or communicated. It’s also heterogenous in nature, meaning the same level of service will be experienced differently by different consumers. Service Excellence does not mean only exceeding the expectations of customers. It mainly deals with delivering what has been promised and addressing all problems and queries. India has to earn the credibility of being a service delivery power house. While it has scaled the bar in software industry, other segments of service sector must follow it through. For this, India Inc must work on developing a service excellence benchmark along the lines of the American Customer Satisfaction Index (ACSI). There is a need and an opportunity in India towards achieving service excellence of global standard.

Perhaps it is now time for India to bring all stakeholders together to build a consensus on drafting a comprehensive policy intervention for an exponential growth in service sector and build credibility through achieving service excellence benchmark. The rise in digital economy; a large pool of skilled manpower and rapidly increasing work force migrating from agriculture and other sectors to services; young population make it a perfect setting to catapult India into being a global service destination.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Dr. Asit Barma

Professor and Chairperson- Marketing Area, JAGSOM (formerly known as IFIM)

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Dr. Sangita Dutta Gupta

Associate Professor-Economics, Chairperson-Centre for Research, JAGSOM

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