The service sector, also called the tertiary sector, is one of the three parts of the economy in the Three-sector hypothesis. This hypothesis breaks the economy into three main areas so it can be better understood. The other two are the primary sector, which covers areas such as farming, mining and fishing; and the secondary sector which covers manufacturing and making things. The service sector provides a service, not an actual product that could be held in your hand.
Activities in the service sector include retail, banks, hotels, real estate, education, health, social work, transport, computer services, recreation, media, communications, electricity, gas and water supply. ndian economy's orientation is changing from a manufacturing/ agriculture dominated to a knowledge-based one, wherein modern technologies and high value-added services are significantly contributing to the country's gross domestic product (GDP). Services sector accounts for about 60 per cent of India – Asia's third largest economy. Some of India's top services exports are software, back-office support and banking services.
'Services' is a huge basket that comprises numerous sub-industry-segments like financial, educational, telecom, digital (including internet), travel & tourism, construction, consultation, IT et al. Certain recent developments, investments and government initiatives pertaining to some of such sub-segments are discussed hereafter. Key Statistics Indian service sector enjoyed foreign direct investment (FDI) inflows amounting to US$ 3. 64 billion during April-November 2012, according to the recent statistics released by the Department of Industrial Policy and Promotion (DIPP).
Foreign investment in the services sector, which contributes over 50 per cent in India's GDP, grew to US$ 5. 21 billion in 2011-12 from US$ 3. 29 billion in 2010-11. Activity in India's service sector expanded at the fastest pace in a year in January 2013. The HSBC Markit services Purchasing Managers' Index (PMI), which gauges business activity from a survey of over 400 companies ranging from banks to hospitals, jumped to 57. 5 in January 2013 from 55. 6 in the previous month. Recent Investments/ Developments In a bid to enhance its presence in APAC and Middle-East regions, India's premier express courier company DTDC Courier and Cargo Ltd.
has entered Australia and Kuwait through joint ventures (JV). The Australian venture, in which DTDC holds 34 per cent, will be handled jointly by DTDC and Fast World Express Pty Ltd. , while the Kuwait venture will be handled by Kuwait Bayarek General Trading and Contracting Co. W. I. I. (who is the Master franchise). With this DTDC's global footprint has gone up to 16 countries providing services to over 240 international locations Accor, a European hotel operator, had first launched its property, Hotel Formule 1, in Gujarat.
Now, the company is contemplating to have another property in the city. The group owns brands like Sofitel, Pullman, MGallery, Novotel, Suite Novotel, Mercure, Adagio, ibis, and Formule 1, which range from budget to luxury hotels, and the upcoming property could be any one of them Accor has 19 hotels with 3780 rooms and two convention centers in India. Formule 1 is its low-cost brand. After opening a Formule1 in Greater Noida recently, it opened the second Formule 1 in Ahmedabad.
It is all prepared to launch a third one in Pune and intends to have 15 Formule 1 hotels in India over the next few years Reliance Infra, or rather RInfra has introduced online chat service for Mumbai's 2. 8 million electricity consumers. The facility will provide a service to consumers through which they would be able to resolve their issues on real-time basis by having an online chat with the company representatives. The consumers would also be provided with the guidance regarding application status, bill-related queries, payment options and other procedural information.
Information regarding change of name requests, e-bills, SMS alerts, billing and payments, web-based services, etc, will also be made available Private telecom services provider Vodafone India has recently launched 'post-to-pre talk time transfer' service that enables its post-paid customer to immediately transfer talk-time (balance) to a pre-paid Vodafone customer. The first-of-its-kind service will be of special benefit for those post-paid customers who have family members, personal friends or office colleagues using a pre-paid connection and are in need of talk time (balance)
Reliance Communications Ltd.has granted a US$ 1 billion-contract to Ericsson AB, the world's largest manufacturer of wireless networks, to manage the systems of the Indian phone operator. The contract is beneficial for Ericsson, as the company is trying to sell more services such as network management and maintenance and this contract will help it expand its services business in Asia. Reliance, which awarded a US$ 1 billion services contract to French phone-equipment maker Alcatel-Lucent SA also, is signing such deals to reduce the cost of running its networks. Government Initiatives.
The Indian Government is very well known to the fact that service-based orientation of the Indian economy is providing fresh impetus to the country's growth and development. To sustain India's position as a strategic service industry on the global platform, the Government keeps introducing norms and policies for the betterment of related infrastructure and auxiliaries. The India-Asean agreement on services and investments is expected to be concluded by early 2014 paving the way for further co-operation, according to Mustapa Mohamed, Malaysian Minister for Trade and Industry.
