Hindu Editorial Analysis : 10-May-2024
A recent report by Goldman Sachs highlights India’s significant growth in the global services sector. This sector is now a cornerstone of the Indian economy, contributing to job creation, foreign investment, and overall economic development.
Importance and Progress
The services sector plays a crucial role in India’s Gross Domestic Product (GDP). Key points include:
- Dominance in GDP: The services sector accounted for 57% of the total Gross Value Added (GVA) in the first half of FY24.
- Foreign Direct Investment (FDI): It ranks first in attracting foreign investment, according to the Department for Promotion of Industry and Internal Trade (DPIIT).
- Export Contribution: India’s share in global services outflows rose from under 2% in 2005 to 4.6% in 2023.
- Cushioning Against Economic Shocks: The services trade boom has helped stabilize India’s external accounts against challenges like high oil prices.
Moreover, a thriving services sector enhances essential services such as education and healthcare, leading to an improved quality of life for citizens. It also fosters innovation and entrepreneurship, promoting economic diversification.
Factors Contributing to Growth
Several factors have fueled the growth of India’s services sector:
- Unique Skills: India has a competitive edge in knowledge-based services.
- Government Initiatives: Programs like Smart Cities, Clean India, and Digital India have supported this growth.
- Resilience During Crisis: The services sector remained strong during the Covid-19 pandemic, driven by increased demand for digital solutions.
Government Initiatives
Recognizing the importance of the services sector, the Indian government has launched several initiatives:
- Start-up India and Stand-up India: These programs aim to encourage entrepreneurship.
- Digital India: Focuses on transforming India into a digitally empowered society.
- Skill India and PM Jan Dhan Yojana: Aims at financial inclusion and skill development.
- Production-Linked Incentive (PLI): Boosts manufacturing in telecom and networking.
- PM Ayushman Bharat Health Infrastructure Mission: Strengthens healthcare networks.
Challenges
Despite the growth, the sector faces several challenges:
- Complex Regulations: Constantly evolving rules can create difficulties for businesses.
- Infrastructure Limitations: Inadequate logistics and transportation can hinder effective service delivery.
- Skills Gap: There is a lack of trained graduates ready for jobs, and an emerging skills mismatch needs addressing.
- Protectionist Tendencies: Some countries may impose restrictions that could affect India’s exports.
Why In News
A recent report by Goldman Sachs on global services highlights India’s impressive rise in this segment, showcasing its potential to become a major player on the world stage as demand for digital and knowledge-based services continues to grow.
MCQs about India’s Rise in the Global Services Sector
- What percentage of India’s total Gross Value Added (GVA) did the services sector account for in the first half of FY24?
A. 45%
B. 50%
C. 57%
D. 60%
- Which of the following initiatives aims to promote financial inclusion in India?
A. Digital India
B. Start-up India
C. PM Jan Dhan Yojana
D. Skill India
- What is one of the major challenges facing India’s services sector?
A. High demand for digital services
B. Complex and evolving regulations
C. Increased foreign investment
D. Growth of healthcare services
- How has India’s share in global services outflows changed from 2005 to 2023?
A. Increased from under 1% to 3%
B. Increased from under 2% to 4.6%
C. Decreased from 5% to 3%
D. Remained constant at 2%
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