Internationalization of Service Sector 1

8/7/2019 Internationalization of Service Sector 1

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ConceptThe Service Sector is one of the three economic sectors,the others being the secondary sector (approximatelymanufacturing) and the primary sector (extraction suchas mining, agriculture and fishing).Service Sector Industry is basically providing servicesinstead of manufacturing and developing the products tothe end User.


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StatisticsThe software services in Indian economy increased by33 percent which registered a revenue of USD 31.4billion

Business services grew by 82.4 %Engineering services and products exports grew by 23 %and earned a revenue of USD 4.9 billionServices concerning personal, cultural, and recreationalhad a growth of 96 %

Financial services had a rise of 88.5 %Travel, transport, and insurance grew by 23 %The software services witnessed an alarming rise of 35.5% and reached a lump some amount of USD 18billion.


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Sectors ToC

over Information TechnologyIT-enabled services (ITeS)

TelecommunicationsFinancial ServicesBankingInsurance

Hotels and Restaurants


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Sectors


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IT Sector IT industry in India comprises of software industry andinformation technology enabled services (ITES), which

also includes business process outsourcing (BPO)industry.The origin of IT industry in India can be traced to 1974


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StatisticsIT services will contribute over 7.5 % of the overall GDP.IT Exports will account for 35% of the total exports withpotential for 2.2 million jobs in IT by 2008.IT industry will attract Foreign Direct Investment (FDI) of U.S. $ 4-5 billion.Market capitalization of IT shares will be around U.S. $225 billion.


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A s per the study of N A SS C OM this industry has alsorecorded revenue of US$ 64 billion with a growth rate of

33% in the fiscal year ended in 2008.software export from India accounts for more than 65%of the total software revenue.


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Factors of growthIndian Education SystemHigh Quality Human Resource

C ompetitive C ostsInfrastructure Scenario


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Reasons BPOcompanies want to focus on mission-critical issues andare not interested in frittering away time and energy onnon-core functions.

as businesses grow exponentially, the companies do nothave resources have resources to cope with the growthand as a result they outsource part of their businessprocesses.companies may not have the best talent and skills to do

the job themselves.


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India has an 8-12 hour time zone difference withrespect to the US and other developed markets. Most of the Indian call centers servicing A merican customers

have timings between 5:30 p.m. to 9:30 a.m. This timezone difference allows Indian companies BPOs toservice A merican clients by working in the nights. Last,but not the least, India has a huge pool of Englishspeaking workforce that provides excellent voice basedservices at extremely competitive costs resulting in hugesavings for companies.


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TelecommunicationTelecom in the real sense means transfer of informationbetween two distant points in space.

The Indian telecommunication industry , with about525 million mobile phone connections (Dec 2009), is thethird largest telecommunication network in the world andthe second largest in terms of number of wirelessconnections.


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The total number of telephones in the country crossedthe 543 million mark on Oct 2009.The overall tele-density has increased to 44.85% in Oct 2009.The total wireless subscribers (GSM, C DMA & WLL (F))base is more than 543.20 million now. The wirelinesegment subscriber base stood at 37.06 million with adecline of 0.12 million in Dec 2009.


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T elephony Subscribers (Wireless and Landline): 562.21 million(Dec 2009)C ellphones: 525.15 million (Dec 2009)Land Lines: 37.06 million (Dec 2009)B road B and Subscription: 7.83 million (Dec 2009)M onthly C ellphone Addition: 19.20 million (Dec 2009)T eledensity: 47.89% (Dec 2009)

rojected teledensity: 893 million, 64.69% of population by 2012.The total subscriber base for internet in India is 13.54 million.A t the end of November 2009, total broadband connections in thecountry have reached 7.57 million.


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B roadcastingMain article: Media of IndiaR

adio broadcast stations:A

M 153, FM 91, shortwave68 (1998)R adios: 116 million (1997)T elevision terrestrial broadcast stations: 562 (of which 82 stations have 1 kW or greater power and 480

stations have less than 1 kW of power) (1997)T elevisions: 110 million (2006)


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Financial Sector The Financial sector in India comprises of variedelements financial institutions, financial markets,financial instruments and financial services.The Reserve Bank of India (RBI) acts as the main creditregulator and is the apex institution in the Indian financialsystem.The other important financial institutions are thecommercial banks (both public and private sector),cooperative banks, regional rural banks anddevelopment banks.