Moreover, the Delhi Government, under its electronic monitoring service level agreement (e-SLA), has decided to integrate its online service with SMS facility. The new system, which is currently being tested, will enable Delhi citizens to check the status of their important documents like the driving license. Apart from that, they can also check the status of various other facilities such as electricity connections, water connections, ration card, freehold of Delhi Development Authority's flats, issuance of birth and death certificate, etc. The system is expected to be in place soon. Road Ahead.
Needless to say, education is the thrust of development and hence, drives any industry and sector of the economy. Education in itself is one of the most crucial service industries and its growth comes prior to any other industry. A study named 'Indian Higher education Sector' by Deloitte has stated that the demand for higher education will continue to increase due to a booming economy, with a growing share of the knowledge-intensive services sector and growing middle class. The projection of increasing the Gross Enrolment Ratio from current levels to 30 per cent by 2020 would itself translate into 24 million additional enrolments.
Moreover, India currently has 80 million mobile internet users and the number is burgeoning with every passing year, according to an Internet and Mobile Association of India (IAMAI) and IMRB report. In order to cater to these users, digital entrepreneurs are evolving a plethora of mobile-based value-added services (VAS) for everything (from entertainment to payments and advertising). Industry experts believe that with passage of time, VAS would break out into separate verticals like entertainment, payments, social media and many more in the years to come
Post-liberalisation period (since 1991) Main articles: Economic liberalisation in India and Economic development in India GDP of India has risen rapidly since 1991. In the late 1970s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent companies, removed price controls, reduced corporate taxes and promoted the creation of small scale industries in large numbers. However, the subsequent government policy of Fabian socialism hampered the benefits of the economy, leading to high fiscal deficits and a worsening current account..
The collapse of the Soviet Union, which was India's major trading partner, and the Gulf War, which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans.  India asked for a $1. 8 billion bailout loan from the International Monetary Fund (IMF), which in return demanded reforms.  In response, Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated the economic liberalisation of 1991.
The reforms did away with theLicence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.  Since then, the overall thrust of liberalisation has remained the same, although no government has tried to take on powerful lobbies such as trade unions and farmers, on contentious issues such as reforming labour laws and reducing agricultural subsidies.  By the turn of the 21st century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalisation.
 This has been accompanied by increases in life expectancy, literacy rates and food security, although urban residents have benefited more than agricultural residents.  While the credit rating of India was hit by its nuclear weapons tests in 1998, it has since been raised to investment level in 2003 by S&P and Moody's.  In 2003,Goldman Sachs predicted that India's GDP in current prices would overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035, making it the third largest economy of the world, behind the US and China.
India is often seen by most economists as a rising economic superpower and is believed to play a major role in the global economy in the 21st century Services Further information: Information technology in India and Business process outsourcing in India India is 13th in services output. The services sector provides employment to 23% of the work force and is growing quickly, with a growth rate of 7. 5% in 1991–2000, up from 4. 5% in 1951–80. It has the largest share in the GDP, accounting for 55% in 2007, up from 15% in 1950.
 Information technology and business process outsourcing are among the fastest growing sectors, having a cumulative growth rate of revenue 33. 6% between 1997 and 1998 and 2002–03 and contributing to 25% of the country's total exports in 2007–08.  The growth in the IT sector is attributed to increased specialisation, and an availability of a large pool of low cost, highly skilled, educated and fluent English-speaking workers, on the supply side, matched on the demand side by increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations.
The share of the Indian IT industry in the country's GDP increased from 4. 8% in 2005–06 to 7% in 2008.  In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world he economic liberalisation in India refers to ongoing economic reforms in India that started on 24 July 1991. After Independence in 1947, India adhered to socialist policies. Attempts were made to liberalise economy in 1966 and 1985. The first attempt was reversed in 1967. Thereafter, a stronger version of socialism was adopted. Second major attempt was in 1985 by prime minister Rajeev Gandhi.
The process came to a halt in 1987, though 1966 style reversal did not take place.  In 1991, after India faced a balance of payments crisis, it had to pledge 20 tons of gold to Union Bank of Switzerland and 47 ton to Bank of England as part of a bailout deal with the International Monetary Fund (IMF). In addition, the IMF required India to undertake a series of structural economic reforms.  As a result of this requirement, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh(currently the Prime Minister of India) started breakthrough reforms, although they did not implement many of the reforms the IMF wanted.
 The new neo-liberal policies included opening for international trade and investment,deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.
