An All-round Push

India’s services sector is rolling on. But key sectors such as financial services and hospitality need a big stimulus.

- Clifford Alvares

SERVICES IS A BIG CONTRIBUTOR TO THE GDP, and like most past budgets, this one too needs to push the services sector. After all, it is often referred to as the engine of growth for the domestic economy. It’s one of the main contributors to the economy, contributing nearly 60 per cent of the gross value added. It generated a huge export value of nearly $38.95 billion in H1FY2019, despite global headwinds and trade wars.

According to market experts, taxation of services is well-settled. Most services are taxed at 18 per cent. “The budget per se would not have any major changes in terms of taxation issues; it is actually well-settled. Service sector policy issues will have an impact on the medium to long-term, but not in the immediate future,” said A K Sridhar, director, and chief investment officer, India First Life Insurance.

But the tailwinds of the demographic growth and the burgeoning middle class often times has a positive rub-off on other sectors in the economy, and therefore, services do play a vital role. If you look at some of the critical services sectors such as IT, the largely skilled manpower has transformed India into a global IT hub. Almost 33 per cent of the Indian workforce is said to be employed in the services sector which comprises of tourism, IT, healthcare, hospitality, real estate, and financial services.

One factor that sets apart the services sector is low-cost skilled labour. It helps India to, for instance, become an important destination for medical tourism as a result of cheaper and excellent healthcare services. Besides, Indian IT has nearly half the market share in the global sourcing market worth $185 billion.

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