Buoyancy Check
Context:
- The services sector in India appears to have had a solid start to the fiscal year, if one were to make their choice purely on the findings of the S&P Global Services PMI Business Activity Index.
The Purchasing Managers’ Index, or PMI:
- It is a survey-based indicator that asks participants about shifts in their perceptions of key business indicators from one month to the next. It acts as a barometer for recent changes in the industrial and service sectors of the economy.
- After being calculated separately for the industrial and services sectors, a composite index is also produced.
- The PMI is an integer that ranges from 0 to 100. Scores above 50 suggest expansion, while scores below 50 imply contraction. A reading of 50 indicates no change.
- It usually makes its appearance at the start of each month. It is therefore recognised as a trustworthy leading indicator of economic activity.
India’s services sector:
- The service sector in India is the biggest, fastest-growing, and most productive one. Trade, lodging and dining, transportation, storage, and communication, financing, insurance, real estate, commercial services, community, social, and personal services, as well as services associated to construction, are all included in India’s services industry. Economic Survey 2022–23 estimates that the industry grew by 8.4% (YoY) in FY 22 and will grow by 9.1% in FY 23.
Challenges:
- The COVID-19 pandemic significantly harmed India’s services sector, which was particularly negatively impacted by a sharp contraction in all of its subsectors, especially “trade, hotels, transport, communication, and services related to broadcasting.”
- The consequences of demonetization were briefly felt in the services sector, just as they were in other sectors.
- Employment in the services sector: Neither the quantity nor the quality of jobs produced have been sufficient to match the sector’s contribution to GDP.
- Lack of Policy: There is no policy fostering inclusive growth, and the development of the sector is hampered by a plethora of disjointed governmental organisations.
- Domestic Laws and Services Trade Barriers
- Market Access Restrictions: India’s commercial partners face a variety of obstacles to accessing the market.
Governmental initiatives:
Structural alterations:
- Deregulation of the space industry, the removal of telecom-related regulations from the IT-BPO sector, and the implementation of consumer protection laws in the e-commerce sector.
- Health Sector: In October 2021, the Indian Prime Minister approved the establishment of 157 new medical colleges to expand residents’ access to reasonable medical treatment.
- Tens of thousands of Ayushman health and wellness clinics have been set up by the Indian government to provide affordable primary level testing and treatment for diseases including cancer and diabetes, among others.
- PLI (Production Linked Incentive)
- The Mahatma Gandhi National Fellowship
- National Broadband’s mission
- BharatNet project.
- The Smart Cities Mission, the Pradhan Mantri Awas Yojana (PMAY-Urban), and other recent government projects
- collaboration on a global scale, as the UK-India Free Trade Agreement. partnership on a large scale between Australia and India in the fields of internet-based technology and the digital economy.
Moving forward:
- India’s service sector is undergoing a structural change as a result of the changing environment. However, this structural change has improved opportunities for creativity and independent work. The majority of middle-class families rely on the service industry. The poorest people in Indian society also require better living conditions, but achieving this would be more challenging without a more robust service sector.
