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Services CHAPTER

The services sector as a whole has mostly recovered from the impact of the nationwide
lockdown imposed during March-May 2020 and localised lockdowns during the second
covid wave in April-May 2021, although some of the sub-sectors continue to be impacted.
During the first half of 2021-22, the Services sector grew by 10.8 per cent. The recovery
is more pronounced given the Gross Value Added (GVA) of Services crossed the pre-
pandemic level in Q2 2021-22. However, being a contact intensive sub-sector, GVA of
‘Trade, hotels, transport, communication & services related to broadcasting’ still remains
below its pre-pandemic level. The overall Services sector GVA is expected to grow by
8.2 per cent in 2021-22, although the spread of Omicron variant brings in a degree of
uncertainty for near term, especially in segments that require human contact.

High frequency indicators such as services purchasing managers’ index, air freight and
rail freight bottomed out in 2020. The impact of second covid wave in April-May 2021 on
these indicators was much more muted as compared to during the full lockdown in March-
May 2020. During April-December 2021, rail freight crossed its pre-pandemic level while
air freight and port traffic almost reached their pre-pandemic level. Domestic air and rail
passenger traffic is also increasing gradually. The global issue of container shortage is
impacting port traffic.
Services exports, after the initial slump during the first three quarters of 2020-21,
surpassed its pre-pandemic level in Q4 2020-21. During H1 2021-22, services exports
grew by 21.6 per cent, deriving strength from global demand for software and IT services
exports. India’s share in world commercial services exports increased to 4.1 per cent
in 2020. Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21,
adding 1.38 lakh employees during the same period. The Government undertook a major
reform of removing telecom regulations in the IT-BPO sector. As per a survey conducted
by NASSCOM, these reforms have reduced compliance burden, enhanced productivity,
increased global competitiveness and lowered the cost of doing business in India. Similarly,
the Government has opened up space sector to private players, which will enhance the
socio-economic use of space assets and activities. During the first half of 2021-22, the
Services sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of
the total FDI inflows into India.