The services sector has been at the forefront of the rapid growth of the Indian economy, contributing nearly 63 per cent of the GDP in 2007-08. The sector has come to play an increasingly dominant role in the economy accounting for 59.6 per cent of the overall average growth in GDP in the last eight years between 2000-01 and 2007-08.

As per the Central Statistical Organisation, the services sector has continued to grow in the second quarter of 2009-10.

• Trade, hotels, transport and communication grew 8.5 per cent in July-September 2009 from a year earlier.
• Financing, insurance, real estate and business services grew at 7.7 per cent in July-September, 2009 from a year earlier.
• Community, social and personal services grew at 12.7 per cent in July-September, 2009 from a year earlier.

Indicators

Lead indicators suggest that the pace of expansion in the services sector activity is likely to be sustained even in the next financial year.

• Foreign tourist arrivals (FTAs) during calendar year 2009 were 5.10 million.
• Railways freight traffic increased to 833.03 million tonnes during fiscal 2008-09 from 794.21 million tonnes carried during 2007-08, an increase of 4.89 per cent.
• The number of telecom subscribers in the country increased to 562.21 million in December 2009, an increase of 3.5 per cent from 543.20 million in November 2009. With this the overall tele-density (telephones per 100 people) has touched 47.89.
• Cargo handled at major ports during April–December 2009 2010 has been 411.95 million tones as against 391.82 million tonnes in the corresponding period in the previous fiscal.

The prospects for growth in the Indian services sector continues to be robust, according to a survey by KPMG, conducted across the BRIC (Brazil, Russia, India and China) countries in the spring of 2009. The survey revealed that 31.3 per cent of Indian companies saw their activity levels improving. Around 37 per cent forecast new order growth in one year’s time, compared with 16 per cent that anticipated a fall. Even capital expenditure at Indian services firms is anticipated to rise, with 43 per cent of companies saying they plan to increase spending on fixed assets.

According to a HSBC survey, business activity among Indian services companies expanded at its fastest pace in 16 months in January 2010, rising for a second straight month on a sharp increase in new work orders.

The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 58.96 in January 2010, its highest since September 2008. (A reading above 50 represents expansion while anything below points to a contraction.)