CH. NO.
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PARTICULARS
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INTRODUCTION GROWTH IN THE SERVICES DIVISION REASONS FOR GROWTH IN THE SERVICES DIVISION RECESSIONS AND THE SERVICES DIVISION HUMAN RESOURCES IN THE SERVICES DIVISION OFFSHORING THE FUTURE TRENDS IN THE SERVICE INDUSTRY PRESENT STATE OF INDIAN ECONOMY AND SERVICE INDUSTRY
GROWING IMPORTANCE OF SERVICE INDUSTRIES IN INDIA.
CONCLUSION BIBLOGRAPHY
Importance of Service Industries in India
1. INTRODUCTION: There are two major sectors in the Indian economy: the goods-producing sector and the service-producing sector. The goods-producing sector includes agriculture, forestry, and fishing; mining; construction; and manufacturing. The service-producing sector includes the divisions of (1) transportation, communications, and utilities; (2)wholesale trade; (3) retail trade; (4) finance, insurance, and real estate; (5) public administration; and (6) services. This sixth groupthe services divisionincludes a number of industries (see Table 1).
Table 1 Main Groups of Industries in the Services Division
Agricultural services (including landscaping and horticulture) Hotels and other places of lodging Personal services (including dry cleaning, tax preparation, and hair cutting) Business services (including temporary agencies and business software developers) Automotive services Miscellaneous repairs Motion pictures Amusements and recreation Healthcare Legal services Private education Social services Museums, zoos, and botanical gardens Membership organizations (including houses of worship and clubs) Engineering and management services (including consulting) Other miscellaneous services
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The general category of the service division includes a wide variety of industries, but can be categorized into primarily consumer-oriented (providing a service directly to a consumer), primarily business-oriented (providing a service directly to another business) or mixed (providing services to both businesses and individual consumers). Alternately, the services division activities can be described by their economic activities as physical, intellectual, aesthetic, and other experiential activities. Physical activities involve working with objects; examples include repairing cars, landscaping, cutting hair, or preparing a meal. Intellectual activities involve providing education or training, such as at a university or trade school. The aesthetic activities entail providing consumers with artistic or visual experiences; museums, theater performances, art shows, and musical performances are examples. Finally, other experiential activities involve providing customers with recreation, such as in amusement and theme parks, zoos, or campgrounds. A final way in which to categorize services is by what is transformed through the service. A service may transform a physical object, which occurs when something is repaired, altered, or improved. Having an article of clothing custom-made, a room remodeled, or an appliance repaired would involve transforming a physical object. Service division jobs may also change a consumer. Examples of changes to consumers are education, whereby the consumer learns knowledge or skills; health care, in which a person's health is improved; or personal services, such as when a hairstylist cuts a consumer's hair. A change to an organization is a third type of transformation involved in the service industry. For instance, a management consulting firm may make changes to an organization's structure or business processes to improve it. The final set of jobs in this categorization captures those professions in which there is no apparent object. For example, when an attorney provides legal representation to a client, or in professional sports competitions a service is provided, even though no specific object can be identified.
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Importance of Service Industries in India
2. GROWTH IN THE SERVICES DIVISION: The three industries within the services division that experienced the most growth in the last decade are as under: Business services: The business services areas in which the largest
numbers of jobs were gained were personnel supply and computer services. The personnel supply area includes organizations such as temporary employment agencies, traditional employment agencies, and other organizations that supply labor to other companies. The computer services industry includes massproduced software, custom programming, custom computer systems design, and computer leasing. The primary reason for growth in both of these areas has been changes in business processes.
Health care: In the health care industry, there were four components
that added large numbers of jobs: offices of physicians and other practitioners, nursing and personal care facilities, hospitals, and home health care. Two main reasons for this increase are new medical procedures, with which additional personnel are required to perform them, and because of the increased number of elderly persons in the India and their requisite health care needs.
Social services: Social services encompass daycare for children,
residential care for the elderly, and other family services; engineering and management services; private education; recreation and amusement; and membership organizations (e.g., houses of worship).
