The service sector, which has surpassed manufacturing sectors in terms of overall contribution to the gross domestic product over the last few years and forms about 40 per cent of the GDP, has shown a steady growth in many areas.
This has been highlighted by a recent survey made by the Associations Council of the Confederation of Indian Industry.
The survey which covers 12 major services sectors has been conducted for the period April-December 2002 estimated over April-December 2001.
Out of 12 sectors surveyed, three have reported excellent growth, five have recorded high growth of 10 per cent and above, two sectors have reported moderate growth of 0 to 10 per cent. Only two sectors have reported negative growth.
Housing finance and cellular services have recorded 40 per cent and 78 per cent growth, respectively.
Because of the government's commitment to create road infrastructure, housing facilities for the millions by virtue of higher provisions and incentives in the Budget, there has been a commendable increase in the amount of sanctions and disbursements by the housing finance companies in recent months.
This has on the other hand given a spurt to the construction activity which has now recorded 10 per cent growth.
The survey also highlights that construction and housing finance would continue to move upwards provided some issues and constraints including workable foreclosure laws are resolved by the government.
The de-growth in the project export (-10 per cent) is basically linked to order position, inadequate incentives in addition to some problems including procedural hurdles.
According to the survey, cellular services which have recorded 78 per cent growth and have maintained the roundabout 80 per cent growth achieved in the financial year 2001-02 have tremendous prospects in this country and rural telephony and resolution of disputes would also create huge growth for this sector.
Air cargo transportation (10 per cent), including export cargo (11 per cent) and import cargo (10 per cent) has done better in April-December 2002 compared to (6.4 per cent), (6.2 per cent) and (7.2 per cent) in April-September 2002.
The survey confirms positive trend in the hotel and tourism industry which has recorded positive growth of 12 per cent from negative growth (-10 per cent ) achieved during April-September 2002.
After the September 11 attacks, the hotel industry and occupancy rates had suffered very badly and for the first time since then the situation has improved in this quarter. However, overall the position is not as buoyant as before.
The survey stresses for providing much more incentives, care for this vital segment in the services sector which is a major foreign exchange earner.
According to the survey, there has not been enough addition to electric power generation and the required investment in projects is not getting the required momentum. The monsoon failure and delay has adversely affected hydel power generation which has recorded (-8 per cent) growth.
Thermal power generation has maintained more or less the same growth (6.3 per cent) and nuclear power generation which had recorded negative growth for the first time in April-September 2002 has recorded positive growth this time.
Privatisation of power supply and distribution requires a lot of groundwork to clear the backlog in the existing power supply and distribution network. Finance is also a major constraint in this sector.
Leasing and hire purchase which continues to be negative since long has again recorded (-5 per cent) negative growth in this quarter and is subject to restrictive laws and procedures.
Recovery is also among other major constraints and is responsible for bad performance for this sector, confirms the Ascon survey.
The survey brought out for April-December 2002 confirms that the services sector has tremendous possibilities and enough bearing on economic growth and indicates comparatively better situation than that done for April-September 2002.
The survey stresses the need for redressing some basic issues and constraints like services tax -- high stamp duties, multiplicity and varying state level regulations, service level agreements et cetera -- for helping the services sector to grow alongside the manufacturing sector.
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