The worst hit sector – Service sector. Service sector has been a key driver of both Global and Indian economy over the last three decades. LPG reforms (Liberalisation Privatisation Globalisationof 1991, introduced by former prime minister Manmohan Singh) also had a prime focus on service and manufacturing sector.
But India’s manufacturing sector has been stagnant since last three decades at 16% and the target to reach 25% of the total GDP is somewhere vanished into the air. As a result India’s growth has only came into result via Service sector! (55 Percent contributions in GDP). Services export is far greater than Goods export.
But, as you know, before the pandemic hit the world, service sector was Booming. India was becoming a major quality service provider. However, after the lockdown of March- consecutive 4 months till June- the hardest hit any sector has faced was the Service sector. Thousands of employees got fired from there lucrative positions. Job Security cannot be seen anywhere; government or private. This can be seen from IT sector employees to teachers and labourers. Given the uncertainty in the world market and the slowdown of developed economy by 8% this year, India service let growth as to depend mostly on the Domestic economy.
Have we done enough to revive the Service sector ?
Yes, you would say that 20 lakh crore stimulus package- introduced for the recovery of economy-by prime minister Narendra Modi. The package had a strong focus on MSME sector, employees provident fund, power district distribution companies and taxation, among other affected areas. Most of the Stimulus package is in the form of funding and loan opportunities and injecting liquidity into the market.
Not only this, the sector finds little mention or attention in the governments Aatm-nirbhar reform package. The sector significance in the economy continues to grow with its share amounting to two third of the total FDI inflows into India and about 38% of total exports.
Now in the post pandemic world, Service sector is struggling hard to came back in its neutral state.
From tourism, aviation, shipping, space to call centres and delivery services the sandstill in activity is bound to have a knockout effect on employment, production and the economy as a whole.
In the short run, government needs to make cuts in the VAT, make provisions for GST holidays, compensate for wages of workers under distress and draft flexible terms for working capital credit.
The government should focus on the sector by announcing scheme based export incentives and provides interim relief by continuing with the existence schemes in the short run.