Draft Report of the High Level Group on Services Sector

1 Calculated from Central Statistical Organisation estimates of GDP (at factor cost) data at 1999-2000 prices for the services categories excluding construction; http://mospi.nic.in/pressnote_31may07.htm

2 Assessment based on information on the employment-generation-potential in the unorganised service sectors. India’s chief statistician Dr pronab Sen said at a recent ICRIER conference on ‘Productivity Growth in a Globalising Economy: Implications for Business and Policy’; “The NSSO data suggests that almost 50 per cent of the income in rural areas is coming from non-agriculture sources.. economic analysts should keep in mind the fact that several Indian manufacturing and service companies have started outsourcing the non-core activities, resulting in high growth of services”.

3 While the dynamic growth of India’s commercial exports— and in particular software services (comprising computer services, IT enabled services and business process outsourcing) — are widely reported, the dynamic expansion of its services imports has attracted less attention even though the growth rate in 2006 exceeded that of exports. According to the most recent numbers put out by the WTO, India has turned a net exporter of commercial services in 2006, though India’s commercial services imports grew robustly by 40 per cent in 2006 and are only about 5 per cent short of its commercial services exports.

4 Transportation services covers sea, air and other including land, internal waterway, space and pipeline transport services that are performed by residents of one economy for those of another, and that involve the carriage of passengers, the movement of goods (freight), rentals (charters) of carriers with crew, and related supporting and auxiliary services (Metadata: WTO International Trade Statistics 2007).

5 Travel includes goods and services acquired by personal travellers, for health, education or other purposes, and by business travellers. Unlike other services, travel is not a specific type of service, but an assortment of goods and services consumed by travellers. The most common goods and services covered are lodging, food and beverages, entertainment and transportation (within the economy visited), gifts and souvenirs (WTO International Trade Statistics 2007, op cit).

6 Other business services, comprise trade-related services, operational leasing (rentals), and miscellaneous business, professional and technical services such as legal, accounting, management consulting, public relations services, advertising, market research and public opinion polling, research and deployment services, architectural, engineering, and other technical services, agricultural, mining and on-site processing (WTO International Trade Statistics 2007, op cit).

7 Computer and information services include computer services (hardware and software related services and data processing services), news agency services, and other information provision services (WTO International Trade Statistics 2007, op cit).

8

^ Balassa’s Revealed Comparative Advantage (RCA) Index is computed as:

Rih =(Xih/Xit)/(Xwh/Xwt),

Where Rih= Balassa’s Index of RCA

Xih= Country i’s export of product h

Xit=total export of country i

Xwh=world export of product h

Xwt=total world export

9 The factual base of this section is derived largely from NASSCOM-McKinsey, NASSCOM-McKinsey Report 2005: Extending India’s leadership of the Global IT and BPO Industries; NASSCOM, Strategic Review 2008: The IT-BPO Industry in India; NASSCOM-BCG, NASSCOM-BCG Innovation Report 2007and Rupa Chanda, 2007, Trade in IT and IT-Enabled Services: Issues and Concerns in an India-EU FTA.

10 See footnote 5 for definition of travel services

11 A Report by the Mckinsey Global Institute (The “Bird of Gold”: The Rise of India’s Consumer Market) has estimated that 3.6 million households in India had an income above Rs five lakh in 2005 and that this figure will go up to 8.8 million by 2015 and 42.6 million by 2025. Given this profile it is likely that the demand for tourism will grow manifold in the country in the coming years. As observed by the Sub Group on Tourism in its Report to the High Level Group: ‘With the rapidly growing disposable incomes, growing educational and awareness levels, holiday travel is growing at a very healthy rate in the country. Business travel is also booming because of the high growth in the country’s economy. These trends are likely to continue for many years. Domestic tourism has a very wide spread, benefiting people and businesses in all parts of the country. There will be no limit in this expansion, so long as we can create the right infrastructure of products, services, access facilities and also adopt effective marketing and promotional strategies.’

12 See footnote 4 for definition of transportation services.

13 This Section of the Report of the High Level Group is substantially based on the report of the Sub Group of Financial services, of which Shri K. V. Kamath, Managing Director & CEO, ICICI Bank Limited was the Chairman, and Shri K. N. Bhandari, Secretary General, General Insurance Council, Shri M. V. Nair, Chairman & Managing Director, Union Bank of India, Shri Aditya Puri, Managing Director, HDFC Bank Limited, Shri Deepak Satwalekar, Managing Director & CEO, HDFC Standard Life Insurance Company Limited and Shri U. K. Sinha, Chairman & Managing Director, UTI Asset Management Company Private Limited, were members.

14 Source: “Financial Inclusion – The Indian Experience”, speech by Smt. Usha Thorat, Deputy Governor of the Reserve Bank of India, in London, June 19, 2007.

15 The new pension schemes for government employees being set up under the pension reforms, to be regulated by the Pensions Fund Regulatory & Development Authority (PFRDA), would be permitted to invest up to 5% of their corpus in equities. This has so far not come into effect.

16 The Review of Payment & Settlement Systems in India released by RBI in October 2007 suggests the use of mobile telephones and cards for payments, and recommends that regulatory changes be carried out to facilitate the same.

17 The information base of this section is derived mainly from the ICRIER study titled Impact of Organized Retailing on the Unorganized Sector (as yet unpublished) being conducted for the Ministry of Commerce & Industry.