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314 Economic Survey 2021-22

Startups in India have grown remarkably over the last six years. The number of new
recognised starups have increased to over 14,000 in 2021-22 from only 733 in 2016-17.
As a result, India has become the third largest startup ecosystem in the world after the
US and China. Further, a record 44 Indian startups have achieved unicorn status in 2021
taking the overall tally of unicorns in India to 83, most of these are in the services sector.

INTRODUCTION

9.1 Services sector contributes over 50 per cent to India’s GDP. While Covid-19 pandemic has
had an adverse impact on most sectors of the economy, the services sector has been the worst
affected as its’ share in India’s GVA declined from 55 per cent in 2019-20 to 53 per cent in
2021-22. Within the services sector, the effect of Covid-19 has been varied. While non-contact
1
services such as information, communication, financial, professional and business services have
remained resilient, the impact has been much severe on contact based services such as tourism,
retail trade, hotel, entertainment and recreation, etc.

IMPACT OF COVID-19 AND SEQUENTIAL RECOVERY

9.2 The services sector contracted by 8.4 per cent Year on Year (YoY) in 2020-21 (Table 1).
This decline was driven by a sharp contraction of 18.2 per cent YoY in the sub-sector ‘Trade,
hotels, transport, communication & services related to broadcasting’. Owing to its contact
intensive nature, the services included in this sub-sector had to bear the maximum brunt of the
disruptions caused by the prevailing pandemic. The sub-sector ‘Public administration, defence
& other services’ which includes expenditure by the government on one hand and services such
as health, education, recreation etc, on the other, contracted by 4.6 per cent YoY in 2020-21.
The relatively less contact intensive sub-sector ‘Financial, real estate & professional services’
was the least impacted, with a marginal decline of 1.5 per cent YoY in its GVA during 2020-21
(Table 1).
9.3 During the first half of the current fiscal year, the services sector has registered a steady
recovery. Overall, the services sector grew by 10.8 per cent YoY in first half (H1) 2021-22
(Table 1). A closer look at the quarterly estimates shows that Gross Value Added (GVA) in
services sector (excluding construction) crossed its pre-pandemic level in Q2 2021-22 (Table
2
2, which compares the performance of quarterly GVA over the GVA in Q3 2019-20). The sub-
sector ‘Trade, hotels, transport, communication & services related to broadcasting’, which was
the worst hit last year, grew by 18.4 per cent YoY in H1 2021-22. However, the quarterly GVA
of this sub-sector is still below its pre-pandemic level (Table 2). On the other hand, GVA of
‘Public administration, defence & other services’ sub-sector witnessed a robust recovery. During
H1 2021-22, the sub-sector grew by 12 per cent YoY, surpassing its pre pandemic level in
Q2 2021-22 (Table 2). The ramping up of government expenditure in the wake of Covid-19 has
contributed to the recovery of this sub-sector. Further, the sub-sector ‘Financial, real estate &
professional services’ expanded by 5.8 per cent YoY in H1 2021-22, its GVA remained resilient
throughout (Table 2).

1 As per the Advance Estimates of 2021-22.
2 Pre-pandemic level denotes Q3 2019-20 GVA