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Non banking financial companies (NBF C s) comprise of finance and leasing companies and institutions like LI C ,GIC , UTI, Mutual funds, Provident Funds, Post OfficeBanks etc. the dominant segment of the Indian financialsector is the banking industry as they manage more than80% of the funds in the economy.


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Financial servicesC orporate finance is that segment in Indian financialservices where financial decisions are arrived at bybusiness enterprises and accordingly the businessstrategies are made. Maximizing the corporate value isthe main aim of corporate finance, thereby minimizingthe corporate risk.


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Personal finance is entirely related to the application of finance principles, thereby helping an individual to makenecessary monetary decisions. Individuals or families

through this, obtain, budget, save, and spend resources(entirely monetary) taking into consideration theassociated financial risks and time period. The personalfinance apparatus includes savings accounts, creditcards and consumer loans, stock market investments,retirement plans, social security benefits, insurancepolicies, and income tax administration.


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Public finance is entirely an economy related conceptwhereby it is related with paying for governmentalactivities. This field helps the entire economy to have anidea about what the government is doing, how much hasbeen its collections and from whom have they beencollecting these resources.


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Opportunites in FinanceThe distributed financial gain of the venture capital fundsis not taxed. The financial gains are taxed after theinvestors receive as incomeThe have more insurance and banking productsintroduced into the market to broaden the spectrumwhich in turn would boost the growth of the sector Further nullification of the regulations have to take placein order to increase the competition and boost the growthof the financial sector to reach the US$ 51 billion mark


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The banking system in India is the most extensive. Thetotal asset value of the entire banking sector in India isnearly US$ 270 billion. The total deposits is nearly US$220 billion.


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BankingB anking in India originated in the last decades of the18th century. The oldest bank in existence in India is theState Bank of India , a government-owned bank that

traces its origins back to June 1806.C urrently, India has 96 scheduled commercial banks(S C Bs) - 27 public sector banks (that is with theGovernment of India holding a stake), 31 private banks(these do not have government stake; they may bepublicly listed and traded on stock exchanges) and 38foreign banks. They have a combined network of over 53,000 branches and 17,000 A TMs. A ccording to areport by I C RA Limited, a rating agency, the publicsector banks hold over 75 percent of total assets of thebanking industry, with the private and foreign banksholding 18.2% and 6.5% respectively


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Statistics BankingThe total assets of all scheduled commercial banks byend-March 2010 is projected to touch Rs 40,90,000crore.The banking industry is slated for growth in future with amore qualitative rather than quantitative approach.


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a consolidation phase in the banking industry in India isexpected in the near future with mergers andacquisitions gathering more pace. One might also seemergers between public sector banks or public sector banks and private banks. C redit cards, insurance are thenext best strategic places where alliances can beformed.


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The Indian banks are hopeful of becoming a globalbrand as they are the major source of financial sector revenue and profit growth.The profit pool of the Indian banking industry is probableto augment from US$ 4.8 billion in 2005 to US$ 20 billionin 2010 and further to US$ 40 billion by 2015.This growth and expansion pace would be driven by thechunk of middle class population.


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Insurance Sector Insurance sector in India is one of the booming sectorsof the economy and is growing at the rate of 15-20 per cent annum. Together with banking services, it

contributes to about 7 per cent to the country's GDP.Insurance is a federal subject in India and Insuranceindustry in India is governed by Insurance A ct, 1938, theLife Insurance C orporation A ct, 1956 and GeneralInsurance Business (Nationalisation) A ct, 1972,Insurance Regulatory and Development A uthority (IRD A )A ct, 1999 and other related A cts.


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Basic Funda

It is due to globalization, deregulation and also terroristattacks; that the insurance industry is undergoing amassive change.In the words of a layman, insurance means managingrisk.


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The insurance company works in a manner by collectingpremiums from policy holders, investing the money(usually in low risk investments), and then reimbursing

this same money once the person passes away or thepolicy matures. The greater the probability for a personto have a shorter life span than the average mark, thehigher premium that person has to pay. The case is thesame for all other types of insurance, includingautomobile, health and property.