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Importance of Service Industries in India
3. REASONS FOR GROWTH IN THE SERVICES DIVISION:
The reasons for growth in the largest growth area of the services divisionthe businessoriented servicescan be linked to three broad economic developments relevant to those services:
Contractual labor arrangements: such as outsourcing, have created
opportunities in the field of personnel supply (e.g., temporary agencies and employee leasing).These contractual labor arrangements have also contributed to the growth of management services, such as consulting and facilities support. Finally, engineering services have changed; many engineers now operate under these new contractual arrangements rather than working for one employer as an employee.
Construction
activity: More construction brings higher demand for
engineering, architecture, surveying, landscaping, and horticultural services.
Improved technology: It has driven a higher demand for computer services,
such as computer repair, technical support, and software development. Management and engineering services, in the form of consulting, have also grown with this improved computer technology.
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Importance of Service Industries in India
4. RECESSIONS AND THE SERVICES DIVISION: Most areas of the services division are likely to experience slow growth or may even lose jobs during a recession.
Engineering and management are areas of the services division which
typically lose jobs in the average quarter of a recession. One reason for this is that these types of companies (e.g., management consulting firms, architectural firms) depend heavily on projects, not on ongoing production, which are likely to be cut back in times of economic recession.
Business services are also affected, particularly with personnel supply (e.g.,
employment agencies) and computer services (e.g., custom software creation).
Agricultural services are other affected area, because of the landscaping and
horticultural component; automotive services, such as car rentals and repairs; miscellaneous repairs; the lodging industry; personal services, such as laundry, cleaning, and garment services; and motion pictures. The areas of the services division that gain jobs more quickly during a recession than in normal times are:
Health care services, gaining jobs rapidly during an economic downturn due
to the nature of this industry; health care is unaffected by recession because consumers see it as a necessity rather than something that can be used less often depending on the economy. Moreover, because much of Indian health care costs
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Importance of Service Industries in India
are supplemented by Medicare, Medicaid, and private insurance, this funding is not susceptible to competition with other types of purchases, and the benefits continue to be available to Indians during times of recession and unemployment.
Private education, which is in higher demand when more people are
unemployed due to an economic recession. That is, if people can't find jobs, they tend to go back to school, resulting in higher demand for teachers and administrators in public education.
The other areaschild day care, amusements and recreations, and
private collegesthey tend to have fairly unattractive, low-paying jobs, which people are less likely to take in strong economic conditions, but more likely to take when the unemployment rate is high.
5. HUMAN RESOURCES IN THE SERVICES DIVISION:
As jobs in the Indian economy shift from the goods-producing sector to the services sector, so do many of the tasks involved in successful human resource management. Job analysis, recruitment and selection, training, performance appraisal, compensation, and labor relations are all likely to be affected by this current trend towards increased services jobs.
There are a few specific concerns for human resources in the service industry:
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Importance of Service Industries in India
Job analysis, which involves gathering information to understand how to
successfully perform a job, is likely to be conducted differently in service jobs than in manufacturing jobs. Because much of service work is knowledge work, in which job activities are less observable, this may mean differences in the way that job analysis is conducted. In service jobs, observation of job tasks may not be as useful as interviewing job incumbents or using a standardized form such as the Position Analysis Questionnaire.
Recruitment and selection practices in the services sector are as varied as
the types of positions in this sector. As mentioned previously, many of the job areas that grow during economic recessions do so because there are fewer attractive job options available. Thus, during strong economic conditions, these areas (i.e., health care, day care, amusement and recreation, and private colleges) may have difficulty recruiting job applicants, and may need to be more innovative in their approach.
Training in the services sector may require increased attention to technology
skills, as many service sector jobs now require the use of computers. Even entrylevel retail jobs make use of computer technology for inventory and sales, and the ability to use these machines is critical. Additionally, customer-service skills are a crucial training need in many service industry jobs; thus, this type of training is likely to increase in value in service jobs.
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Importance of Service Industries in India
Performance appraisal in the service sector is likely to be different than in the
goods producing sector. While a physical accounting of performance through measuring production is possible in manufacturing and similar industries, it is less possible in service jobs. There may not be observable outcomes in service sector jobs. Thus, appraising performance by measuring behaviors is more appropriate for this sector. Additionally, outcomes other than production can be measured in service jobs: customer satisfaction, sales in a retail location, or other outcomes can be meaningful ways to measure performance.
