Service Sector Book 602 PDF

EMERGING TRENDS
IN SERVICES SECTOR
U. K. RAO
itor G
.
Ed
National Institute for Micro, Small and Medium Enterprises (ni-msme)

(An Organisation of Ministry of MSME, Government of India)
Yousufguda , Hyderabad – 500 045
EMERGING TRENDS IN
SERVICES SECTOR
Editor G.U.K.RAO
National Institute for Micro, Small and Medium Enterprises

(An Organisation of Ministry of MSME)
Government of India
Yousufguda , Hyderabad – 500 045
Tel: 91-40-23608544 – 46, Fax: 91-40-23608547, 23608956
www.nimsme.org, E-mail: registrar@ nimsme.org
Information contained in this work has been obtained from the professional
experiences of the Contributors and is believed to be reliable. However, neither
ni-msme nor the editor shall be responsible for any errors, omissions, or damages
arising out of use of this information.
Copyright  2013, ni-msme

First reprint 2013
Price : `.450/-
No part of this publication may be reproduced or distributed in any form or by any

means, electronic, mechanical, photocopying, recording, or otherwise or stored in a
database or retrieval system without the prior written permission of the publishers.
The program listings (if any) may be entered, stored and executed in a computer
system, but they may not be reproduced for publication.
This edition can be exported from India only by the publishers, ni-msme
ISBN 81-901608-8-5
Published by
National Institute for Micro, Small & Medium Enterprises
(An Organisation of the Ministry of MSME)
Government of India
Yousufguda, Hyderabad - 500 045
Ph : +91-40-23608544 / 23633499
FOREWORD
The MSMEs, especially the micro and small enterprises are the
backbone of our economy. They serve a double purpose. On
one hand, they help reduce the unemployment rate, as the
entrepreneurs not only find gainful employment for
themselves and their family members, but often take in a few
other workers too. On the other, they make a noticeable
contribution to the country's GDP.
Taking note of this, the Government of India, over the past

six and half decades of the country's independence, has been formulating policies
and programmes to encourage new enterprises to come up and to help them
progress and prosper.
In recent years, among the MSMEs the services sector has been flourishing
with over 55% share in the GDP. The sector holds immense possibilities for
enterprise start-up in many areas. Undoubtedly it is a rising sector with huge
potential. However, to chalk out policies and schemes, authentic and well-
researched field data is very necessary, which is woefully short with regard to this
sector.
It is precisely for this reason that ni-msme, with its insight and expertise of
MSME sector, has attempted to provide an overview of the services sector through
this volume. The main focus themes covered in the chapters of the volume are:
Development of service enterprises: Policy consideration; Devising proper
categorization of services; Services sector and exports; Sustainability in the service
enterprises; Human resources for emerging services; Role of service sector in
Global value chain and Sunrise service sectors.
The present volume has not only covered the above themes but also tried to
project future trends of the services sector.
In this context, the volume “Emerging Trends in Services Sector”, a

compilation of research papers on different facets of the sector, contributed by
eminent author’s is brought out by ni-msme, makes itself highly useful,
informative and relevant.
I especially congratulate my colleague Dr. G.U.K. Rao for his dedication and
i
relentless effort for making the volume rich by his invaluable contributions on
ni-msme Golden jubilee year. I hope, as suggested, another volume on social
services would also be taken up in due course.
Hopefully all those concerned with MSME promotion and development will
find this volume useful, informative and for further research in the services sector.
This publication is the first in the series. Suggestions for improvement in its
content and presentation are welcome.
M.CHANDRASEKHAR REDDY
Director General
ii
PREFACE
MSME sector is the plank on which the national economy is keeled. Its
significance has been proved time and again, both among the developed countries
and the developing ones. In the past six and half decades since our independence,
the structure and composition of the MSME sector has undergone sea changes,
getting annexed with new streams of activities, sophisticated technologies, adding
on modern features. Particularly in recent years, the services sector has emerged as
the avenue of opportunities, in relation to both rural and urban contexts. The
climate of globalisation has further accentuated the possibilities.
Recognising the vast potential of the services sector for enterprise creation
and income generation activities, which are the remedy for the maladies of
unemployment and low income/poverty, the Government of India is formulating
some initiatives to encourage the growth of the sector via new start-ups. For this
exercise, accurate and well-researched data – facts from the field as well as experts'
analysis – is very necessary. The regretful truth of the matter is, the data on services
sector is scanty at best, and the little that is available is scattered and vague.
I am sure as the author, the book titled Emerging Trends in Services Sector,
being published by ni-msme, comes as a handy source of information to all
intellectuals. The volume is a collection of essays/research papers on different
facets and organs of the services sector, emanating from experts on the subject. The
present volume gives good attention to the streams of retail, information
technology, health care, tourism and hospitality, insurance and finance; but further
there would be scope to detail the very relevant and important streams of
construction and realting, entertainment, information, education and social
services.
Publishing a volume always calls for coordination and cooperation on various

fronts from different individuals. A book of this nature requires support in terms of
expertise, skills and funds. Therefore the author’s gratitude to many quarters is
natural. As such my sincere thanks goes to ni-msme which has come forward to
publish this volume of essays in its Golden Jubilee Year.
I am grateful to the Ministry of MSME, New Delhi for graciously enabling

our endeavour. My sincere thanks go to our Director General, Prof.
M. Chandrasekhar Reddy, who has been encouraging and providing guidance for
the publication of the volume and has been a constant source of inspiration. My
iii
special thanks are due to my colleagues, members of faculty who had contributed
papers and made my task easy by sharing the burden; also to all the other experts
who have contributed their views and suggestions which have been incorporated in
the volume.
My special thanks are also due to Dr. Girija Bai who has advised and
supported me in the editorial work. I also thank Mr. L. Ashok Kumar for his ready
response for typing the matter according to my demands on countless number of
occasions
Dr. G.U.K. Rao
iv
CONTENT
S No Title Page Nos

Forward
Preface
1. Service Sector Enterprises in Indian Economy by Dr. G.U.K. Rao 1
2. Service Sector - Policies and Programmes Support Mechanism 69
by Dr. Bhagwan Prasad
3. Promotion of Rural Service Enterprises by R.S. Singh 77
4. Business Trends in IT and ITeS Industries in India 85
5. IT and ITes Industry in India 87
6. IT Enabled Services in Power Distributions by M.V.S. Birinchi 91
7. Multimedia Development as important Service Enterprise by 99
Srinivas Goud
8. Retail Services Sector in India by Dr. G.U.K. Rao 103
9. Developing Successful Micro Entrepreneur in Health Care 135
through Franchising - A Global Experience by Srikanth
Kumar Padhi
10. Infotainment by P. Udaya Shanker 151
11. Consultancy Needs for Service Sector by N.R. Dattatreya and 157
Dr. G.U.K. Rao
12. LSCM Application as small e-Business for Manufacturing and 163
Service Sector Enterprise of India by Dr. N. Srilaxmi
13. Women in Service Enterprises by Dr. C. Rani 177
14. Development of Tourism Industry through Cluster approach 185
by K. Surya Prakash Goud
15. Sustainable Development of Innovative Tourism by 195
R.S.R.C. Kumar
16. Life Insurance Industry in India - A Study by Mustaq Ahmed 201
17. Bio-Technology : The Sunrise Service Sector 215
18. Promotion of Entrepreneurship in Service Sector by 219
R.S.R.C. Kumar
19. Service Enterprises - A Financial Perspective by 223
Gopala K Murthy
20. Financing Hi-tech Farming activities - A Viable Option for 237
Sustainable Agriculture by G.G.K. Murthy
SERVICE SECTOR ENTERPRISES IN INDIAN
ECONOMY
Dr. G.U.K. Rao*
I. Introduction
With a growing economy and a strong internal market, India is destined to
make competitive products using technological innovations. The services sector in
the country has a major share in transforming the nation into a developed country.
In this sector broadly six areas that are closely related are functioning based on
India's core competence, natural resources and skilled / talented manpower. These
are: Agriculture and Food Processing; Infrastructure; Education and Health care;
Information and Communication Technologies (ICT); Tourism; and Critical
technologies and Strategic Services.
The service sector forms the backbone of social and economic development
of a region. It has emerged as the largest and fastest growing sector 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.
Services account for more than 60 per cent of world GDP, and the trade in services
has grown more rapidly than merchandise trade since 1985. It is a large and the 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 as a whole
had contributed as much as 58.2 per cent of the overall average growth in gross
domestic product (GDP) between the years 2001-02 and 2011 - 2012.
India has been recording high growth in the export of services during the last few
years. Such exports have increased threefold during the last three years (between
2009 to 2012) According to a study conducted by the Reserve Bank of India, that if
the average annual growth rates of the last three years – 51.9 per cent for services
exports and 7.6 per cent for manufacturing exports – were projected into the future,
*Director, School of Enterprise Development, ni-msme
1
Emerging Trends in Services Sector
by the beginning of 2012. If the current pace of growth is sustained, services could
bring in US $ 130 billion in foreign exchange revenue in 2010 while merchandise
would collect only about 120 billion.
The story that unfolds is this: in less than two years, India's exports would be
led by services not just in growth rates but also in absolute numbers.
Table 1: Indian Economy – Snapshot

Sl.No. Parameter 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 (IR)
1 GDP (at current prices, US$ bn) 916.4 1060.7 1202.9 1431.5 1637.4
2 GDP Growth (at constant prices, %) 9.3 6.7 8.3 9.3 6.2
3 Exports –Merchandise (US$ bn) 163.1 185.3 178.8 251.1 305.96
4 Imports –Merchandise (US$ bn) 251.7 303.7 288.4 369.7 489.3
5 Exports –Services (US$ bn) 107.2 93.0 124.0 149.0 146.6
6 Software Exports (US $ bn) 40.4 47.1 49.7 59.0 68.8
7 Imports –Services (US$ bn) 56.1 53.7 82.2 130.9 96.4
8 Forex Reserves (US$ bn) 309.7 252.0 279.1 304.8 295.4
Source : Compiled from Economic Survey Reports & DGCI&S, Kolkata
1R: 1st Revised Estimates
The Chart -1 indicates the Indian Economy of financial years from 2008 to
2012. In the diagram it is observed that there is a marginal increase in economy of
every financial year. It is also observed that every parameter of Indian economy
increases in every year except the parameter GDP growth decreased in the year
2011-12.
Chart-1: Indian Economy
2
II. Devising a proper Classification of Services

The services sector of the economy can be broadly grouped into three
segments namely, the public sector, the private corporate sector and the household
sector. The first two are generally referred to as the organised part of the economy,
as the accounts of all the business transactions of these sectors are recorded in
specified documents and are made available as public documents at regular
intervals. The third sector, that is the household or unorganized sector, is comprised
of all the unincorporated enterprises including all kinds of proprietorships and
partnerships run by individuals.
The GATS agreement covers four modes of supply for the delivery of
services in cross-border trade:
Criteria Supplier Presence
Mode 1: Service delivered within the Service supplier not present
Cross-border territory of the Member, from within the territory of the
supply the territory of another Member member
Mode 2: Service delivered outside the
Consumption territory of the Member, in the
abroad territory of another Member, to a
service consumer of the Member
Mode 3: Service delivered within the Service supplier present within
Commercial territory of the Member, through the territory of the Member
presence the commercial presence of the
supplier
Mode 4: Service delivered within the
Presence of a territory of the Member, with
natural person supplier present as a natural person
Source: Document MTN.GNS/W/124, available on the World Trade Organization Website.
Although the Services Sector has a pivotal role in the country's economic
development, the database in this sector is highly disorganized. A major limitation
of the existing statistical system in this respect is the absence of a well-organized
mechanism for maintaining a regular and proper database for this sector.
The National Industrial Code (NIC) classification of the Central Statistical