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Types of Insurence

Life Insurance - Insurance guaranteeing a specific sumof money to a designated beneficiary upon the deathof the insured, or to the insured if he or she livesbeyond a certain age.Health Insurance - Insurance against expensesincurred through illness of the insured.Liability Insurance - This insures property such asautomobiles, property and professional/businessmishaps.


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Hotel Industry

Hotel Industry in India has witnessed tremendous boom inrecent years.

The 'Incredible India' destination campaign and the recentlylaunched ' A tithi Devo Bhavah' ( A DB) campaign havealso helped in the growth of domestic and internationaltourism and consequently the hotel industry.


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ReasonsThe opening up of the aviation industry in India hasexciting opportunities for hotel industry as it relies onairlines to transport 80% of international arrivals.

upgrading of national highways connecting various partsof India has opened new avenues for the development of budget hotels in India.Taking advantage of this opportunity Tata group andanother hotel chain called 'Homotel' have entered thisbusiness segment.


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StatsA ccording to a report, Hotel Industry in India currentlyhas supply of 110,000 rooms and there is a shortage of 150,000 rooms fueling hotel room rates across India.

A ccording to estimates demand is going to exceedsupply by at least 100% over the next 2 years.With demand-supply disparity, hotel rates in India arelikely to rise by 25% annually and occupancy by 80%,over the next two years.


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Statistics Hotel

Hotel Industry in India is also set to get a fillip with Delhihosting 2010 C ommonwealth Games. Government hasapproved 300 hotel projects, nearly half of which are inthe luxury range. The future scenario of Indian hotelindustry looks extremely rosy.


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Travel and tourism industry

Travel and tourism industry is the second highest foreignexchange earner for India, and the government hasgiven travel & tourism organizations export house status.


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Statistics tourismA ccording to an estimate total direct employment in thetourism sector is around 20 million.In the year 2002, the Government of India announced a

New Tourism Policy to give boost to the tourism sector. Thepolicy is built around the 7-S Mantra of Swaagat (welcome),Soochanaa (information), Suvidhaa (facilitation), Surakshaa(security), Sahyog (cooperation), Sanrachnaa(infrastructure) and Safaai (cleanliness).50% of profits derived by hotels, travel agents and tour operators in foreign exchange are exempt from income tax.The remaining profits are also exempt if reinvested in atourism related project.


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Reasons Tourism

the tremendous growth of Indian economy has resultedin more disposable income in the hands of middle class,thereby prompting increasingly large number of peopleto spend money on vacations abroad or at home.India is a booming IT hub and more and more people arecoming to India on business trips.aggressive advertising campaign "Incredible India" byTourism Ministry has played a major role in changing theimage of India.


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Ending TourismC onde Nast ranked India amongst the top 10 touristdestinations. JBI C ranked her as the fifth most attractiveinvestment destination. Besides, India is probably the

only country that offers various categories of tourism.These include history tourism, adventure tourism,medical tourism (ayurveda and other forms of Indianmedications), eco tourism, cultural tourism, rural tourism,religious/pilgrimage tourism, spiritual tourism, and beachtourism etc.


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A viation Sector

The open sky policy of the government has helped a lotof overseas players entering the aviation market in India.From then, it has only been growing in terms of playersand the number of aircrafts. A t present, private airlinesaccount for around 75% portion of the domestic aviationmarket.


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Statistics A irlinesThe 9th largest aviation market in the world is India.Taking the help of the statistics from the Ministry of C ivilA viation, approximately 29.8 million passengers traveled

to/from India in 2008, showing a surge of 30% from2007. The prediction stated that international passengerswill touch 50 million by 2015. More opportunities in theaviation industry in India are likely to make way for about69 foreign airlines from 49 countries.


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The Indian C ivil A viation market grew at a CA GR of 18%, being valued round US$ 5.6 billion in 2008.

The investment plans to the tune of US$ 9 billion hasbeen made by the A viation Ministry for modernizing theexisting airports by 2010.


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Market share airlines


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Sector Wise offshore performance

Indian IT sector

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Internationalization of Service Sector 1