Compensation in the goods-producing sector can be specifically linked to
productivity (e.g., actual goods produced), but tying compensation to outcomes in the services sector may be more difficult. Some outcomes are easy to measure, such as in the number and value of homes sold by a real estate agent, but others are more difficult to assess, such as the degree to which a customer service representative has successfully resolved a customer's problem. Thus,
compensation that effectively rewards and motivates employees must be based on a performance appraisal that reliably and accurately captures performance. Human resources managers should use caution when developing rewards based on outcomes; a poorly designed incentive system may result in employees aiming for outcomes at the expense of customers. For instance, if a car repair shop pays employees for each new set of brakes they install, employees may begin to try to sell brakes to customers who don't need them in order to receive extra pay.
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Labor unions originally grew in prominence in goods-producing jobs but now
also represent many employees in the service industry. Although labor union membership has declined overall in recent decades, unions are still a presence in both manufacturing and service jobs. Many service sector employees seek representation from a union due to concerns about pay, benefits, and job security that may not be as strong as in some other areas of the economy.
6. OFFSHORING :
One topic that is becoming increasingly important to the services division of the Indian economy is offshoring. Offshoring occurs when Indian jobs and production are relocated to a foreign country. Offshoring can be contrasted with outsourcing, which occurs when a company contracts with another company to perform part of their work, but does not necessarily shift to a foreign country. While offshoring has received a great deal of recent media attention and increasing in the India, levels of job losses in the service sector due to offshoring are small relative to total Indian employment. However, these may either understate or overstate the total effect of offshoring on Indian employment. New jobs may have been created overseas by Indian companies, rather than shifting existing jobs away from the India. Offshoring of service jobs has increased and is likely continue to do so, experts believe. Research indicates that offshoring has increased pace in recent years.
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Importance of Service Industries in India
7. THE FUTURE TRENDS IN THE SERVICE INDUSTRY: Globally outsourcing industry would continue to grow.
Following the success of US and UK, more countries in the European Union would outsource their business.
Technological power shift from the West to the East as India and China emerge as major players.
Political backlash over outsourcing would come down as companies reap the benefit of outsourcing.
8. PRESENT STATE OF INDIAN ECONOMY AND SERVICE INDUSTRY:
The global recession only partially succeeded in slowing the Indian economy thanks to the continual offsetting growth of service sector to nearly 10% in the year 2010-11. The Economic Survey 2011-12 presented in the Lok Sabha on Mar 15, 2012, suggests that the Services Sector continues to remain growth engine for Indian Economy. The Economic Survey points out that the Services Sector grew by 9.4% which was little higher than 9.3% in the previous year. The dampening effect of international investment into industry sector slowed the GDP growth rate to 6.9% unleashing a flurry of worries for the Government. The industry sector contributes nearly 26% to the GDP. However, maintaining the growth momentum the Service Sector recorded expected growth rate to bottom out the industrial slow down across the globe. The Sector along with the agricultural sector, placed India in the top fastest growing economies of the world despite Euro zone crisis and North American economic instabilities.
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Importance of Service Industries in India
The Survey clearly says that the economy has successfully navigated the turbulent years of the recent global economic crisis because of the vitality of this Sector in the domestic economy and its prominent role in India's external economic interactions. The Survey reveals that the share of services in India's GDP at factor cost (at current prices) increased from 33.5% in 1950-1 to 55.1% in 2010-11 and to 56.3% in 2011-12 as per Advance Estimates (AE). If construction is also included, the Service Sector's share increased to 63.3% in 2010-11 and 64.4% in 2011-12. Projecting the employment figures the Survey says that while agriculture continues to be the primary employment-providing sector, the Services Sector (including construction) is in second place. As per the National Sample Survey Organisation's (NSSO) report on Employment and Unemployment Situation in India 2009-10, on the basis of usually working persons in the principal status and subsidiary status, for every 1000 people employed in rural and urban India, 679 and 75 people are employed in the agriculture sector, 241 and 683 in services sector (including construction) and 80 and 242 in the industrial sector, respectively. The FDI inflows to the Services Sector (top five sectors including construction) have also increased by 36.8% to USD 9.3 billion to the Services Sector in 2011-12 (AprilDecember).
