FDI equity inflows into services sector now US$ 28.26 billion

The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman tabled the Economic Survey 2018-19 in Parliament today.

 

The services sector accounts for 54 per cent of  India’s Gross  Value Added (GVA). Its growth rate moderated to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18. The segments that saw deceleration are tourism, trade, hotels, transport, communication and services related to broadcasting, public administration and defence. Financial, real estate and professional services category accelerated. India received 10.6 million foreign tourists in 2018-19 compared to 10.4 million in 2017-18. Foreign exchange earnings from tourism in India stood at US$27.7 billion in 2018-19 compared to US$28.7 billion in 2017-18. The IT-BPM  (Business Process Management) industry grew by 8.4 per cent in 2017-18 to US$167 billion and is estimated to have reached US$181 billion in 2018-19.

 

 

India’s Gross value added in the Service Sector

Despite the recent growth moderation, services sector growth continues to outperform agriculture and manufacturing sector growth, contributing more than 60 per cent to total GVA growth.

 

Trade in service Sector

Economic Survey says that “Services exports have slowed somewhat during April-December 2018 after witnessing strong performance in 2017-18 (April-December) by sub-sector, exports of transport services have maintained strong momentum during 2017-18 (April-December) and April-December, 2018, supported by strengthening merchandise trade activity, while exports of Computer & ICT services have continued to recover steadily. On the other hand, travel receipts have slowed somewhat during April-December, 2018 after posting strong growth in 2017-18 (April-December), which is in line with the moderation in foreign tourist arrivals during this period. Exports of business services have witnessed a similar trend. Meanwhile, services imports have slowed during April-December, 2018 from the previous year led by a deceleration in imports across all sectors. The rising services trade surplus has helped finance nearly 50 per cent of India’s trade deficit as of 2017-18 (April-December). However, the service trade surplus is largely driven by Computer & ICT services, and to some extent, travel services. Meanwhile, India runs a very small trade surplus in business services and insurance & pensions and a small trade deficit in financial services.”

 

FDI into services Sector

Economic Survey says that “FDI equity inflows into the services sector accounted for more than 60 per cent of the total FDI equity inflows into India. During  2018-19, FDI equity inflows into services sector fell by US$696 million or 1.3 per cent from the previous year to about US$28.26 billion, which is in line with the small decline witnessed in overall FDI inflows into India. This was driven by weaker FDI inflows into sub-sectors such as telecom, consultancy services, air and sea transport, which offset the strong inflows witnessed in education, retail trading and information & broadcasting.

Tourism

Economic Survey says that “Tourism sector is a major engine of economic growth that contributes significantly in terms of GDP, foreign exchange earnings and employment. In India, the Tourism sector had been performing well with Foreign Tourist Arrivals (FTAs) growing at 14 per cent to 10.4 million and Foreign Exchange Earnings (FEEs) at  20.6 per cent to US$28.7 billion in 2017-18.  However, the sector witnessed a slowdown in 2018-19. The Foreign Tourist Arrivals (FTA) in 2018-19 stood at 10.6 million compared to 10.4 million in 2017-18. The growth rate of FTAs declined from 14.2 per cent in 2017-18 to 2.1 per cent in 2018-19. Foreign Exchange Earnings (FEEs) from tourism stood at US$27.7 billion in 2018-19 as compared to US 28.7 billion in 2017-18. The FEEs declined from 20.6 per cent in 2017-18 to -3.3 per cent in 2018-19. Outbound tourism increased in recent years, with the number of departures of Indian nationals from India, that stood at 23.94 million in 2017 as against 21.87 million in 2016, with a growth rate of 9.5 per cent in 2017. This was more than double the foreign tourist arrivals in India.”

 

 

IT-BPM Services

Economic Survey says that “The Indian IT-BPM industry grew by 8.4 per cent in 2017-18 to US $167 billion (Excluding e-commerce but including hardware) from US$154billion in 2016-17, as per NASSCOM data. It is estimated to have reached US$181 billion in 2018-19. IT-BPM exports grew by 7.7 per cent to US$126 billion in 2017-18 and is estimated at US$136 billion for 2018-19. E-commerce market is estimated at US$43 billion for FY 2018-19, at growth rate of 12 per cent. The IT services constitute the largest segment with a share of around 52 per cent, followed by BPM with share of around 20 per cent. Software products and engineering services together accounted for around 19 per cent share whereas hardware accounts for 10 per cent.”

 

Media & Entertainment Services

Economic Survey says that “The Media and Entertainment sector comprises mainly of television, print, radio, films, music, digital advertising, over the top (OTT-film and television content delivered over internet), visual effects (VFX) and gaming. Technology has rapidly changed the profile of this sector especially in the area of content and carriage. As per the FICCI-EY Media and Entertainment Repot 2019, the size of the Industry has increased from Rs91,810 crore in 2013 to Rs 1,67,500 crore in 2018, a growth of 82.44 per cent in the last 5 years. Audio-visual services have been identified by the Government (2018) as one among the 12 Champion Services sectors for focused development so as to reap its full potential.”