Organization (CSO) has found wide use in India (Appendix-1). While
internationalizing this code it is desirable to make the classification of services in the
country comparable with other countries. In this context, the World Trade
3
Organization's (WTO's) List of Services sheds important light on the various

service areas that have been recognized (Appendix-2). While it is likely that the
importance of many service areas will vary from country to country, it will be
noticed from this list that none of the areas seem irrelevant to the Indian context.
With increasing communications and free flow of information, it is very likely that
services, which seem unimportant today, would acquire significance in the near
future.
When the world was moving from the industrial to information and
knowledge era, we witnessed a changing pattern in the sectoral share of GDP and
the number of people employed in each sector. The GDP share of agriculture fell
from 36.1 per cent to 16.1 per cent during 1981 to 2012. During the same period the
contribution of the manufacturing sector moved up from 25.9 per cent to 27.8 per
cent, whereas that of the services sector shot up from 38 per cent to 57.7 per cent
excluding construction. There has been considerable change in the employment
pattern too. The percentage of people employed in agriculture came down from 64
to 54. Simultaneously, the percentage of people employed in the manufacturing
went up from 15 to 19 and in the service sector from 20 to 27. This trend will
continue and, by 2020, our employment pattern is expected to be 44 per cent in
agriculture, 21 per cent in manufacturing and 35 per cent in service sector.
Thus, the broadest definition of the service sector encompasses all activities
except those in the goods producing sectors; agriculture, mining, and
manufacturing. Therefore, services by nature of their operation can be categorized
as follows –Trading (wholesale and retail); Business (BPO); Communication; IT;
Image processing; Automated teller machines (ATM); Landscaping; Beauty parlors;
Construction and engineering; Distribution; Education and training; Finance;
Health; Tourism and travel; Recreation, cultural, and sporting; Cable operating;
Transportation; Security; Retail; Repairs and “Other” services.
According to Williamson and Lindert (1980) “services sector is defined more

specifically to be the sector of production outside of agriculture and industry, and
includes construction, trade, finance, real estate, private services, government, and
sometimes transportation”.
International trade in goods is a relatively simple idea to grasp: a product is

transported from one country to another. Trade in services is much more diverse.
Telephone companies, banks, airlines and accountancy firms provide their services
in quite different ways. The agreement covers all internationally traded services —
for example, banking, telecommunications, tourism, professional services, etc. It
4
also defines four ways (or “modes”) of trading services:

 Services supplied from one country to another (for example, e-mailing a
translated document or market research report' international telephone calls),
officially known as cross-border supply ( WTO jargon; “mode 1”)
 Consumers or firms making use of a service in another country (e.g. tourism),
officially “consumption abroad” (for example, tourism or consumer services
when a visiting businessman or -woman), (“mode 2”)
 A foreign company setting up subsidiaries or branches to provide services in
another country (e.g. foreign banks setting up operations in a country), officially
commercial presence (“mode 3”)
 Individuals travelling from their own country to supply services in another (e.g.
fashion models or consultants), officially presence of natural persons (“mode 4”)
 In the Indian context, while applying the GATS, the contribution of services
sector has increased manifold.
III Services Sector Contribution to Indian Economy

The Services Sector has been the most dynamic sector of the Indian
economy, especially through the preceding ten years. Table-2 shows the changes
that have been taking place in the Services Sector over the last few decades.
From a low level of 30.3 per cent of GDP in 1950-51, the share of services
increased to 58.2 per cent in 2011-12. Between 1950-51 and 2011-12, the share of
Services Sector in GDP rose by only 27.40 percentage points, which is an increase
of about 0.46 percentage points per annum. However, between 1990-91 and 2011-
12, the share had increased by 15 percentage points, which is an increase of 0.75
percentage points per annum. Clearly, the rate of growth is significantly higher from
2000 onwards.
Table-2: Sectoral Shares in GDP (in per cent)

Year Agriculture # Manufacturing Services*
1950-51 53.1 16.6 30.3
1960-61 48.7 20.5 30.8
1970-71 42.3 24.0 33.8
1980-81 36.1 25.9 38.0
1990-91 29.6 27.7 42.7
2000-01 22.3 27.3 50.4
2010-11 14.5 27.8 57.7
2011-12 16.1 25.7 58.2
Notes: Among the following symbols,
5
# includes forestry and logging, fishing, including mining and quarrying;

construction, electricity, gas and water supply; * includes :(a) transport,
communication and trade; (b) banking and insurance, real estate, dwellings and
business services; and (c) public administration and defence and other services.
Source: Economic Survey Reports (2012–13)
Chart -2: Sectoral Shares in GDP (During1950-51 to 2010-12) (in %)
The above chart describes the Sectoral Shares in GDP from year 1950-2011 of
different services like Agriculture, Manufacturing and other services like Transport,
Trade, Banking etc. which is mentioned in the Table-2. In the above line chart, it is
observed that, in the year of 1950-1991, the Agriculture was having high percentage
in GDP than in manufacturing sector. Where as in the year of 2000 to 2012 the
contribution of manufacturing is higher than that of agriculture. From the
beginning, the services contribution to the Indian economy is on increasing trend.
The percentage of services like Trade, Banking, Communication, Transport etc.
having high percentage in GDP in every year than the Services in Agriculture and
Manufacturing.
Table 3: Rate of growth of GDP at factor cost at 1999-2000 prices (per cent)
IX plan X plan 2007-08 2008-09 2009-10 2010-11 2011-12
Agriculture and Allied 2.5 2.5 5.8 0.1 1.0 7.0 3.7
Mining & quarrying 4.0 6.1 3.7 2.1 6.3 5.0 -2.2
Manufacturing 3.3 8.6 10.3 4.3 9.7 7.6 2.7
Electricity , gas and 4.8 5.6 8.3 4.6 6.3 3.0 8.3
6
water supply
Construction 7.1 12.9 10.8 5.3 7.0 8.0 4.8
Trade and hotels, transport 8.9 16.6 10.7 7.6 10.3 11.1 11.2
& communications
Financing, real estate, 8.0 9.5 12.0 12.0 9.4 10.4 9.1
& Business
Community, social 7.7 6.1 6.9 12.5 12.0 4.5 5.9
& personal Services
GDP 5.5 7.8 9.3 6.7 8.4 8.4 6.2
Note: Plan period is simple average
Chart-3: Rate of Growth of GDP at factor cost
The above chart indicates the rate of growth of GDP at factor cost of
different services mentioned in the table-3. The growth of GDP is high in services
of Financing, Real Estate and Business while growth is low in services of Mining,
quarrying and Manufacturing. The overall percentage of all years from 2007-2012,
the growth of GDP is alternatively increases and decreases. The services of
Electricity, gas and water supply in the year 2010-11 having the low percentage i.e.
3% comparing to other services in GDP growth of every year.
7
Table4: Services sector's share in GDP (in per cent)

Year Services* Year Services*
1950-51 30.3 2004-05 51.7
1960-61 30.8 2005-06 54.1
1970-71 33.8 2006-07 55.1
1980-81 38.0 2007-08 61.2
1990-91 42.7 2008-09 62.4
2000-01 50.4 2009-10 63.0
2001-02 50.0 2010-11 63.3
2002-03 50.7 2011-12 64.4
2003-04 50.7
Note: * include (a) Transport, communication and trade; (b) Banking and insurance,
real estate, dwellings and business services; (c) construction and (d) Public
administration and defence and other services.
Source: Economic Survey Reports
Chart –4: Service sector share in GDP of India [2001 - 2012]
The above diagram depicted with trend line indicates the service sector's share in
GDP in the years from 1950-2012. In 1950-51, the percentage of service sector
share in GDP is low and in 2011-12 it is having high percentage comparing to other
years of GDP.
In the above diagram it is displaying regression equation i.e.

y=2.1931x+30.415 with correlation coefficient r2=0.9366 which means that there is
a strong relation between services sector like IT, ITeS, Tourism, banking and
insurance, real estate, dwellings and business services, construction etc. during the
period mentioned above.
8
Table-5: Share of different services categories in GDP at factor cost

(current prices) (per cent)
2000-01 2005-06 2006-07 2007-08 2008-09 2009-10^ 2010-11@ 2011-12* 2012-13**

Trade, hotels, & restaurants 14.6 16.7 17.1 17.1 16.9 16.5 17.2 18.0 25.1#
Trade 13.3 15.1 15.4 15.4 15.3 15.1 15.7 16.6
Hotels & restaurants 1.3 1.6 1.7 1.7 1.5 1.4 1.5 1.5
Transport, storage, &
7.6 8.2 8.2 8.0 7.8 7.7 7.3 7.1
communication
Railways 1.1 0.9 0.9 1.0 0.9 0.9 0.8 0.7
Transport by other means 5.0 5.7 5.7 5.6 5.5 5.3 5.3 5.4
Storage 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Communication 1.5 1.6 1.5 1.4 1.4 1.4 1.1 0.9
Financing, insurance,
13.8 14.5 14.8 15.1 15.9 15.8 16.0 16.6 17.2
real & business services
Banking & insurance 5.4 5.4 5.5 5.5 5.6 5.4 5.6 5.7
Real estate, ownership
of, dwellings & business 8.7 9.1 9.3 9.6 10.3 10.4 10.4 10.8
services
Community, social, &
personal services 14.8 13.5 12.8 12.5 13.3 14.5 14.0 14.0 14.3
Public administration & defence 6.6 5.6 5.2 5.1 5.8 6.6 6.1 6.1
Other services 8.2 7.9 7.6 7.4 7.5 7.8 7.9 7.9
Construction 6.0 7.9 8.2 8.5 8.5 8.2 8.2 8.2 8.2
Total Services 50.8 53.1 52.9 52.7 53.9 54.5 54.4 55.7 56.5
Total Services (incl. Construction) 56.8 61.0 61.0 61.2 62.4 62.7 62.6 63.9 64.8
Total GDP 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source : Central Statistics Office (CSO).
Notes : Shares are in current prices and growth in constant prices; Figures in parenthesis
indicate growth rate;
* first revised estimates, @ second revised estimates, ^ third revised estimates,
** Advance Estimate (AE);
# includes the shares and growth of both trade, hotels, & restaurants and transport,
storage, & communication only for 2012-13.
9
Six of the seven major components of non-factor services in the invisibles

account of the BoP, — travel, transportation, insurance, financial services,
communication services and business services — contributed on a net basis only
5.8 per cent of the surplus on account of services trade in 2011-12. Thus, the
seventh component viz., software services, comprising information technology
(IT) and IT enabled services (ITES), was the main driver of the surpluses generated
from non-factor services. The net surplus from travel grew modestly in 2006-07.
This has been depicted in Chart-5 below.
Chart-5: Share of different services categories in GDP at factor cost
The above chart interprets the share of different services categories in GDP
at factor cost, which clearly indicates that the percentage rating is increasing in every
year of share of different service categories in GDP. It shows that, in the different
services categories in GDP, the services of Community, social and personal services
are having the high percentage rating comparing to other services categories. It is
also observed that the services of Transport, storage and communication are
having low percentage since there is no percentage rating in the year 2011-12
compare to other services.
Travel receipts grew by 18.1 per cent on an annual average basis over the last
three years reflecting in part the attractiveness of India as a tourist destination.
10
Travel payments were also catching up with corresponding average annual growth
at 19.6 per cent. Transportation payments exceeded receipts, resulting in a modest
deficit. The classification in BoP accounting system of software, business, financial
and communication under the head “miscellaneous” alludes to the recent nature of
their importance. Growth in software services receipts (both IT and ITeS) was
phenomenal at an annual average of 32.9 per cent in the last five years. As per the
revised data of the RBI, growth in business services on a net basis was higher at 33.9
per cent in 2010-11; the other services, albeit posting lower growth rates, have
nevertheless helped catalyze the growth process through appropriate technology
transfer from the rest of the world.
Thus, higher levels of surplus arising from services have helped moderate the
overall goods and services balance. As a proportion of GDP, goods and services
deficit was placed at 12.4 per cent of GDP in 2010-11, which is lower than the level
of 15.5 per cent of GDP in 2009-10.
IV. Key drivers of the services sector

