CMDR DHARWAD

organizedUGC sponsored A

TWO DAY NATIONAL SEMINAR

INDIAN ECONOMY: OPPORTUNITIES AND

CHALLENGES

SERVICE SECTOR LED ECONOMIC GROWTH IN INDIA:

A STUDY ON IT/ITES SECTOR

INTRODUCTION

• India has a kaleidoscopic variety and rich cultural heritage.

• Though it is considered as agrarian economy it has achieved vast growth in other sectors.

• Service sector forms a backbone of social & economic development of a nation.

Its growth rate has been higher than that of the agriculture and manufacturing sector

The share of services in India’s GDP at factor cost (at current prices) rose from 33.3 per cent (1950–1951) to 56.5 per cent in 2012–13, as per advance estimates.

During FY 2014–15, the sector is projected to grow at a healthy 5.6 per cent, according to National Council of Applied Economic Research (NCAER).

The service sector has emerged as the largest and fastest growing sectors in the world economy making higher contribution to the global output and employment

ECONOMIC LIBERLIZATION IN INDIA

Economic liberalization started way back in 1991. with goal of making the economy more market-oriented and expanding the role of the private and foreign investment.

Specific changes include the reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign investment.

High economic growth recorded by the country in the 1990s and 2000s.

PRE-LIBREALIZATION POLICIES:

Believed in the internal markets.Five-Year Plans of India resembled central

planning in the Soviet Union. Steel, mining, machine tools, water,

telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s.

Elaborate licenses, regulations and the accompanying red tape, commonly referred to as License Raj, were required to set up business in India between 1947 and 1990.

GROWTH RATE OF REAL GDP AND ITS MAIN SECTORS, 1951-52 TO 1987-88

1950-51/1959-60

1960-61/1969-70

1970-71/1979-80

1980-81/1987-88

2.7

1.6 1.82.1

6

5.3

4.6

6.9

44.3 4.5

6.3

3.63.2 3.4

4.9

PRIMARY SECTOR SECONDARY SECTORTERITIARY SECTOR GDP

IT/ITES SECTORA Star performer

It/ites can do for india, what automobile did for japan & oil for saudi arabia - Mckinsey & co.

Transforming India’s image from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a global player in providing world class technology solutions and business services.

STRUCTURE OF INDIAN IT INDUSTRY

IT/ITES SECTOR

VALUE PROPOSITION

COST ADVANTAG

E

QUALITY/MATURIT

Y OF PROCESS

EASE OF SCALABLITY

The impact of pre and post liberalization on GDP of India:

REAL GDP GROWTH

AGRICUTURE & ALLIED

INDUSTRY

MANUFACTURING

SERVICES

0 5 10 15 20 25 30 35 40

3.6

2.7

5.8

5.8

4.2

4

2.5

6.2

5.9

5.2

2.9

1.3

4.4

4.3

4

5.6

4.4

6.4

5.8

6.3

5.3

4

5.7

4.8

5.9

5.7

3.7

7

7.5

6.4

5.2

0.9

4.1

3.9

7.8

1950'S1960'S1970'S1980'S1990-911991/92-1996/971997/98-2002/03

A severe macroeconomic and balance of payment crisis in 1991, following to first gulf war and fall of Soviet Union led to the fear of lagging behind China in economic development led in 1978, forced the Indian policy makers to focus on new economic policies

The major share in GDP is of service from 1991 to 2003 i.e. because of the liberalization and changes in government regulations.

The Global Meltdown Of 2008-09 And Its Impact On Indian IT Sector:

THE DOMINO EFFECT

OVERALL GROWTH PERFORMANCE OF IT-BPM SECTOR

TOTAL IT -BPM SERVICE EXPORTS DOMESTIC

59.9

47.1

12.8

64

49.7

14.3

76.3

59

17.3

87.7

68.8

19

95.2

75.8

19.3

VALUE IN USD BILLION

2008-09 2009-10 2010-11 2011-12 2012-13E

Estimated decelerated growth in 2012-13 of 8.4% as compared to 2011-12 of 15%.

TOTAL IT-BPM SECTOR0%

5%

10%

15%15% 8.40%

GROWTH RATE

2011-122012-13E

IT/ITES GROWTH PROSPECTS :Growth in global IT spending

Emergence of Disruptive technologies such as cloud, mobility, analytics, social media, and flexible

product portfolios are reshaping the Indian IT industry. these new disruptive technologies and their

applications could have a global economic impact of USD14–33 trillion in 2025.

Growth in markets beyond the US and EU.Growth in government investments

CHALLENGES

High attrition Weaker infrastructure Competition from other low-cost countries US Immigration Bill and EU Data Protection

Bill

It was after the liberalization in 1991 and the new wave of globalization that India was able to make its mark in global market and it was IT/ITES sector which played a pivotal role.

India’s nature to manage its savings, which helped it to be unaffected. India’s trade surplus with the US was healthy and India’s export to US was only 3% of GDP. Hence the effect was not that drastic.

Even though there has been slow down in economy and GDP rate has been fluctuating, major share in the Indian economic growth still remains from the service sector

CONCLUSION

As the new scenario unfolds, it is getting clear that the future growth of IT and ITeS will be fuelled by the verticals of climate change, mobile applications, healthcare, energy

efficiency and sustainable energy. Traditional business strongholds will make way for new geographies, there

would be new customers and more and more of SMEs will go for IT application and services.

PRESENTED BY

SAHANA HIREMATHM.Com (Final)

DR. S.G. HIREMATHASSOCIATE PROFESSOR

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