The services sector, which has been hardest hit by the pandemic, is expected to grow 8.2% in FY22. However, retail, hospitality, transport, communication and services related to broadcasting still remain below pre-pandemic levels.
The 2021-22 economic study indicates that the whole sector contracted for the first time by 8.4% in 2020-21. During the first half of 2021-2022, the services sector grew by 10.8%, as the gross value added (GVA) of services exceeded the pre-pandemic level in the second quarter of FY22 .
Services exports, which contribute more than 50% to India’s GDP, after the initial plunge in the first three quarters of 2020-2021, surpassed their pre-pandemic level in the fourth quarter of FY21. In the first half of this fiscal year, services exports grew by 21.6%, drawing strength from global export demand for computer software and services.
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While the pandemic has had a negative impact on most sectors of the economy, the service sector has been hit hardest, with its share in India’s GVA falling from 55% in 2019-20 to 53% in 2021- 22.
The effect of the pandemic was varied within the service sector, as contactless services such as information, communication, financial, professional and business services remained resilient, while the impact was much more severe on contact-based services such as tourism. , retail, hospitality, entertainment and leisure, etc.
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During the first half of 2021-2022, the services sector received more than $16.7 billion in FDI, which accounts for almost 54% of the total FDI inflows in India. This is more than 29% less than foreign direct investment inflows into services during the corresponding period last year. This decline was driven by the computer software and hardware sub-sector.
IT-BPM turnover on the rise
The information technology and business process management (IT-BPM) sector is a major segment of Indian services. In 2020-21, according to NASSCOM preliminary estimates, IT-BPM revenue (excluding e-commerce) reached $194 billion, growing 2.26% year-on-year, adding 1.38 lakh of employees.
The share of IT services has been constant for many years. The share of BPM services remained the same at 19.8%, while that of hardware services improved slightly to 8.3%. In 2020-21, IT services, software and engineering services, BPM services and hardware services generated revenues of $99.1 billion, $40.3 billion, $38.5 billion and $16.1 billion, respectively.