Services contributed as much as 62.9 per cent of the overall average growth in
GDP in the last five years (2007-08 and 2011-12). Impressive growth in IT and ITeS
enabled services, rail and road traffic and fast additions to the existing stock of
telephone connections, particularly the mobile, played a key role in such growth.
Outside the sunrise and the conventional sub-sectors, financial services like
banking, insurance, real estate and business services grew at a strong 9.4 per cent in
2011-12. Tourism, which is part of services, also saw impressive growth. ITeS
services and the BPO industries grew substantially, with Indian companies
expanding their services portfolio. There was also growth in the telecom sector,
with India emerging as the world's fastest growing telecom market.
In alignment with the global trends, Indian service sector has witnessed a
major boom and is one of the major contributors to both employment and national
income. The activities under the purview of the service sector are quite diverse. The
Indian economy has moved from agriculture based economy to a knowledge based
economy after liberalization. Today the IT industry and ITeS are the dominant
industry in the service sector. Media and entertainment have also seen tremendous
growth in the past few years.
Information Technology Industry

India's services exports range from information technology (IT) to services
provided by Indian doctors and nurses abroad. RBI's classification of service
exports includes transport, travel, construction, insurance and pensions, financial
11
services, telecommunications, computer and information services, and personal,

cultural and recreational services.
The Economic Survey for 2011-12 said the outlook for the services sector in
the domestic economy is linked to its prospects externally. “While software services
exports have continued to be steady, the unfolding events in the euro area could lead
to some sluggishness in this sector,” it said. “The fair-weather business services
exports, which have already shown signs of deceleration, may not get better.”
According to the World Trade Organization, India ranked sixth in exports of

commercial services in 2011 with a 3.6% global share. In services imports, it ranked
seventh with a 3.4% global share.
In contrast, India ranked 19th for its share of merchandise exports,

contributing 1.6%; it ranked 13th in its share of merchandise imports with 2.5%.
“Software exports are likely to moderate as global IT spending is expected to be
lower. Major software exporters have already made steep downward revisions in
their guidance on expected revenue during the year,” the Reserve Bank of India
said.
The Information Technology industry has achieved phenomenal growth

after liberalization. The industry has performed exceedingly well amidst tough
global competition. Being knowledge based industry; India has been able to
leverage the global markets, because of the huge pool of engineering talent available
and the proficiency in English language among the middle class.
ITeS sector
The ITeS sector has also leveraged the global changes positively to emerge as
one of the prominent industries. Some of the services covered by the ITeS industry
would be:
 Customer interaction services -Non voice and Voice.
 Back office, revenue accounting, data entry, data conversion, HR services.
 Medical Transcription.
 Content development and animation.
 Remote education, market research and GIS
Retailing
Prior to liberalization, India had one of the most underdeveloped retail
sectors in the world. After liberalization the scenario changed dramatically.
12
Organized retailing with prominence on self service and chain stores has changed
the dynamics of retailing. In most of the tier I and tier II cities supermarket chains
mushroomed, catering to the needs of vibrant middle class. This indirectly
contributed to the growth of the packaged food industry and other consumer
goods.
Financial Services-Banking and Insurance

Prior to liberalization these two sectors were controlled and regulated by the
government. Nationalized banks and insurance companies had a firm grip over the
market. After liberalization the banking and insurance domain opened up for
private participation
Banking Sector
The three major changes in the banking sector after liberalization are:
 Step to increase the cash outflow through reduction in the statutory liquidity and
cash reserve ratio.
 Nationalized banks including SBI were allowed to sell stakes to private sector
and private investors were allowed to enter the banking domain. Foreign banks
were given greater access to the domestic market, both as subsidiaries and
branches, provided the foreign banks maintained a minimum assigned capital
and would be governed by the same rules and regulations governing domestic
banks.
 Banks were given greater freedom to leverage the capital markets and determine
their asset portfolios. The banks were allowed to provide advances against equity
provided as collateral and provide bank guarantees to the broking community.
Insurance Sector
The Insurance Regulatory and Development Authority Act 1999 (IRDA Act)
allowed the participation of private insurance companies in the insurance sector.
The primary role of IRDA was to safeguard the interest of insurance policy holders,
to regulate, promote and ensure orderly growth of the insurance industry. The
insurance sector could invest in the capital markets and other than traditional
insurance products, various market link insurance products were available to the
end customer to choose from.
Some of the prominent insurance companies are:

 Bajaj Allianz Insurance Corporation
 Birla Sun Insurance Co Ltd
 HDFC Standard Insurance Co Ltd
13
 ICICI Prudential Insurance Co Ltd

 Max New York Insurance Co Ltd
 Tata AIG Insurance Co Ltd
Future Trends
 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.
The services sector, once again, is poised to exhibit robustness during 2009-
10. The advanced estimates of national income released by the CSO have projected
the aggregate services growth rate as 9.4 per cent during 2011-12. (Chart-6)
Year : 2000-01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11-12
Aggregate 5.7 7.3 7.3 8.1 8.2 11.0 10.1 10.4 10.0 10.5 9.3 9.4
Growth Rates
(in per cent)
Services
Chart- 6: Growth rates of Services Sector in Indian Economy
14
The remarkable performance of the services sector as a whole has been

reflected in the select lead indicators of the services sector (Table-3). The tourism
sector has performed well in terms of foreign tourist arrivals, with a moderate
improvement at 11.2 per cent during April- December 2011. In case of transport
and other services, there has been a substantial increase during 2011 over the
corresponding period of 2011.
Table- 6: Sectors attracting highest FDI flows (Rs. crore)
Sector Amount of FDI Inflows Cumulative

Share of
inflows
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (April
2000 to
2011)
Services sector (a) 1986 2399 21047 9121 15919 19945 15053 142539
Computer software
& hardware 2441 6172 11786 4217 6670 4127 3551 48940
Telecommunications (b) 570 2776 2155 3963 9231 12270 7542 57035
Construction © 696 667 4424 3593 7490 13469 4979 46219
Housing & real estate 0 171 2121 5161 8353 14027 5600 48819
Source: Department of Industrial Policy & Promotion.

(a) financial & non-financial services; (b) radio paging, cellular mobile, basic telephone services;
(c) construction including roads & highways.
Chart-7: Cumulative Share of FDI In-flows in Services Sector

Cumulative Share of inflows (April 2000 to 2011
160000 142539
140000
120000
100000
80000 57035
60000 48940 46219 48819
40000
20000
0
Services sector (a)
Housing & real

Computer software
Telecommunications
Construction ©
& hardware
estate
(b)
15
The Chart-7 describes the Bar diagram for cumulative share of inflows from
year 2000-2011 for different sectors. It is observed that, among the services
financial and non-financial services predominates the FDI in-low followed by the
Housing and real estate, computer hardware, telecommunications and
construction.
V. Services provided and expected outputs

(a) IT and IT-enabled Services
Over the years, India has been witnessing a transition from agriculture-based
economy to a knowledge-based economy. The knowledge economy creates,
disseminates, and uses knowledge to enhance its growth and development. One of
the major functional pillars of this economy is Information Technology (IT) and
IT-enabled services (ITeS) industry. The Indian software and services (IT services)
industry has been moving up the value chain, giving India a formidable brand equity
in the global markets.
Department of IT (DIT) is the nodal organisation in the country, responsible

for formulation, implementation and review of national policies in the field of
information technology. All policy matters relating to silicon facility; internet;
computer based information technology and processing including hardware and
software; standardization of procedures and matters relating to international
bodies; promotion of knowledge based enterprises; e-commerce; information
technology education; etc are addressed by it. The department has been making
continuous efforts towards making India a front-runner in the age of information
revolution. Some of the major initiatives undertaken by it include:
 A 'National Taskforce on Information Technology and Software

Development' was formed with the objective of framing a long term
'National IT policy' for the country and also for removing the impediments to
growth of the infotech industry. The taskforce suggested various measures
towards building India's IT industry and proliferating the use of IT in the
country.
 Enactment of the IT Act, which provides a legal framework to facilitate
electronic commerce and electronic transactions; prevent computer crimes;
promote electronic filing or documentation and digital signature. It aims to
create an enabling environment for e-governance and boosting e-commerce
in the country.
 Community information centres have been set up in the seven north eastern
16
states and Sikkim for socio-economic development of the region to provide

internet connectivity, e-mail facilities, interface between citizens and
government, distance learning programs, information on national
programmes, disaster management system, public health awareness, etc. to
the public.
 E-governance is one of the areas in which ICT is having a profound impact
on the way governments function and the manner in which government
services are made available to the citizens.
 State Wide Area Network (SWAN) is a scheme for establishing state wide area
networks across the country in 29 states and 6 union territories (UTs) over a
period of five years. The scheme envisages to provide central assistance to
states and UTs for establishing SWANs at all levels from state and UT
headquarters to the blocks with a minimum bandwidth capacity of 2 Mbps.
 State Data Centres have been identified as one of the important elements of
the core infrastructure for supporting e-Governance initiatives under NeGP.
It is proposed to create data repositories or data centres in various states so
that common secured data storage could be maintained to serve a host of e-
governance applications.
 e-district projects have been launched with the objectives of computerising
the backend workflows at the district level with appropriate business process
re-engineering (BPR); reducing the work load at the district level;
 ensuring fast processing of cases or grievances; and enabling better
monitoring of various government schemes like e-sevas.
 National Informatics Centre (NIC) has been instrumental in steering ICT
applications in government departments at Central, State and District levels.
It is facilitating improvement in government services; wider transparency in
its functions; and improvement in decentralised planning and management.
The Government has identified growth of Electronics and IT Hardware

manufacturing sector as a thrust areas and has been providing a package of incentives
for the electronics/IT hardware manufacturing sector with the objective of:-
 Making the industry globally competitive
 Attracting more FDI into it
 Bringing down the prices of the end products as well as the production costs
 Increasing volumes to take advantage of efficiencies of scale
 Increasing the demand etc.
17
The rapid advances in ICT have far-reaching effects on both industrial

governance and business systems. Successful institutions and enterprises use ICT to
improve their productivity and to apply new knowledge. In particular for the SME
sector, it is essential to have access to adequate information to enhance productivity
and facilitate market access.
As per the estimates of NASSCOM, India's IT and Business Process

Outsourcing (BPO) sector (excluding hardware) revenues were US$ 87.6 billion in
2011-12, generating direct employment for nearly 2.8 million persons and indirect
employment of around 8.9 million. The Indian IT-ITeS sector (including the
domestic and export segments) is expected to exceed US $ 82 billion of annual
revenue in fiscal year 2011-12, registering an increase of nearly 21.2 per cent over
the fiscal year 2010-11. Its contribution to GDP has been estimated to surge by 7.5
percentage points in 2011-12 as compared to 1.2 per cent during 1997-98. Service
and software exports have fuelled this higher contribution. The review expects
India's software services and BPO exports to surpass US $ 69 billion in the current
fiscal year, a rise of 18.8 per cent over the last fiscal year. As per a report by ICRA, IT
services spending by Indian companies is likely to grow by around 28 to 30 per cent
in the medium term, driven by reallocation of corporate budgets from internal to
external spending rather than growth in aggregate IT spending. Expansion of the
service portfolio to lower cost, remote/virtual delivery models are some other
factors responsible for this growth, which have expanded the scope of market
available for service providers.
Table-7: India's Global Trade of Services US $ (Billion)