 Thus, unlike the reforms of 1966 and 1985 that were carried out by the majority Congress governments, the reforms of 1991 carried out by a minority government proved sustainable. There exists a lively debate in India as to what made the economic reforms sustainable.  The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%.  With this, India became the second fastest growing major economy in the world, next only to China.  The growth rate has slowed significantly in the first half of 2012.
 An Organisation for Economic Co-operation and Development (OECD) report states that the average growth rate 7. 5% will double the average income in a decade, and more reforms would speed up the pace.  Indian government coalitions have been advised to continue liberalisation. India grows at slower pace than China, which has been liberalising its economy since 1978.  The McKinsey Quarterly states that removing main obstacles "would free India's economy to grow as fast as China's, at 10 percent a year".
 There has been significant debate, however, around liberalisation as an inclusive economic growth strategy. Since 1992, income inequality has deepened in India with consumption among the poorest staying stable while the wealthiest generate consumption growth.  For 2010, India was ranked 124th among 179 countries in Index of Economic Freedom World Rankings, which is an improvement from the preceding year. Indian Economy-Post 1991 The most important thing that happened in 1991 is that we started increasingly integrating into the world economy.
India certainly will be not left out in the way side in the industrial revolution of our time. Sure enough Indian is already in the forefront of Information Technology which is beginning tochange our lives so dramatically. During the last thirty years we had adopted economic strategy of planned growth. This policy continued up to 1991 in which the State had to play a major role. Over a period of time, the whole entrepreneurial abilities of a people were tied down to the myriad of all controls with a set of regulations and licenses – so much so that the Indian economy was called a“License Raj”.
When you want to produce something, you needs a licence, to increase production you needs a licence, to re-allocate your resources, you needed a licence – every decision was taken by the Babus (Bureaucrats)) rather than the entrepreneurs themselves. And to these myriads of controls and regulations, the entire productive potential was tied down. Liberalisation basically meant unleashing the productive potential of people in terms of reducing the kind of constraints imposed over a period of time upon the entrepreneurs.
This is the true meaningof liberalisation. Over a period of time in the 1950-60s when the private sector was not developed enough, it was only to be expected that the Government would need to come in a big way and take alead in the industry as a producer. But in the spate of enthusiasm, I think, we overdid it so much so that by 1991 we were boasting of PSUs commanding heights in the Indian economy over the private sector. It turned out that, if you looked at the total investment made.
is above Rs. 4,00,000 crore in the Public Sector Undertakings, Rs. 2,50,000 crores for the State level Public Sector Undertakings and what is the rate of return that the countryhas given on this, it is really2. 5%. So we had to face a very strange situation in 1991 where the Government was borrowing from the market at the rate of 14 % and was investing where the rate of return was only 2. 5 %. But this just could not go on. This was a sure recipe for disaster and indeed it did strike us.
No matter you think how special you are, you are not immune from the basic laws of economics and we were made to realise that in terms of a crisis which started in 1991. And it was from then onwards thatwe started changingour policies and have nowcome a long way. Successes and Failures before 1991 But this does not mean that we have totally failed before 1991. We achieved a lot of things before 1991. There were successes as well as failures. On the whole however there are a few good things that we had achieved. First of all, the industrial production base was widened.
We succeeded in developing a poolof technicallytrained manpower on a scale, which has no parallel in the world. We certainly can take pride in the opportunities availed for us for higher education whichwe have created in terms of IITs and IIMs. You will recall that Ihave heardour students in USA saying I did not get admission to the IIT , that is why I have came here. This is the kind of qualitative change that has taken place in the outlook of the people. That if we don’t get admission to the IIT, at leastwe can get to universities aboard.
While there are very remarkable achievements in terms of foundation, Ithink what happened was that the economy was not able to achieve a higher level of efficiency and the Public Sector Undertakings example is very obvious. And whose money is it? It is all your money and if they are going to get a return of 2. 5 %, there is no reason to pump in more money in such activities. That is why we have to come back and change and we also realised that just the Government’s interventionin economic theory was justified because of the failure of themarket.
But we also saw that just as markets fail, there is also failure on the part of the Government. So to correct market failure, you have the Government but when the Government fails you have to bring in the market. Therefore, we have to have a combination of intervention plus free flow of marketforces and I think these kind of things that are emerging. The most striking example – is that of the finance sector.
If you look at the finance sector after nationalisation in 1969 and 1980, there was enormousbranch expansion but with this expansion, we also needed to raise low interest loans for the Government to finance its fiscal deficit which was growing at a rapid pace and when finally we hadto have a regime of administrative interest rates, a regime of directed credit and allied schemes which finally began eating into the efficiency of banking system . So we are now increasinglyrealising that it is notonly the scale of financial system that matters, but it is also efficiency which is necessary for better economic growth.