Analysing the States' performance in the Service Sector the Economic Survey 2011-12 notes that the highest growth rates of the Services Sector are in the north-eastern States of Arunachal Pradesh (34.9%) and Sikkim (30.1%). Among the other States, Goa with
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20.1% and Bihar with 16.6% growth top the list. This is over and above their very high growth rates in 2008-09. Other States with higher than national average growth in the sector are Kerala, Tamil Nadu, Maharashtra and Mizoram. The Survey, while outlining the performance of major services like Tourism including hotels and restaurants, Shipping, IT and ITeS and Construction Services expresses no cause for worry despite a slight moderation in services growth to 9.4% (as also in 201011). It says this moderation is due to the steep fall in growth of public administration and defence services reflecting fiscal consolidation. In fact growth in trade, hotels and restaurants is more robust at 11.2% and retail-sector growth is expected to be more robust in 2012-13. With hardening of interest rates, the real worry would be with the real estate ownership of dwellings and business services segment, the growth of which has started decelerating and construction services with growth falling by nearly half. The outlook of the Services Sector in the domestic economy is linked to the prospects of the sector externally. While software service exports have continued to be steady, the unfolding events in the euro area could lead to some sluggishness in this sector.
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Importance of Service Industries in India
9. GROWING IMPORTANCE OF SERVICE INDUSTRIES IN INDIA.
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Importance of Service Industries in India
There has been an increase in demand for the services of professionally qualified technicians with establishment of technical institutes. Communication services like entertainment, education and the right to information by the public is more important. Due to increasing standards in education there is an increasing demand for educational services. Primary, secondary, higher secondary schools, junior degree collgese are the institutes which are in great demand. As the number of students goes up the demand for private classes, tutions, etc. also increases. Banking services have become necessary to meet financial requirements of the public and the national industrial sector. Personal care services are essential to develop potentiality of an individual for a perfect personality and positive image. Electricity services are required for the benefit of society, industry and so on. With the increasing amount of trade and business, done by road there has been a demand for transport services which benefits various automobile manufacturers. Large section of population prefer having their own vehicles, proving a good business propositions for automatic industry. The tourism has geared itself to make the tourists enjoy the holiday seasons in the places of their choice and take them away from monotonous existence of cities. Adequate hospital services are essential for the well being of the society. Hospitality services work on the strategies to satisfy the business class through their service in terms of comfort and satisfaction. The above activities have left
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the management scientists, professionals and socio-economic thinkers to analyze and understand that managing services need attention, to stay in business. As the natural resources are depleting and need for conservation is increasing we see the coming of service providers like pollution control agencies, car pools etc. The development in information technology has given rise to services like mobiles, World Wide Web etc.Professional requirements need a change when technology develops and evolves. This necessitates proficiency in the management level by giving a boost to abilities.
10. CONCLUSION
The service industry forms a backbone of social and economic development of
India. It has emerged as the largest and fastest-growing sectors in the world economy, making higher contributions to the global output and employment. Its growth rate has been higher than that of agriculture and manufacturing sectors. It is a large and most dynamic part of the Indian economy both in terms of employment potential and contribution to national income. It covers a wide range of activities, such as trading, transportation and communication, financial, real estate and business services, as well as community, social and personal services. In India, services sector continues to be a star performer as its share in GDP has climbed from 58% in 2010-11 to 59% in 2011-12 with a growth rate of 9.4%.
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The Reference Books
Production Management
Author
L .C. Jambh
Websites:-
http://business.gov.in/Industry_services/services_sector.php http://www.tradingeconomics.com/india/gdp-growth-annual
http://www.moneycontrol.com/news/economy/economic-survey-servicessector-grows-by-94-despite-slowing-gdp-growth_680804.html http://indiabudget.nic.in/es2010-11/echap-10.pdf http://www.iaspassion.com/article.aspx?artid=2365 http://www.cci.in/upload/Connect/file/FileSZF[REGJan%20%20Mar%202010%20connect.pdf
http://wiki.answers.com/Q/What_is_the_importance_of_service_industry#ixz z1vJASdSro
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