Years Exports Imports
1997 8.9 12.3
1998 11.0 14.2
1999 14.0 17.0
2000 16.0 18.9
2001 16.8 19.8
2002 19.1 20.8
2003 23.1 25.5
2004 38.5 38.4
2005 68.0 67.0
2006 73.0 70.0
2007 86.9 47.7
2008 107.2 56.1
2009 93.0 53.7
2010 124.0 82.2
2011 149.0 130.9
Source: ITC
18
India's services sector during the last few years and has been globally
recognized for its high growth and development. This sector has been growing at an
annual growth rate of about 28% during the last 5 years. India's service sector
contributes more than 55 per cent of GDP, making it the most formidable
component of the country's economy. An extrapolation of Reserve Bank data by
India Brand Equity Foundation in fact shows that service exports could topple
merchandise exports in the medium term. The Government of India is taking up
most care to uplift this potential sector which contributes heavily in India's Foreign
exchange. (Source: FIEO). The country's share of services in the global scenario is
presented in Table-7 and depicted in chart – 8 from 1996-97 to 2010-11.
Chart-8: India's Global Trade of Services
Table -8: India's Services Exports (Share in per cent)
Travel Transportation Insurance Software Non-software Total

services miscellaneous services in
services US $ million
1990-91 32.0 21.6 2.4 - 43.9 4,551
1995-96 36.9 27.4 2.4 - 33.3 7,342
2000-01 21.5 12.6 1.7 39.0 25.3 16,268
2001-02 18.3 12.6 1.7 44.1 23.3 17,140
2002-03 16.0 12.2 1.8 46.2 23.8 20,763
2003-04 18.7 11.9 1.6 47.6 20.1 26,868
2004-05 15.4 10.8 2.0 40.9 30.8 43,249
2005-06 13.6 11.0 1.8 40.9 32.6 57,659
19
2006-07 12.4 10.8 1.6 42.4 32.5 73,780

2007-08 12.6 11.1 1.8 44.6 30.0 90,342
2008-09 10.7 11.1 1.4 45.5 31.3 1,01,678
Source: Monthly Bulletin, various issues, Reserve Bank of India.
The break-up of India's services exports over a period of time during 2000-
01 to 2008-09 in percentage terms is presented in the following chart – 9(a) and in
absolute terms of US$ millions is depicted in Chart-9(b)
Chart-9(a): Break-up of India's services during 2000 to 2009 (in %)
Chart-9(b): India's services exports during 2000 to 2009 (in US$ Billion)
20
(b) Health
The most important service in the Indian economy is health and education.
The 'Ministry of Health and Family Welfare' is responsible for the implementation
of various programmes in the areas of health and family welfare, prevention and
control of major communicable diseases as well as promotion of traditional and
indigenous systems of medicines. Accordingly, it is carrying out measures like
National Health Policy, implementing National Rural Health Mission (NRHM) in
different States, conducting surveys and studies, etc.
Health has been recognised as an important component in the process of

economic and social development. It does not simply mean absence of diseases,
rather it is a state of complete physical, mental and social well-being. Sanitation and
hygiene, nutrition as well as safe drinking water are the basic determinants of good
health. Over the years, India has built up a vast health infrastructure and manpower,
with a wide variety of hospitals and dispensaries being set up at different levels and
run both by public and private sectors. They are being managed by qualified doctors
and trained nurses. Expansion in access to healthcare services combined with
technological advancements in this field has resulted in substantial improvement in
health indices of the population and a steep decline in mortality rates. Under the
mandate of National Common Minimum Programme (NCMP) of the
Government of India, health is one of the major thrust areas with special focus on
primary health care.
The health sector in India has been fragmented between the Centre and the
States. Items like public health, hospitals, sanitation, etc. comes under the State list
of the Constitution, while the items having wider ramification at the national level
like population control and family welfare, medical education, prevention of food
adulteration, quality control in manufacture of drugs etc. have been included in the
Concurrent list.
Table -9 : IT-BPO sector and India's Inclusive Growth

Key Area Role for IT-BPO sector
Healthcare 50 per cent of Indians do not have access to primary
healthcare-Information technology can provide it at half
the cost Effectively increase outreach to rural populations
Enable remote access to doctors through electronic
diagnostic devices and real time video conferencing
Building and operating next-generation processes
21
Financial services A large chunk of Indian households are unbanked.

Technology can enable access for 200 million families
Overcome challenges to provide financial services in rural
areas mobile banking and remittance; Internet kiosks for
distribution of select financial products; Low cost ATM
Education and skill India faces a three-fold shortage in teachers-technology
development can address this through remote solutions ICT solutions
can overcome challenges of teaching(e.g., virtual
classrooms, recorded lectures by senior faculties, modular
multimedia content)
India suffers from a leakage of 40-50 per cent in public
food distribution-Information technology can ensure
transparency
Public services e-Governance enhancing basic citizen services UIDAI to
create identity for each citizen in the country
Connectivity and AccessCommunity service centres, with broadband connectivity,
to provide all government to citizen services-also create
opportunities for livelihood
Source: NASSCOM, Strategic Review, 2010.
There are six systems of medicine and health care in the country. These are:
Ayurveda, Unani, Siddha, Yoga, Naturopathy and Homoeopathy. The main
objectives of the Department are to:-
 Attain global leadership of the country in the field of traditional medicine
 Upgrade the educational standards in the Indian systems of medicine and
Homoeopathy colleges in the country
 Evolve pharmacopoeia standards for Indian systems of medicine and
Homoeopathy drugs
 Draw up schemes for promotion, cultivation and regeneration of medicinal
plants used in these systems
 Promote good health and expand the outreach of health care
 Improve the quality of teachers and clinicians;
 Ensure AYUSH services and drugs which are safe and efficacious at affordable
rates
 Facilitate availability of raw drugs which are authentic and contain essential
components
 Integrate AYUSH with health care delivery system and national programmes
 Re-orient and prioritize research in AYUSH.
22
The Ministry has been implementing various programmes by propagating the

National Health Policy in the country which aims to achieve an acceptable standard
of good health amongst the general population of the country.
The policy involves following strategies for achievement of its goals;
 Disease management including early case detection and complete treatment,

strengthening of referral services, epidemic preparedness and rapid response
 Integrated vector management (for transmission risk reduction) including
indoor residual spraying in selected high areas, use of insecticide treated bed
nets, use of larvivorous fish, anti-larval measures in urban areas including bio-
larvicides and minor environmental engineering
 Supportive interventions including behaviour change communication,
public-private partnership (PPP) and inter-sectoral convergence, human
resource development through capacity building, operational research
including studies on drug resistance and insecticide and so on.
As a result of all such measures, India has achieved impressive demographic

transition owing to the decline of crude birth rate (CBR), crude death rate (CDR),
total fertility rate and infant mortality rate. As per the available information, the
CBR declined from 40.8 births per thousand population in 1951 to 29.5 in 1991 and
further to 22.1 in 2010. Similarly, there has been a sharp decline in CDR from 25.0
deaths per thousand populations in 1951 to 9.8 in 1991 and further to 7.2 in 2010.
(c) Education and Training in Entrepreneurship Development

Education is the most crucial investment and essential to human resource
development. It has always been accorded a place of honour in every economy. It
implies ability of the people to read, write and understand. It has the fundamental
aspects of imparting knowledge, wisdom and culture. A well-defined educational
system holds the key to economic growth, social transformation and moderni-
zational integration of a country. It also strongly influences the improvement in
health, hygiene, demographic profile, productivity and quality of life. Eradication
of illiteracy has been one of the major national concerns of the Government of
India since Independence.
While education strongly influences improvement in health, hygiene and

demographic profile, the Ministry of Human Resource Development' is involved in
eradicating illiteracy in the country. It is concerned with universalisation of
elementary education, achieving full adult literacy, laying down of National Policy
23
on Education, meeting the needs of secondary and higher education for all and so
on. India achieve impressive demographic transition. Noticeable improvement in
literacy rate in the country is one of the factors that has enabled.
The Ministry of HRD is the nodal organization at the Centre for dealing with
all the facets relating to education in the country. It consists of two departments,
namely, (i) the Department of School Education and Literacy; and (ii) the
Department of Higher Education.
Among the several policy initiatives of the Ministry, the most notable is the
National Policies on Education (NPE), which has been modified in 1992. The
policy envisages a National System of Education to bring about uniformity in
education, making adult education programmes a mass movement and providing
universal access, retention and quality in elementary education.
The Indian educational structure mainly consists of three stages: Elementary,

Secondary and Higher Adult Education has been accorded a high value as without
it, illiteracy cannot be completely eradicated from the country. At present, around
101 districts are implementing Total Literacy Campaigns, 171 districts Post-Literacy
Programmes and 325 districts Continuing Education Programmes. There is also a
scheme of Jan Shikshan Sansthan ' or 'Institute of People's Education' which has
been launched as a polyvalent or multi-faceted adult education programme aimed at
improving the vocational skill and quality of life of its beneficiaries.
Apart from the formal education, imparting education and training in

entrepreneurship development is expected to grow by over 100 per cent in the next
five years, according to FICCI.
In this direction, the Government of India is encouraging the setting up of

Entrepreneurship Development Institutes (EDIs) in both public and private
sectors throughout the country. The Ministry of Micro, Small and Medium
Enterprises (MoMSME), has encouraged many insrtitutions to cater to the needs of
entrepreneurs as well as trainers and executives concerned with promotion and
development of MSME in the country. Apart from this, the Ministry has an apex
training institute working in Hyderabad in the field of enterprise promotion,
including the service sector in Hyderabad called National Institute for Micro, Small
and Medium Enterprises (ni-msme).
ni-msme, as an service institute of the Ministry, has long-standing

experience in not only general EDPs but rural and women entrepreneurship
24
development, and has conducted several streams of programmes over the past
four-and-half decades in the country. These include: training programmes for public
administrators; trainers; entrepreneurs; and sector-specific training programmes (e.g.
for food-processing and agro-industries). The Institute has also been organising
programmes for the executives of developing economies from 1967 onwards on
regular basis. In India, this is the first organisation to the international training and
consultancy in the field of enterprise promotion. The current programmes cover a
specturm of need based themes like IPR, Tourism and Hospitality Management,
Micro Finance through Self-Help Groups, apart from the general themes like
MSME Policy and Promotion, MSE Financing and Management. The essential
inputs of the programmes aim to create a conducive business environment and to
enhance the institutional capabilities which, in turn, helps foster entrepreneurial
dynamism and sustained enterprises in the developing economies.
The institute organises about 18 such programmes for the benefit of the
executives of various organisations of the developing countries. All these programmes
are being funded by the Union Ministry of External Affairs, CFTC, UNIDO, GTZ,
AARDO, TCS-Co Plan, etc. The focus is on the transformation and diversification
of micro and small enterprises to growth-oriented activities, and on unleashing their
under-utilised productivity potential.
(d) Media and Entertainment

Media are the vehicle of transmitting information, education and entertainment
to the masses. It is an easier and efficient means of mass communication, and plays a
key role in the overall development of an economy. Media are the conscience-keeper
of the nation and have many tasks to perform in the day-to-day life of people. They
help the Government to achieve various socio-economic and political goals; educate
urban and rural masses; instill a sense of responsibility among the people; as well as
provide justice to the needy. They include print publications like newspapers,
magazines, journals and other electronic disseminators like radio, television and
internet. With the changing scenario across the world, it has acquired the status of
an industry.
In India, the media and entertainment industry is undergoing remarkable

change and is one of the fastest growing service sectors. The Ministry of
Information and Broadcasting is the nodal authority in India for the formulation
and administration of rules, regulations and laws relating to media industry,
operating through three main wings; Information, Broadcasting and Films Wing. It
plays a significant part in helping the people to have access to free flow of
information. It is also responsible for international co-operation in the field of mass
25
media, films and broadcasting, and interacts with its foreign counterparts on behalf
of Government of India. The main functions of the Ministry are to:
 Provide country wide news services through All India Radio (AIR) and
Doordarshan (DD)
 Develop the broadcasting and television networks as well as promote import and
export of films
 Educate and motivate the people for greater participative involvement in the
various developmental activities and programmes of the Government
 Liaise with State Governments and their organisations in the field of
information and publicity
 Organise film festivals and cultural exchanges in the country
 Administer the Press and Registration of Books Act, 1867 in respect of
newspapers
 Disseminate information about India within and outside the country through
publications on matters of national importance
 Use interpersonal communication and traditional folk art forms for
information/ publicity campaigns on public interest issues
 Serve as a constant link between the Government and the Media, by acting as a
clearing house of official information and authentic data pertaining to the Union
Government's plans and programmes.
The entertainment industry is basically an intellectual property-driven sector

with small to large players spread across the country. It covers films, music,
broadcast, television and live entertainment. As per the recent report by
Pricewaterhouse Cooopers (PwC), Indians are likely to spend more on
entertainment in the coming years with a steady growth in their disposable income.
And as per the combined survey report by KMPG and FICCI, the entertainment
industry in India is expected to expand by 12.5% every year and is likely to reach US$
20.09 billion by the year 2013. As per FICCI-KPMG report, Indian film industry
alone is worth US$ 2.11 billion and is likely to witness a 9.1% growth till 2013,
followed by Indian television Industry, DTH, and Indian Animation Industry.
(e) Retail Markets

