Explain growth of service sector?

Explain growth of service sector?

Services comprise a set of economic activities like transportation, trade, tourism, communications, banking and insurance, real estate, public administration, defence and so on. According to an Adrian – Payne four factors are responsible for growth in the service sector. They are: demographic, social, economic and political.


Demographic changes: The life expectancy has raised which in turn, is producing an expanding retired population. This sector has created a new demand for travel and leisure, as well as for healthcare, nursing and life insurance. The need for infrastructural support services has increased due to the development of new towns and regions.


Social changes: The number of women’s in work force has increased, and this has led to traditional domestic functions being performed outside the home. The rise in number of double income household has created a greater demand for consumer services, including retailing, real estate and personal financial services. With the growing income, the standard of life has improved. Smaller families with double income spend ore on entertainment, travel and hospitality services.

The aspiration levels have increased due to communication and travel. As a result, both children and adults are making new demands on learning establishments, so that they can develop the skills needed in order to compete. In the complex and fast changing environment. This has opened avenues for knowledge and information based services.


Economic changes: The demand for communication, travel and information services has increased due to globalisation. This has been filled by the rapid changes brought about by new information technology. Increased specialization within the economy has led to reliance on specialist service providers For e.g. advertising and marketing research have now become specialist functions providing support to all the sectors of the economy.


Political and legal chap : The size of the government has grown creating a huge infrastructure of service departments. With the growth in international trade, the demand on legal and other professional services have increased, cutting across national boundaries.

Manufacturing firms handing over repair and maintenance, data processing, where rousing and logistics services to specialised sources, which they earlier used to perform in- house. The liberalization has also created a new avenue for growth. The slow growth of agriculture and industry and the presence of widespread unemployment have driven people to seek work in the informal services. This is particularly true in the urban areas, where petty pavement retail trade, transport, another is repair and service establishments have proliferated.

Since the overall growth of the economy is now dependent on the service sector, the pace of productivity growth in services becomes critically important. Therefore, the government is taking an initiative in the sector.



Economic affluence: One, of the key factors for the growth of demand for services is the economic affluence. According to the NCAER study the size of the middle income consumer is raising fast and the percentage of the very poor household’s declining. The rural households in the upper income category is growing at a much faster pace than the urban households in the corresponding categories. The Economic liberalisation Process has had a positive impact on the Indian households. Their income as well as their expenditure has been pushed, creating a demand for many goods and services.


Changing Role of Women: Traditionally the Indian woman was confined to household activities. But with the changing time there has been a change in the traditional way of thinking in the society. Women are now allowed to work. They are employed in defence services, police services, postal services, software services, health services, hospital services, entertainment industries, Business Process Outsourcing and so on.

The percentage of working women has been growing rapidly. The changing role of women has created a market for a number of product and services. Earning women prefer to hire services in order to minimise the innumerable roles that they are required to perform. The demand by woman is forcing service organisations to be more innovative in their approach.


Cultural Changes: Change is the underlying philosophy of culture place of change in Indian culture is not uniform. However, during the last century the factors of change are prominent. The emergence of the nuclear family system in place of the traditional joint family system creates a demand for a host of services like education, health care, entertainment, telecommunication, transport, tourism and so on. There has’ been a marked change in the thought Processes relating to investment, leisure time perception and so on which has created a huge demand for services.


I.T. Revolution: For the last 15 years India’6aste,en occupying a vital position in the area of Information Technology. IT became one of the key service businesses of the country. India has the largest software skilled population in the world. The domestic market as well as the international market has grown substantially. Realising the potential for this area many state governments have made IT as their most, prioritized segment states such as Karnntnka, Andhra Pradesh, Madhya Pradesh Maharashtra and Delhi have already achieved substantial progress in Information Technology the In Ile years to come ‘Lille IT enabled se Aces will have a bright future. The growth. of’ population, industrialisation and indiscriminate consumptions have affected the, natural resources, environment and the ecological balance. Due to this there is an imbalance of the ecology various service organisations have been promoted in order to take up social marketing. Thousands of crores of rupees are being spent on safeguarding the rare animals and birds, water pollution, conservation of oil & energy and research to develop new technologies that can promote effective use of natural resources and safeguard the environment.


Development of Markets: During the last few decades the wholesaler and the retailer population has grown in the country. Urban India has become a cluster of wholesaling and retailing business. In the Semi – urban areas, retailing has spread to the nooks and corners of the streets and in the rural areas retail business is significantly present. A new breed of organisations, offering marketing services has come up. The government also offers marketing services to the small-scale agricultural farmers, artisans and other traditional business sectors such ‘as promotion of regulated markets, export promotion councils, development boards etc.


Market orientation: The changing competitive situation and demand supply positions has forced the manufacturing organisation to shift their philosophy from production orientation to market orientation. Market is a service function that has been added in the organisation. The pressures in the market has further forced the manufacturing organisations to have marketing research, accounting, auditing, financial management, human resource management and marketing research divisions – all of which are services functions.


Health-Care Consciousness: In India, the healthcare market has grown substantially. The increased life expectancy is the result of the consciousness of the people regarding the health issues. The growth of fitness clubs, diagnostic centres, medical counselling, health-related information sites are the reflections of the growing demands for health care services. The government as well as the social organisations have taken up the mass campaigns in order to create awareness among the illiterate persons and the rural population on health service. Hence, the growth of health related services.


Economic liberalisation: The economic liberalisation of the 1991 has brought many changes in the Indian scenario. With the Disinvestment and the Privatisation policies the state owned monopolies in many service areas came to an end Multinationals were permitted to enter the Indian market. Liberal lending policies and lower interest rates motivated many people to become self-employed. Different sectors like Banking, Insurance, Power projects, Telecommunication, Hospitality sector, Health Services, Entertainment, Air transport, and Courier services witnessed intense competition, due to the entry of multinationals. The flow of  time-tested service technology from various parts of the world changed the attitude of the Indian consumer towards sources.


Rampant migration: One of the important reasons for the growth of services in India is the rampant migration of rural to semi-urban and urban areas. Migration to urban areas for the  want of jobs and livelihood has resulted in the expansion of cities and townships due to which businesses like real estates, rentals, transportation and infrastructure services are rapidly expanding.


Export potential:  India is considered to be a Potential source for services. There are a number of services that India offers to various parts of the world like banking, insurance, transportation co data services, accounting services, construction labour, designing, entertainment, education, health services, software services and tourism. Tourism and software services are among the major foreign exchange earners of the country and that the growth rate is also very high as compared to the other sectors.


Service tax: The growth in the service sector attracted the attention of the government as a tax generating source. Over the years, the number of services brought under service tax has increased- Service tax is levied on hotels and restaurants, transport, storage and communications, financial services, real states, business services and social and personal services.

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