Diverse financial and non-financial service markets
The country’s service industry includes several markets, largely classified under financial and non-financial segments. The economic contribution from financial, real estate, and professional services in India accounted for about 21 percent in financial year 2022. Trade, hotels, transport, and communication made up nearly 17 percent of the total 53 percent service trade that year.Employing Indians in the millions, the financial segment of services includes banking, insurance, and real estate in the country. With the National Stock Exchange and the Bombay Stock Exchange, the country has one of the most diversified financial sectors with room for traditional companies, as well as new entities. A liberal FDI policy and accessible MSME infrastructure makes it a vibrant market to both public and private players.
Non-financial segments in services include tourism, hospitality, and transportation, communication, among other related sectors amounting to nearly 130 million employees in fiscal year 2021. These include more fragmented markets and unorganized segments, especially within the tourism and hospitality markets. Digitalization has further led to the expansion of these industries to include e-commerce and connected online markets.
The land of software and IT services export
One of the key contributors to services boosting the country’s GDP in fiscal year 2022, clocking higher than estimates, was the demand and export of telecom and IT services, in addition to business services. The latter is made up of accounting, auditing, R&D, quality assurance, and management consulting. Business and software services make up the highest net service exports from India. The established players responsible for that include multinational companies like Tata Consultancy Services, Infosys, and Wipro, among others. The United States availed most of these exports, followed by Europe.The success of the service industries in India, domestically, and more for exports, has a direct impact on job creation for what is now the most populous country in the world with many young people. With the economic liberalization of the 1990s and the more recent 100 percent FDI in several service sectors, India has grown to both invest and depend heavily on the service sector from an economic perspective. The pandemic has also shown the dangers of this dependency, displaying its fragility to external factors, not just within, but also connected industries.