Apart from expansion in coverage the retail sector is gradually modernising
with traditional markets giving way to departmental stores, hypermarkets and
western style malls. An extension of the trend has been observed in the form of
value malls. These are malls set up by top property developers and local retail chains
in regional areas specifically to sell branded apparels, footwear and accessories at
prices 25-30 per cent cheaper than the maximum retail price.
26
(f) Tourism and Hospitality

Another sector that is giving critical momentum to services export growth is
travel and tourism. Tourism and Hospitality is one of the traditional sub-sectors in
services enterprises. Today the tourism and hospitality industry in India contributes
around 6.23 per cent to the national GDP and 8.78 per cent of the total employment
in the country. According to the Eleventh Five Year Plan, the Indian government is
going to spend an amount of US$472 billion in elevating and developing civil
amenities such as bridges, roads, ropeways, telecom services, ports, and other forms
of transport. Foreign Tourist Arrivals (FTAs) to India increased from 5.17 million
in FY09 to 5.78 million in FY10, thereby resulting in a increase of 11.8% YoY. FTAs
during the period January-June 2011 were 29.19 lakh with a growth of 10.9 per cent,
as compared to the FTAs of 26.32 lakh with a growth of 8.9 per cent during
January-June 2010 over the corresponding period of 2009. It was better than
UNWTO's projected growth rate of 5% to 6% for the world in 2010. Tourism
continues to play an important role as a foreign exchange earner for the country.
Foreign Exchange Earnings from Tourism in terms of US$ during January-June
2011 were US$ 7.8 billion with a growth of 14.2 per cent, as compared to US$ 6.8
billion with a growth of 36.6 per cent during January-June 2010 over the
Number of domestic tourist visits in India during 2010 was 740.21 million as
compared to 668.80 million in 2009, with a growth rate of 18.8 %. Number of
Indian national departures from India during 2010 was 12.99 million as compared
to 11.07 million in 2009, registering a growth rate of 17.4%. (Table - 10). The
percentage of annual growth rate of both domestic and foreign tourists is depicted
in chart-10.
Table-10: Performance of Out-Bound Tourism Sector in India

(in million)
Year Tourist Visits Annual Growth Rate
Domestic Foreign Domestic Foreign
1991 6.67 3.15 - -
1992 8.15 3.1 22.2% -1.6%
1993 10.58 3.54 29.9% 14.4%
1994 12.71 4.03 20.1% 13.8%
1995 13.66 4.64 7.5% 15.2%
1996 14.01 5.03 2.5% 8.4%
1997 15.99 5.50 14.1% 9.3%
1998 16.82 5.54 5.2% 0.7%
27
1999 19.07 5.83 13.4% 5.3%

2000 22.01 5.89 15.4% 1.1%
2001 23.65 5.44 7.4% - 7.8%
2002 26.96 5.16 14.0% -5.1%
2003 30.90 6.71 14.6% 30.1%
2004 36.63 8.36 18.5% 24.6%
2005 39.20 9.95 7.0% 19.0%
2006 46.23 11.74 17.9% 18.0%
2007 52.66 13.26 13.9% 12.9%
2008 56.30 14.38 6.9% 8.5%
2009 66.88 14.37 18.8% -0.1
2010 74.02 17.85 10.7 24.2
Source: Bureau of Immigration, India & Ministry of Tourism
Chart -10: Annual Growth rate over previous year (in %) of both Domestic
and Foreign tourists
D o m e s t ic - Foreign -
35.00%
30.00%
P e r c e n t ag e s
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Years
The Chart- 10 indicates the line chart for annual growth rate variations over
previous years of domestic and foreign tourists of tourism sector in India from the
year 1991-2010. It clearly indicates that there is alternatively increases and decreases
in the percentage of AGR of the tourists. Where as in the year of 2003 there is high
growth rating and in the year of 2001 there is low growth rating of Tourism sector in
India.
The absolute figures for tourist arrivals do appear significantly meagre

compared to that of 20 million tourist arrivals in China during 2006, 16 million in
Malaysia or 12 million in Thailand for the same period as reported by media sources.
Inadequate availability of good quality and affordable hotel rooms, lack of decent
28
airports and transport, shabby maintenance and service at the nation's monuments
and other places of interest, etc. are some of the basic factors that have made India
an unattractive tourist destination compared to its competitors on the Asian
continent.
However, according to the latest Tourism Satellite Accounting (TSA)

research, released by the World Travel and Tourism Council (WTTC), the demand
for travel and tourism in India is expected to grow by 8.2 % between 2010 and 2019.
This will place India at the third position in the world. India's travel and tourism
sector is expected to be the second largest employer in the world. Capital investment
in India's travel and tourism sector is expected to grow at 8.8 % between 2010 and
2019. The report forecasts India to get more capital investment in the travel and
tourism sector and is projected to become the fifth fastest growing business travel
destination from 2010 through 2020.
According to a report by FICCI and Ernst & Young, medical tourism

industry, currently pegged at $450m, has the potential to grow into a $2.2bn
(Rs.10,000 crore) industry by 2012. According to a study by McKinsey and the
Confederation of Indian Industry (CII), medical tourism in India could become a
US$ 2 billion industry by 2012 (from US$ 350 million in 2006). An estimated 1.75
lakh medical tourists visited India in 2005 for cardiac care, cosmetic surgery, joint
replacements and dentistry, about 30% more than 2004. Inbound medical tourism is
expected to contribute about 15% of corporate hospitals total earnings by 2009.
Another initiative in the pipeline is industry body CII's partnership with 29 hospitals
across 16 states to work out a price band for speciality services in cardiology,
orthopaedics, oncology and minimally invasive surgery. The healthcare industry is
working closely with the tourism ministry, which will incorporate these packages
under its 'Incredible India' campaign tp promote medical tourism in overseas
markets.
The prospects for growth of tourism in India are bright. The overall
development of tourism infrastructure coupled with other efforts by the
Government to promote tourism such as appropriately positioning India on the
global tourism map through the “Incredible India” campaign, according greater
focus in newly emerging markets such as China, Latin America and CIS countries,
and participating in trade fairs and exhibitions will facilitate tourism growth. (Table-
11).
29
Table-11: Foreign tourist arrivals and foreign exchange earnings from

tourism sector only
Year Foreign tourist % Foreign exchange %

arrivals Number Change earningsa Change
in lakh year Over Million over previous
Previous US$ year
1999-00 25.05 -- 3,036 --
2000-01 26.49 6.7 3,460 15.0
2001-02 25.37 -4.2 3,198 -7.6
2002-03 23.84 -6.0 3,103 -3.0
2003-04 27.26 14.3 4,436 43.8
2004-05 34.57 26.8 6,170 38.2
2005-06 39.19 13.3 7,493 21.4
2006-07 44.47 13.5 8,634 15.2
2007-08 50.81 14.3 10,729 24.3
2008-09 52.82 4.0 11,747 9.5
2009-10 51.67 -2.2 11,394 -3.0
2010-11 55.83 8.1 14,193 24.6
Source: Ministry of Tourism.
Being one of the largest industry in terms of gross revenue and foreign
exchange earnings, tourism industry stimulates growth and expansion in other
economic sectors like agriculture, horticulture, poultry, handicrafts, transportation
and construction, as well as giving momentum to the growth of service exports. It is
a major contributor to the national integration process in the country as also
preserver of natural and cultural environments.
Chart- 11 (a): Foreign Tourist Arrivals ( in Lakh numbers)

60 Foreign tourist arrivals
50
40
in lakh
30
20
10
0
1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010-
00 01 02 03 04 05 06 07 08 09 10 11
Years
30
Chart 11(b): Foreign Exchange Earnings ( in US $ Million)
Foreign exchange earnings

16,000
14,000
12,000
in Million
10,000
8,000
6,000
4,000
2,000
0
1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010-
00 01 02 03 04 05 06 07 08 09 10 11
Years
Foreign Tourist arrivals decreased in the year 2002-03 and it continued by

increasing year by year. Similarly foreign exchange earnings decrease in the year
2001-02 as well as 2002-03 and it remains same continue increase year by year. There
is alternatively increases and decreases percentage in US$ millions of both Foreign
tourist arrivals and Exchange earnings in the year 1999-2011 from Tourism sector.
Hotel/Restaurants
While the Indian market poised to attract a large number of retail chains, they
are posting a threat to the kiosks and premium restaurants, in the process also
creating a tussle between the organised and unorganised sectors. On the one hand,
street hawkers are uncertain about their future (in light of the Supreme Court's ban
on street sellers cooking at the capital city's pavements); and on the other, retail
chains are looking forward to make huge investments in the Indian market
The Indian catering services sector is estimated to be worth Rs 57,000 crore,

of which only Rs 3,940 crore – or 6.9 per cent – is accounted for by the organised
sector. The vast unorganised segment mainly comprise of the streetside stalls/
kiosks, constituting the majority of consumer food service units, and is
characterised by intense fragmentation and a virtual absence of standardisation of
operations.
In what is turning out to be an aggressive race to increase the number of outlets, it is

observed that the organised sector is taking over the unorganised sector. There is a
paradigm shift from the unorganised to the organised sector. Chinese restaurants
are positioning themselves in such a way that their share is gradually rising. These
31
restaurants provide an ambience that suits the requirements of the public. One can
spend a nice time with family and friends, have business meetings, and so on. In
contrast, kiosks are like takeaways with no arrangements for seating— and the
summers are cruel enough Hygiene is one of the major drawbacks associated with
the unorganised sector. Though they claim that they prepare the food in hygienic
conditions and wash the utensils and vegetables properly, a fussy customer can see
the things that are amiss. The various seasonings are not changed for months; the
tomato ketchup bottle is dirty with usage; and the condition of the utensils is at its
worst. On the other hand, there are quick service restaurants (QSRs) and premium
restaurants like Yo! China that have a display kitchen allowing the customers to see
how the food is prepared
(g) Business Development Services (BDS) for Clusters

The BDS initiative in a cluster will enable the producers in the region to access
information about the forward and backward linkages — in terms of finance,
markets and technology inputs — essential to their activities. This is being
supported by the Central Government and international agencies like the World
Bank, DFID, KFW and GTZ.
The initiative is being implemented in three phases including diagnosis,

capacity building and reward. The first stage will diagnose the needs for BDS
intervention, and the opportunities and challenges in BDS provisioning. In the
second stage, steps for training, information access, market access and consultancy
and counselling services will be initiated. The third stage will evaluate the actual
increase in the productivity, profitability and competence of the MSMEs after
which the BDS provider will exit the cluster. The three stages will take four years to
complete.
(h) Micro finance for informal sector viability

