New Delhi: India’s service sector witnessed a swift rebound in 2021-22 driven by growth in the contact intensive services sub-sector, which faced the maximum burden of the pandemic, the Economic Survey for 2022-23, which was tabled Tuesday in the Parliament, noted.
The Economic Survey said that this subsector completely recovered from the pre-pandemic level in the second quarter of 2022-23, driven by the release of pent-up demand, ease of mobility restriction, and near-universal vaccination coverage. Going forward, strong momentum growth and an uptick in the high-frequency indicators (HFIs) for the contact-intensive services sector reflect a strong growth opportunity in the next fiscal.
PMI services, indicative of service sector activity, has also witnessed a strong rebound in recent months with the retreating of the price pressures of inputs and raw materials. India has been a major player in services trade, being among the top 10 services exporting countries in 2021, having increased its share in world commercial services exports from 3 per cent in 2015 to 4 per cent in 2021, the document said.
“India’s services exports have remained resilient during the Covid-19 pandemic and amid current geopolitical uncertainties, driven by higher demand for digital support, cloud services, and infrastructure modernisation catering to new challenges. To ensure the liberalisation of investment in various industries, the Government has permitted 100 per cent foreign participation in telecommunication services including all services and infrastructure providers, through the Automatic Route. The FDI ceiling in insurance companies was also raised from 49 to 74 per cent. Measures undertaken by the Government, such as the launch of the National Single-Window system and enhancement in the FDI ceiling through the automatic route, have played a significant role in facilitating investment,” the Economic Survey explained.
With the waning of the pandemic and external shocks on account of the Russia-Ukraine conflict, there is evidence of improvement in the performance of various services sub-sectors. The hotel industry is thriving with improvements in occupancy rate, increase in the average room rate (ARR) and rise in revenue per available room (RevPAR) which are now much nearer to the pre-pandemic level of 2019-20. The tourism sector is also showing signs of revival, with foreign tourist arrivals in India in 2022-23 growing month-on-month with the resumption of scheduled international flights and the easing of Covid-19 regulations,” the Survey further said.
The real estate sector has witnessed resilient growth in the current year, with housing sales and the launch of new houses surpassing in the second quarter of 2022-23 the pre-pandemic level of second quarter of 2019-20, the Survey informed.
“The government’s push to boost digital economy, growing internet penetration, rise in smartphone adoption and increased adoption of digital payments has also given a renewed push to these industries. The introduction and piloting of Central Bank Digital Currency (CBDC) will also provide a significant boost to digital financial services. They may lay the framework for another generation of financial innovation,” the Economic Survey document.