The services sector remains one of the main engines of growth in terms of contribution to national and state incomes, trade flows, foreign direct investment (FDI) inflows, and employment, said the Economic Survey — the annual report card of the government for 2015-16 — tabled in Parliament on Friday.
“The services sector contributed almost 66.1% of its gross value added growth in 2015-16, becoming the important net foreign exchange earner and the most attractive sector for FDI inflows,” the Survey said.
Despite a slowdown during 2010-14, India showed the fastest service sector growth globally, with a compound annual growth rate (CAGR) of 8.6%, followed by China at 8.4%. The global average was 2.5%.
The sector also saw the highest growth in FDI inflows with 74.7% growth to $14.8 billion in the first seven months of 2015-16, and 70.4% growth to $16.4 billion in 2014-15, accounting for more than half of the total FDI inflow into the country.
In 2014, FDI in India stood at $34 billion increased by 22% over 2013.
India’s services exports increased from $16.8 billion in 2001 to $155.6 billion in 2014, making the country eighth largest services exporter in the world.
In 2014, India’s services sector registered a growth of 10.3%, which was higher than China’s 8%.
The services sector grew 9.2% in 2015-16 as per the advanced estimates, the survey said.
However, the global slowdown had its impact. Growth of net services, which has been a major source of financing India’s trade deficit in recent years, decelerated to 5.0% in 2014-15 from 12.4% in 2013-14, and became negative at (-) 3.1% in the first half of 2015-16.
“The growth prospects of the services sector are promising as also indicated by some other estimates like the Nikkei/Markit Services PMI for India, which rose to 54.3 in January from 53.6 in December, the highest figure since June 2014,” the survey said.