Micro finance is recognized as a potential major contributor to the economic
development of the poor. It ensures the delivery of timely credit in a convenient
and user-friendly method. Further, approaches of meeting credit needs are
envisaged through self-help groups formed in the informal sector.Graduation to
Micro Enterprises The SHG approach is gaining wide acceptance as an effective
strategy for empowerment of vulnerable sections. Promotion of income
generating micro enterprises would form an important component of the entire
process of sustainable SHG promotion
32
Micro enterprises vs. micro producers

The important role of micro enterprises in developing economy is
increasingly being recognized. In particular micro scale production operations are
key players in these economies, providing significant employment and income to
poorer groups, and providing essential goods and services to poorer communities.
 As a result of this new awareness of the importance of micro producers, many
governments have implemented policy changes to legitimize.
 However, despite the appreciation and importance of these small producers,
this group does not appear to have been the major beneficiary of this policy
effort. Trade based micro enterprises, not micro producers, absorbed the
greater part of available credit. These producers finding less access to
commercial lending institutions must raise their capital through personal and
family savings.
 The major factor behind the failure of many micro enterprises support
programmes is: absence of the new production practices and operations,
neglecting the economically counter productive activities. The absence of a
technological component to the promotional effort is found to be also one of
the contributing factors. While the importance of technology is widely
appreciated at larger scale enterprise levels, the technological concerns of micro
producers have been largely neglected. Micro enterprises have great potential,
but also pose great technological problems, which finance alone rarely, can
resolve. Although they operate on a smaller scale, the problems are neither
simpler nor less expensive to resolve.
(i) Financial services

With a jump in the Indian economy from manufacturing sector that never
really took off, to a nascent service sector, Banking as a whole is undergoing a
change. A larger option for the consumer is getting translated into a larger demand
for financial products and customisation of services is fast becoming the norm than
a competitive advantage. With the Retail banking sector expected to grow at a rate
of 30% [Chanda Kochhar, ED, ICICI Bank] players are focussing more and more
on the Retail and are waking up to the potential of this sector of banking. At the
same time, the banking sector as a whole is seeing structural changes in regulatory
frameworks and securitisation and stringent NPA norms that were to be in place by
2004 anticipated the faster one adapting to these changing dynamics, the faster is
one expected to gain the advantage. Going by international standards, a large
portion of the Indian population is simply not “bankable” – taking profitability into
consideration. On the other hand, the financial services market is highly over-
leveraged in India. Competition is fierce, particularly from local private banks such
33
as HDFC and ICICI, in the business of home, car and consumer loans. ICICI bank
has been present in the financial service sector for the past 50 years. With a network
of about 950 branches and 3,300 ATMs in India and a presence in 17 countries, it
happens to be the largest bank in the private sector and also the second largest bank
in India. Its total assets add up to Rs.3,767 billion (USD 96 bn.) as on December
31,2007 and profit after tax to Rs.31.10 billion for fiscal 2007. It ranks third on the
Indian stock exchange, in terms of free float market capitalization. It offers an
extensive array of banking products and financial services to corporate and retail
customers via a variety of delivery channels and through its dedicated subsidiaries
and partners in the fields of investment banking, venture capital, life and non-life
insurance, and asset management. The United Kingdom, Russia, Canada,
Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre
are presently the banks subsidiaries. The ICICI has its representative offices in the
United States, China, South Africa, Bangladesh, Thailand, United Arab Emirates,
Malaysia and Indonesia.
The insurance sector in India has been traditionally dominated by state

owned Life Insurance Corporation and General Insurance Corporation and its four
subsidiaries. The Government of India allows FDI in the insurance sector up to
26%. As a result, a number of new joint venture private companies have entered
into life and general insurance sectors and their share in the insurance market is
rising. The Insurance Development and Regulatory Authority (IRDA) is the
regulatory authority in the insurance sector under the Insurance Development and
Regulatory Authority Act, 1999.
The remarkable performance of the services sector as a whole has been

reflected in the select lead indicators of the services sector (Table-12). The tourism
sector has performed well in terms of foreign tourist arrivals, with a moderate
improvement at 14 per cent during April- December 2012. In case of transport and
other services, there has been a substantial increase during 2012 over the
Table12: Performance of India's Services Sector: Some Indicators
Sector Indicators Unit Period

2008-09 2009-10 2010-11 2011-12 2012-13
Aviation Airline passengers Million 49.5 (a) 54.5 (a) 64.5 (a) 70.2 (a) 67.5 (a)
(domestic and
international)
Telecom Telecom connections lakh 4297.25 6212.8 8463.2 9513.4 8955.1(b)
(wireline and wireless)
34
Tourism Foreign tourist arrivals Million 5.28 (a) 5.17 (a) 5.78 (a) 6.31(a) 6.65 (a)
Foreign exchange US$ 11832 11394(e) 14193(a) 16564(a) 17737(a)
earnings from tourist million
arrival
Shipping Gross Tonnage (GT) Million 9.28 9.69 10.45 11.06© 10.45 (d)
of Indian shipping GT
No. of ships Numbers 925 1003 1071 1122 © 1158 (d)
Ports Port traffic Million 744.02 850.03 885.45 911.68 455.77(e)
Railways tonnes
Freight traffic Million 833.31 887.99 832.75 969.78 735.32 ©
tonnes
Net tonne kilometers Million 538226 584760 444515 639768 470956 ©
of railways
Storage Storage capacity Lakh MT 105.25 105.98 102.47 100.85 101.60
No. of warehouses Numbers 499 487 479 468 469
Sources : Directorate General of Civil Aviation, Telecom Regulatory Authority of India, Ministry of Tourism, Ministry
of Shipping, Ministry of Railways and Central Warehousing Corporation (Compiled by EXIM Bank of India).
Notes : (a) calendar years, for example 2007-8 for 2007. (b) As on 31st December, 2012, (c) April- December,
(d) As on 31 January 2013, (e) April-September. GT is gross tonnage; MT is metric tonnes.
Information technology (IT) looks after not only the development and
implementation but also management of computer-based information systems,
particularly software applications and computer hardware. In India, like any other
country, the IT sector has grown with a tremendous pace and marching towards the
competitiveness in the present global environment.
In most of the developing countries, access to information is not adequate;

SMEs need tailor-made information solutions, i.e., business information services
that assess, verify and apply information to a specific business problem. The sector
is estimated to have grown by 19 per cent in the FY2011, clocking revenue of almost
US$ 76 billion. India's outsourcing industry has witnessed a rebound and registered
better than expected growth.
The export revenues are estimated to have aggregated to US$ 59 billion in

FY2011 and contributed 26 per cent as its share in total Indian exports
(merchandise plus services), according to a research report 'IT-BPO Sector in India:
Strategic Review 2011', published by NASSCOM. The workforce in Indian IT
industry will touch 30 million by 2020 and this sunrise industry is expected to
continue its mammoth growth, expect various industry experts. Furthermore,
35
NASSCOM said that the domestic IT-BPO revenues excluding hardware are
expected to have grown at almost 16 per cent to reach US$ 17.35 billion in FY2011.
The country's domestic market for business process outsourcing (BPO) is

projected to grow over 23 per cent to touch US$ 1.4 billion in 2011, says global
research group Gartner. In 2010, the domestic BPO market was worth US$ 1.1
billion. The firm predicts that the domestic BPO market would reach US$ 1.69
billion in 2012 and increase to US$ 2.47 billion by 2014.
VI. India's services exports and imports

The world trade in commercial services and their exports by category and
region-wise are presented in the following two tables (Tables - 13 & 14), in which
one can understand that the other commercial services including the IT and ITeS
dominates in both the exports and imports as well in the globe.
Table- 13: World trade in commercial services by category, 2010

(Billion dollars and percentage)
Value Share
2010 2000 2005 2008 2009 2010
Exports
All commercial services 3695 100.0 100.0 100.0 100.0 100.0
Transportation services 785 23.2 22.8 23.2 20.2 21.3
Travel 940 32.1 27.6 24.8 25.6 25.4
Other commercial services 1970 44.7 49.6 52.0 54.2 53.3
Imports
All commercial services 3510 100.0 100.0 100.0 100.0 100.0
Transportation services 960 28.4 28.6 28.8 25.4 27.3
Travel 850 29.9 27.0 23.9 24.6 24.1
Other commercial services 1705 41.7 44.4 47.2 50.0 48.5
Source: WTO
36
Data from the World Trade Organisation indicate that although software and IT
services exports have so far continued to be steady and India's share of global
service exports rose to 4.4 per cent in 2010, China overtook India in the second half
of the last decade and now accounts for 6.1 per cent of global commercial service
exports (excluding intra-European Union).
Table- 14: Growth of commercial services exports by category and by

region, 1990-2010(Annual percentage change)
World North South and Europe CIS Africa Middle Asia

America Central East
America
Commercial services
1990-95 9 8 9 - - ... ... ...
1995-00 5 7 6 ... ... ... ... 4
2000-05 11 5 8 13 19 ... ... 12
2005-10 8 7 10 6 14 9 ... 13
2009 -12 -8 -8 -14 -17 -9 -3 -11
2010 9 9 12 3 12 10 3 22
Transportation services
1990-95 6 4 7 - - ... ... 11
1995-00 3 1 1 3 ... ... ... 3
2000-05 11 3 10 12 15 ... ... 11
2005-10 7 6 9 5 13 9 7 8
2009 -23 -18 -17 -23 -16 -15 -14 -28
2010 15 16 18 8 20 20 11 26
Travel
1990-95 9 7 10 - - 8 ... ...
1995-00 3 6 7 2 ... 6 ... 2
2000-05 8 2 6 9 18 15 ... 10
2005-10 6 5 7 3 9 8 13 13
2009 -9 -11 -6 -13 -22 -5 4 -3
2010 8 10 9 -1 2 9 18 25
Other commercial services
1990-95 10 12 10 - - ... ... 16
1995-00 7 11 9 ... ... ... ... 6
2000-05 13 8 11 15 25 ... ... 14
2005-10 10 9 15 8 18 10 ... 14
2009 -8 -3 -4 -11 -15 -12 -1 -5
2010 7 8 11 2 9 4 -15 19
Source: WTO
37
With a sustained high growth of export of services, including a growth of 35

per cent in 2008-09, export value reached US$ 101.67 billion. Growth has been
particularly rapid in the computer and related services category consisting of
software services, business services, financial services and communication services
(Table – 15).
Table-15: India's Export of Services (in US $ Million)
Exports 1995-96 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09

Total Goods and Services 39654 61720 128455 162811 202688 256504 290679
Services Export 7344 16268 43249 57659 73780 90342 101678
Services export as % to total 18.5 26.4 33.7 35.4) 36.4) 35.2 35.0
Computer and Information -- 4727 16344 21875 29088 37491 49379
services
Computer and Information -- 29.1 37.8 37.9 39.4 41.5 48.6
services as % of Services
export
Computer services -- 4633 16204 21711 28787 37032 48626
Computer services export as -- 28.5 37.5 37.7 39.0 41.0 47.8
% of Services export
Other business services 2120 4149 8153 12764 17536 20734 20426
Other business services 28.9 25.5 18.9 22.1 23.8 23.0 20.1
export as % of Services
export
Source: Monthly Bulletin, various issues, Reserve Bank of India (for goods and services
exports) and Balance of Payments Statistics (February 2010) IMF.
Chart – 12: India's Export Services

Total Goods and Services Services Export
Computer and Information services Computer services
Other business services
600000
500000
US$ Million
400000
300000
200000
100000
0
1995-96 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09
Years
38
Chart 13: Percentages of India's Export Services

