By TIOL News Service

NEW DELHI, JULY 09, 2014: INDIA has the second fastest growing services sector with its Compound Annual Growth Rate at 9.0 per cent, just below China's 10.9 per cent, during 2001 to 2012. Also, India ranked 12 th in terms of services Gross Domestic Product (GDP) in 2012 among the world's top 15 countries in terms of GDP. While services share in World GDP was 65.9 per cent and in employment was only 44 per cent in 2012, in India, they were 56.9 per cent and 28.1 per cent respectively.

Services constitute a 57 per cent share in GDP at factor cost (at current prices) in 2013-14, an increase of 6 percentage points over 2000-01. Despite deceleration, services GDP growth at 6.8 per cent was above the 4.7 per cent overall GDP in 2013-14. The growth rate of the combined category of trade, hotels, restaurants, transport, storage, and communications decelerated to 3.0 per cent while financing, insurance, real estate, and business services grew robustly at 12.9 per cent.

In 2013-14, FDI inflows to the services sector (top five sectors including construction) declined sharply by 37.6 per cent to USD 6.4 billion compared to an overall growth in FDI inflows at 6.1 per cent resulting in the share of the top five services in total FDI falling to nearly one-sixth.

India's increase in share in world services exports from 0.6 per cent in 1990 to 3.3 per cent in 2013 was faster than in merchandise exports. Exports of software services, accounting for 46 per cent of India's total services exports, decelerated to 5.4 per cent in 2013-14, travel, accounting for a nearly 12 per cent share, witnessed negative growth of 0.4 per cent.

THE Economic Survey 2013-14 has noted that India's Balance of Payments (BoP) position improved dramatically in 2013-14, particularly in the last three quarters. This owed in large part to measures taken by the Government and the Reserve Bank of India (RBI) and in some part, to the overall macroeconomic slowdown that fed into the external sector. Current account deficit (CAD) declined sharply from a record high of USD 88.2 billion (4.7 per cent of gross domestic product GDP) in 2012-13 to USD 32.4 billion (1.7 per cent of GDP) in 2013-14. After staying at perilously unsustainable levels of well over 4.0 per cent of GDP in 2011-12 and 2012-13, the improvement in BoP position is a welcome relief and there is need to sustain the position going forward, the Survey noted.

THE Survey also noted that India's foreign exchange reserves increased from USD 292.0 billion at end March 2013 to USD 304.2 billion at end march 2014. The Survey underlined that India continues to be one of the countries that have sizeable foreign exchange reserves particularly considering that some of the other major reserve holders are nations with large current account surpluses. Intervention in the foreign exchange markets by the RBI so as to manage the exchange rate of the rupee and guard against volatility without targeting a specific rate is behind the accumulation of reserves generally. In the specific context of developments in 2013-14, the intervention was to provide a measure of comfort against the elevated levels of vulnerability indicators which are expressed as proportions of reserves.