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India’s services grew at 2nd highest rate of 9%, China’s at 10.9%

India has the second fastest growing services sector in the world with a compound annual growth rate at 9 per cent, just below China's 10.9 per cent, during 2001 to 2012, the Economic Survey
said on Wednesday. Among the world's top 15 countries in terms of GDP, India ranked 10th in terms of overall GDP and 12th in terms of services GDP in 2012, it said. ‘India has the second fastest growing services sector with CAGR at 9 per cent, just below China’s 10.9 per cent, during the last 11-year period from 2001 to 2012,’ the survey said.

It said that services share in world GDP was 65.9 per cent but its share in employment was only 44 per cent in 2012. In India, the services sector had a high share in income at 56.9 per cent in 2012 with a lower share of 28.1 per cent in employment, it added. In 2013-14 the growth rate of the services sector at 6.8 per cent is marginally lower than in 2012-13. This is due to deceleration in the growth rate of the combined category of trade, hotels, restaurants, transport, storage and communications.

The survey, which was tabled in Parliament on Wednesday, said that services in India are emerging as a prominent sector in terms of contribution to national and states' incomes, trade flows, FDI inflows and employment. Further, it said that the immediate challenge in this sector is revival of growth. India’s services sector which was growing at a steady rate of over 10 per cent since 2005-06 has shown subdued performance in the last three years. Revival, it said, could be achieved through reforms and speeding up of the policy decision making, a targeted approach with focus on big ticket services.

‘Some services like software and telecom were big ticket items that gave India a brand image in services. While further focus on these services is needed to retain and further our lead, the time has come to focus on some other high potential big ticket items that have high manufacturing-sector and employment linkages,’ it added.

Going forward, it said, 2014-15 seems to augur well for the services sector with expansion in business activity in India. ‘There are also signs of revival in growth of the aviation sector with the announcement of new players like Air Asia and Tata-SIA Airline after a turbulent period of withdrawals and losses by some airlines,’ it added. Indications of revival in the world GDP and trade growth in general and of developed countries in particular, could help in revival of the tourism and shipping sectors. ‘With a stable government in place and growing optimism which could translate into investment and growth, some quick reforms and removal of some barriers and obsolete regulations in the services sector could help. The downside risk however is the fragile global situation,’ it said.  The survey said many issues including domestic regulations hinder growth prospects of the services sector, which if addressed deftly could help the sector and lead to exponential gains for the economy.

Listing some general issues, it said that there is an urgent need for a nodal agency and marketing for the sector. Despite having strong growth potential in various services sub-sectors, there is no single nodal department or agency for services. Services activities cover issues beyond trade and a more proactive approach and proper institutional mechanism is needed to weed out unwanted regulations and tap the opportunities in the sector in a coordinated way, it added. There is also need for promotional activities for service exports like setting up a portal, showcasing India’s competence in non-software services in exhibitions, engaging dedicated brand ambassadors and experts. It also said that there is plenty of scope for disinvestment in services PSUs under both central and state governments.

‘Speeding up disinvestment in some services-sector PSUs could not only provide revenue for the government but also speed up the growth of these services,’ it said. The sector is also facing credit, tax and trade policy related issues. ‘These include use of  net instead of gross foreign exchange criteria for export benefit schemes, the issue of retrospective amendments of tax laws like amendment to the definition of royalty to include payment of any rights via any medium for use of computer software, tax administrative measures to tackle delay in refunds, introducing VAT refund for foreign tourists,’ it said.


Govt to set up 16 NIMZs to boost share of manufacturing in GDP
The government has announced setting up of 16 national investment and manufacturing zones (NIMZs) to boost economic growth. Under the National Manufacturing Policy, the government has proposed setting up of NIMZs. The policy aims at enhancing the share of manufacturing in GDP to 25 per cent within a decade and creating 100 million jobs. ‘In order to boost the manufacturing sector, the government has already announced setting up of 16 NIMZs,’ the Economic Survey 2013-14, tabled in the Parliament,on Wednesday said.

Of 16 NIMZs, eight are along the Delhi-Mumbai Industrial Corridor (DMIC). Besides, eight other zones have been given in-principle approval. They are proposed to come up in Nagpur, Chittoor, Medak, Tumkur, Kolar, Bidar and Gulbarga. NIMZs are conceptualised as integrated industrial townships of at least 50 sq km (5,000 hectares) with world class infrastructure. Besides it will have land use on the basis of zoning, clean and energy efficient technology and necessary social infrastructure.

The DMIC project, which is being developed with the help of Japan, would cover Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Gujarat, and Maharashtra along the Western Dedicated Freight Corridor of the Railways.
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