Services export Computer and Information services
Computer services export Other business services export
160
140
120
Percentages
100
80
60
40
20
0
1995-96 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09
Years
Chart-12 indicates the Bar Diagram for Total numbers of goods and services
of India's Export Services and Chart-13 describes the Line Chart for percentage of
Total no. of Goods and services of India's Export Services.
In both diagrams it is observed that computer and Information services has

high percentage of Export services though there is no percentage of goods and
services observed in the year 1995-96. It is also observed that other Business
services has low percentage of Export Services in Total no. of goods and Services
compare to other services of India's Export Services.
India's export of services is expected to touch $310.9 billion by 2011/12,

powered by the booming software, consultancy, engineering and tourism sectors,
according to the Federation of Indian Chambers of Commerce and Industry
(FICCI) survey. Services exports could surpass merchandise exports, which are
expected to more than double to $305.5 billion in the next five years.
Table-16: Global Trade in Services of India*(US$ billion)
Year Export Import Total

1991 4.925 5.945 10.871
1998 11.691 14.540 26.231
2001 17.337 14.483 31.820
2002 19.478 15.034 34.512
39
2003 23.902 17.425 41.326

2004 38.281 25.205 63.486
2005 52.527 32.549 85.076
2006 69.730 40.324 110.054
2007 86.965 47.592 134.558
2008 102.949 56.554 159.503
Average annual growth rate (%)
1991-1998 19.62 20.65 20.19
2001-2008 70.54 41.50 57.32
1991-2008 117.067 50.075 80.429
Note: *Taken at current price
Source: Calculated based on Direction of Trade Statistics Online, IMF.
Chart-14(a): Global trade in services of India

Export Import
120
100
80
US$billion
60
40
20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Years
Chart -14(b): Percentages of Global Trade in Services of

India over a period of time
Export Import Total
300
250
Percentages
200
150
100
50
0
1991-1998 2001-2008 1991-2008
Years
40
Chart-14(b) describes the Bar Diagram of average Annual growth rate of

Global Trade in services of India from 1991-2008. In both charts it is observed that
there is continuous increase in Export and Import services and also continuous
increased percentage in average Annual Growth rate in every year of Global Trade
in Services of India. In the figure 15.1. it shows that there is strong relationship
between Export and Import services of Global Trade in Services of India in every
year
Exports during January, 2012 were valued at US$ 25346.90 million

(Rs.130128.95 crore) which was 10.10 per cent higher in Dollar terms (24.52 per
cent higher in Rupee terms) than the level of US$ 23021.57 million (Rs. 104502.74)
during January, 2011. Cumulative value of exports for the period April-January
2011 -12 was US$ 242791.81 million (Rs 1153799.74 crore) as against US$
196632.76 million (Rs.896518.37 crore) registering a growth of 23.47 per cent in
Dollar terms and 28.70 per cent in Rupee terms over the same period last year.
Imports during January, 2012 were valued at US$ 40107.95 million

(Rs.205911.00 crore) representing a growth of 20.25 per cent in Dollar terms (36.00
per cent in Rupee terms) over the level of imports valued at US$ 33353.59 million (
Rs. 151403.30 crore) in January, 2011. Cumulative value of imports for the period
April-January, 2011-12 was US$ 391459.42 million (Rs.1859168.34 crore) as against
US$ 302528.75 million (Rs. 1379477.78 crore) registering a growth of 29.40 per
cent in Dollar terms and 34.77 per cent in Rupee terms over the same period last
year. (Table-17)
Table 17 : Export and Import under Miscellaneous Services

(US $ million)
2007-08 2008-09 2007-08 2008-09
Miscellaneous services 67,010 77,691 29,298 27,879
Of which:
Communication 2,408 2,172 860 1087
Construction 764 867 707 896
Financial 3,217 3,948 3,133 2,958
Software 40,300 46,300 3,358 2,814
New agency 503 800 506 385
Royalties, copyrights etc 157 133 1,037 1,722
Business services 16,772 16,445 16,553 15,435
Source: Monthly Bulletin (2010), Reserve Bank of India.
41
India exported goods worth $112.4 billion during 2005/06 while export of
services was $69.73 billion. Indian services exports are estimated to reach $91.5
billion this fiscal, and merchandise exports to hit $132.7 billion by 2015, as they grew
at 28% annually for the last five years, faster than the 22% growth in goods exports
during the same period.
According to the FICCI study, on the share in worldwide Indian services

exports, India is going to almost triple its share from the current 2.3% to 6% by
2012. While China 's exports of commercial services at $74 billion are now more
than that of India but India 's exports of commercial services would cross that of
China in 2009 - the average annual growth rate of services in China is 19% for the
past five years. By 2013 India 's commercial services exports could be some $100
billion higher than that of China . The commercial services exports from China are
projected to be around $300 billion while that from India would be $397 billion by
2013.
Table -18: Export and Import of Services from India

(US$ billion)
Flow Services Sectors 2000 2001 2002 2003 2004 2005 2006 2007 2008 AGR (%)
Export Communication 0.60 1.10 0.78 0.97 1.09 1.57 2.18 2.35 2.42 38.08
Export Computer and 4.73 7.41 8.89 11.88 16.34 21.87 29.09 37.49 49.38 18.07
information
Export Construction 0.50 0.07 0.23 0.28 0.52 0.35 0.62 0.75 0.72 5.48
Export Financial 0.28 0.31 0.60 0.37 0.34 1.14 2.36 3.38 4.06 171.32
Export Insurance 0.26 0.28 0.33 0.41 0.84 0.94 1.11 1.51 1.55 62.81
Export Other business 4.15 2.35 2.70 2.23 8.15 12.76 17.54 20.73 20.43 49.04
Export Personal, cultural, 0.05 0.05 0.11 0.31 0.51 0.51 0.71 0.36 1.0 45.00
and recreational
Export Transportation 1.98 2.05 2.47 3.02 4.37 5.75 7.56 9.04 11.32 59.00
Export Travel 3.46 3.20 3.10 4.46 6.17 7.49 8.63 10.73 11.83 30.25
Export Services export 16.69 17.34 19.48 23.90 38.28 52.53 69.73 86.97 102.95 64.63
Total
Import Communication 0.10 0.27 1.00 0.61 0.58 0.42 0.61 0.86 1.00 107.25
Import Computer and 0.58 0.91 0.91 0.69 0.93 1.27 1.96 3.47 3.42 61.59
information
Import Construction 0.13 0.47 0.60 1.21 0.83 0.60 0.79 0.73 0.76 61.76
Import Financial 1.28 1.78 1.43 0.49 0.79 0.87 1.95 3.24 3.55 22.26
Import Insurance 0.81 0.81 0.89 1.16 1.75 2.33 2.67 3.18 4.25 52.86
Import Other Business 4.32 3.73 4.08 7.07 11.69 13.69 17.59 18.32 21.06 48.41
Import Personal, Cultural 0.06 0.06 0.10 0.10 0.10 0.10 0.10 0.17 0.30 96.23
and recreational
Import Transportation 8.70 8.50 8.52 9.31 13.23 20.68 24.86 30.78 41.88 47.64
Import Travel 2.69 3.01 2.99 3.58 4.82 6.19 6.84 8.22 9.60 32.12
Import Services Import 19.19 20.10 21.04 24.88 35.64 47.29 58.70 70.55 87.90 44.76
Total
Notes: *Average annual growth rate (%); Source: BOP Statistics Online, IMF
42
Chart- 15(a): Export Services

Communication Computer and information Construction
Financial Insurance Other Business
Personal, Cultural and recreational Transportation Travel
45
40
35
US$ billion
30
25
20
15
10
5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Years
Chart-15(b): Import Services

Communication Computer and information Construction
Financial Insurance Other Business
Personal, Cultural and recreational Transportation Travel
45
40
35
US$ billion
30
25
20
15
10
5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Years
Charts-15 (a) & (b) indicate for Export and Import Services for different
service sectors of India during 2000-2008. In exports, it is observed that Computer
and information services have high growth and Personal, cultural and recreational
services have low growth compare to other Export services of India. In Imports,
the services like transportation services have high growth and personal, cultural and
recreational services has low growth compare to other Import services of India.
From these charts, it is understood that there is continuous increase in Total services
of Export and import services of India for every year.
Imports of commercial services have become important in recent years

reaching US$ 87.90 billion in 2008-09 with a growth of 44.76 per cent (Table-18).
43
Business services were the most important category of service in imports, followed
by transportation and travel. Business services grew by 48.41 per cent in 2008-09.
However, there was a sharp fall in the growth rate of business services imports (as
in the case of business services exports) mainly due to the fall in imports of
architectural, engineering and other technical services and relatively low growth in
imports of business and management consultancy services. Travel and
transportation imports have also registered good growth in this period.
Table-19: Services Attracting Highest FDI Equity Inflows Rs. crore
Ranks Sector 2009-10 2010-11 2011-12 Comulative %

inflow (Apr2000-.- s to total
Dec. 2011) (Apr. Dec. 2011)
(in US $ terms)
1 Services sector 19945 15053 21431 142539 20.1
(financial & non-financial) (4176) (3296) (4575) (31710)
2 Telecommunications 12270 7542 8969 57035 7.9

(radio paging, cellular mobile, (2539) (1665) (1989) (12544)
basic telephone services)
3 Computer software & 4127 3551 2626 48940 6.9

hardware (872) (780) (564) (10973)
4 Housing & real estate 14027 5600 2544 48819 6.9

( 2935) (1227) (551) (10933)
5 Construction activities 13469 4979 7635 46216 6.5

(including roads & highways) (2852) (1103) (1602) ( 10239)
Source : Based on Department of Industrial Policy & Promotion data.

Note : Figures in parentheses are US$ million.
India's services imports

The services sector also attracting higher FDI equity in the country. Their
growth rate over the past three years has reached to more than 20 per cent. Among
the services sector, the FDI equity inflow was seen in the telecommunications
followed by IT and ITeS, Housing and Real Estate and Construction. (Table -19)
The cumulative inflows as percentages of the services over a decade of time in India
is presented in the following chart.
Chart-15 describes the attracting highest FDI inflow on a pie diagram for
44
different service sector from year 2009-2012. The service sector has high growth
percentage among all other services from 2000 April to 2011 December. This has
been followed by telecommunications, computer soft ware and hard ware, housing
& real estate and construction.
Chart- 16 : Percentage share of FDI Inflows through Services sector

Services sector Telecommunications Computer software & hardware Housing & real estate Construction activities
6.5
6.9 20.1
6.9
7.9
VII. The Government Initiative
The services sector has many schemes which are being looked after by
various Ministries at the central government. Of late, the importance of the sector
and its contribution to the GDP has been recognized and thereby various Ministries
have given support for the development and promotion of the services sector in our
country. The Ministries include Ministry of Tourism, Ministry of I & B, Ministry of
Social Welfare and Justice, Ministry of Women and Child Welfare, Ministry of
Environment and Forests, Ministry of Rural Development, Ministry of Commerce
and Industry, Ministry of North Eastern Region and so on. In all these Ministries
the support programmes and schemes are related to the particular services.
Therefore, for the first time in our country the Ministry of MSME has recognized
the sector as one of the emerging economies in our country and thereby included
the service sector enterprises and announced a conceptual definition in terms of the
investment in tools and equipments and taken initiatives for boosting the sector in
many ways. Not only defining the services sector in terms of micro, small and
medium enterprises but also provided a lot of emphasis for strengthening the sector
for their marketing, technology and the quality. In this chapter the emphasis was laid
on linkages of MSMEs with other sectors. Even though most of the service
enterprises are in the unorganized sector, through the enactment of MSMED
45
development, the services sector will thrive for further development in a more
systematic manner.
The process of economic liberalization and market reforms, while exposing

the Indian MSEs to increasing levels of domestic and global competition, has also
opened up attractive possibilities of access to larger markets and of stronger and
deeper linkages of MSEs with larger enterprises. Improved manufacturing
techniques and management processes can be sourced and adopted with greater
ease. A robust and vibrant MSE segment can derive the benefits of these new
opportunities, provided appropriate enabling policies are put in place and measures
for capacity building in public-private mode are also initiated. In this environment
of competition and rapid technological changes, the segment can then achieve
higher sustained growth by enhancing its technological capabilities, elevating its
product and service quality to global standards and seeking ways of innovation.
Ministry of Micro, small and medium Enterprises (MSME) aggressively persist on
establishing the Intellectual Property facilitation centres (IPFC) through DC (MSME).
Under National manufacturing Competitiveness programme, MSME is
implementing a scheme “Building awareness on Intellectual property Rights (IPR)
for Micro, Small and medium Enterprises”. As on today, MSME Ministry has
sanctioned 24 IPFCs for the benefit of MSME sector in the country.
To give proper direction, guidance and encouragement to the Services

Sector, the Ministry of Coomerce and Industry, Government of India has initiated
to set up an exclusive Services Export Promotion Council (SEPC) (Appendix -3).
The micro and small enterprises (MSEs) provide employment to an

estimated 73.2 million persons in the rural and urban areas of the country during
2010-11. During 2001-11, the MSME sector registered continuous growth in the
number of enterprises, production, employment and exports. It is estimated that
there are about 31.15 million MSMEs in the country as on March 31, 2011,
accounting for about 11.48 per cent of the gross value of output in the
manufacturing sector. (Table-20)
Table-20: MSMEs Performance: Units, Employment, Investments,

Production & Exports.
Sl. Year Total Employment Fixed Production Exports

No. Working (in lakh persons) Investment (in Rs.Crores) (in Rs.Crores)
MSMEs (in Rs.Crores)
(in Lakhs)
I II III IV V VI VII
46
1 2001-02 105.21 249.33 154349 282270 71244

(4.07) (4.44) (5.11) (8.03) (2.07)
2 2002-03 109.49 260.21 162317 314850 86013
(4.07) (4.36) (5.16) (11.54) (20.73)
3 2003-04 113.95 271.42 170219 364547 97644
(4.07) (4.31) (4.87) (15.78) (13.52)
4 2004-05 118.59 282.57 178699 429796 124417
(4.07) (4.11) (4.98) (17.90) (27.42)
5 2005-06 123.42 294.91 188113 497842 150242
(4.07) (4.37) (5.27) (15.83) (20.76)
6 2006-07 261.12 595.66 500758 709398 182538
(111.57) (101.98) (166.20) (42.49) (21.50)
7 2007-08 272.79 626.34 558190 790759 202017
(4.47) (5.15) (11.47) (11.47) (10.67)
8 2008-09 285.16 659.35 621753 880805 N. A.
(4.53) (5.27) (11.39) (11.39)
9* 2009-10 298.08 695.38 693835 982919 N. A.
(4.53) (5.46) (11.59) (11.59)
10# 2010-11 311.52 732.17 773487 1095758 N. A.
(4.51) (5.29) (11.48) (11.48)
The figures in brackets show the percentage growth over the previous year. The data for the period
up to 2005-06 is Small Scale Industries (SSI). Subsequent to 2005-06, data with reference to Micro,
Small and Medium Enterprises are being compiled. The growth for the year 2010-11 is based on the
average growth rate for the previous three years. * : Provisional, # : Projected, N. A. : Not Available.
Source: DC(MSME), New Delhi
Chart-17(a): Performance of MSME Sector (No. of Working units)
Total Working MSMEs

350
300
250
Rs. in Lakhs
200
150
100
50
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Years
47
Chart-17 (b): Performance of MSME Sector – Employment (in Lakh Persons)

800
Employment
700
600
in Persons
500
400
300
200
100
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Years
Chart-17(c): Performance of MSME Sector- Investment, Production and Exports

2000000
Investment Production Exports
1800000
1600000
Rs. in Crores
1400000
1200000
1000000
800000
600000
400000
200000
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Years
Chart-17(d): Percentage Change of the parameters of the MSME Sector

Total Working MSMEs Employment Fixed Investment
400 Production Exports
350
300
Percentages
250
200
150
100
50
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Years
48
Chart-17(a) indicates the MSME performance in terms of total working

MSMEs
Chart-17(b) indicates the employment in MSME sector. It is observed that

from year 2001-2011, total employment is high in total MSME sectors and also
there is continuous increasing in the employment for every year in Total MSME
sectors.
The chart-17© shows that export services has low amount of growth since
the information is not available from year 2008-2011 where as production services
has high amount of growth when comparing the MSME performance in
Investments, Production and Export services.
The chart-17(d) interprets the percentage growth rate over previous year in
total number of working units and other parameters of MSMEs performance in
terms of employment, production, investment and exports. In all these lines, it is
very clear from the chart that the year 2006-07 indicated higher mode, since the
enactment of MSMED act in the country.
Chart-18: Percetage Share of Products of MSME Units in the Country
To capture the complete data on the MSME sector, the 4th Census of MSME sector
is being launched.
49
Recently, major initiatives have been taken by the Government to revitalize the
MSME sector. They include:
(i) Implementation of the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006
(ii) A “Package for Promotion of Micro and Small Enterprises” was announced
in February 2007. This includes measures addressing concerns of credit,
fiscal support, cluster-based development, infrastructure, technology, and
marketing. Capacity building of MSME Associations and support to women
entrepreneurs are the other important features of this package.
(iii) To make the Credit Guarantee Scheme more attractive, the following
modifications have been made:
(a) enhancing the eligible loan limit from Rs. 25 lakh to Rs. 50 lakh;
(b) raising the extent of guarantee cover from 75 per cent to 80 per cent for
(1) micro enterprises for loans up to Rs. 5 lakh,
(2) MSEs operated or owned by women and
(3) all loans in the North-East Region; and
(c) reducing one-time guarantee fee from 1.5 per cent to 0.75 per cent for all
loans in the North-East Region.
(iv) The phased deletion of products from the list of items reserved for exclusive
manufacture by micro and small enterprises is being continued. On March 13,
2007, 125 items were dereserved reducing the number of items reserved for
exclusive manufacture in micro and small enterprise sector to 114. Further,
79 items were dereserved through a notification dated February 5, 2008.
Initiatives and measures taken by the Government during the year to enable
service MSMEs to enhance their competitive strength, address the challenges of
competition and avail of the benefits of the global market include the enforcement
of the MSMED Act, 2006.
The main features of the Act are:

- It provides the first-ever legal framework for recognition of the concept of
"enterprise" (comprising both manufacturing and services) and integrating the
three tiers of these enterprises, viz., micro, small and medium.
- Under the Act, enterprises have been categorised broadly into those engaged in
(i) manufacturing and (ii) providing/rendering of services. Both categories
have been further classified into micro, small and medium enterprises, based on
their investment in plant and machinery (for manufacturing enterprises) or in
equipment (in case of enterprises providing or rendering services) as follows:
50
Manufacturing: Micro Enterprises investment up to Rs. 2.5 million; Small

enterprises – investment above Rs. 2.5 and up to Rs. 50 million; Medium
enterprises – investment above Rs.50 and up to Rs.100 million.
- Services: Micro enterprises – investment up to Rs.1.0 million; Small enterprises
investment above Rs.1.0 million; and up to Rs.20 million; Medium enterprises –
investment above Rs.20 million and up to Rs.50 million.
- A package for promotion of MSEs has been approved to address most of the
concerns in the areas of credit, cluster-based development, infrastructure,
technology, and marketing. Capacity building of MSME Associations and
support to women entrepreneurs are the other important features of this
package.
- Under the Credit Guarantee Scheme, life insurance cover for chief promoters
of units provided guarantee cover by the Credit Guarantee Fund Trust for
Small Industries (CGTSI) has been introduced. Further, the one-time
guarantee fee under the scheme has been reduced from 2.5 per cent to 1.5 per
cent with effect from April 1, 2006.
- The Act provides for a statutory consultative mechanism at the national level
with wide representation of all sections of stakeholders, particularly the three
classes of enterprises, and with a wide range of advisory functions and an
Advisory Committee to assist the MSME Board (National Micro, Small and
Medium Enterprises Development Board) and the Central/State
Governments. The other features include (i) establishment of specific Funds
for the promotion, development and enhancement of competitiveness of
these enterprises, (ii) notification of schemes/programmes for this purpose,
(iii) progressive credit policies and practices, (iv) preference in Government
procurements to products and services of the micro and small enterprises, (v)
more effective mechanisms for mitigating the problems of delayed payments to
micro and small enterprises and (vi) simplification of the process of closure of
business by all three categories of enterprises.
- A new 'Package for Promotion of Micro and Small Enterprises' is being
formulated to include supplementary measures to encourage adequate credit
flow, provide further incentives for technology upgradation, infrastructure and
marketing facilities, capacity building of micro and small enterprises, and
support to women entrepreneurs.
Informal estimates suggest the contribution of the MSME sector to be much

higher than those based on the 4th All-India Census conducted in 2007. According
to the census, out of 24.1 lakh enterprises, 67.1 per cent units were under the
category of manufacturing, followed by services (16.78%) and repairing and
51
maintenance (16. 13%). These enterprises provide employment to 93.05 lakh

persons with the following percentage shares of the categories.
The select indicators according to the All India 4th Census of these enterprises are
presented in the following table (Table-21)
Table-21: Select Indicators of MSME in All India 4th Census

Sl. No Activity Manufacturing Services Repair and
Maintenance
1. No. of units( in Lakhs) 16.17 4.04 3.89
(67.1) (16.78) (16.13)
2. Employment (in Lakhs) 80.83 6.28 5.98
(86.83) (6.75) (6.42)
3. Fixed Investment 390459 30208 28471
(in Rs. Crore) (86.94) (6.72) (6.34)
4. Gross Output 290686 11665 10622
(in Rs.Crore) (92.88) (3.73) (3.39)
Source: Final report - 4th All India Census of MSME (Registered Units)
Chart-19: Pie Chart for Percentage of Indicators of MSME in India
No. of Units Rs. in Lakhs Employment (No. of Persons in Lakhs)
Manufacturing Services Repair and Maintenance Manufacturing Services Repair and Maintenance
87%
16%
17%
67%
6% 7%
52
Fixed Investment Rs. in Crore Gross Output Rs. in crore
Manufacturing Services Repair and Maintenance Manufacturing Services Repair and Maintenance
4%
87% 3%
7%
6% 93%
Chart- 19 indicates through the pie diagrams, the performance of MSME in

activities of Manufacturing, Services and Repair and Maintenance in terms of
number of units, employment, investment and gross output . The above table and
charts are prepared based on the 4th census data given in the final report by the
Ministry of MSME
VIII. Conclusion
In terms of annual average rate of growth, world exports of commercial
services not only increased faster (7%) than that of merchandise (5%) between 2000
and 2003, but also increased from 7 per cent in 2002 to 13 per cent in 2003.
Reflecting the importance of services in their overall economic activities, the
industrial countries dominate global exports of services. Nearly two-thirds of
global trade in services is by the EU, USA and Japan. India accounted for 1.4 per
cent of total exports and 1.2 per cent of world imports of services in 2003. India's
exports of services increased from US $ 4.9 billion to US $ 25 billion over the period
1992 to 2003. A sharp rise in earnings from tourism and increased earnings from IT
and ITES, including software exports account for the enhanced services exports
from India.
For India, services account for 55.1 per cent of GDP and 31 per cent of total
exports. The growth potential continues to be large. There was an upward shift in
the trend of growth of services exports (in US dollar terms) from 7.9 per cent in the
first half of the decade of the 1990s to 26 per cent during 2006-07. Software and
other miscellaneous services (including professional, business and technical) have
emerged as the main categories in India's exports of services. The relative share of
travel and transportation in India's services exports have declined over the years,
while the share of software exports has gone up to 49 per cent in 2006-07. The
buoyant growth of professional, technical and business services has provided a
53
cushion against the slowing down of traditional services such as travel and
transportation.
The growing share of services sector in the GDP has the following
implications, mostly beneficial, for the economy.
 Given an appropriate policy conducive to greater competition and efficiency,

which the economic reforms aim at, the service sector can be expected to
contribute a lot more raising and sustaining a higher growth rate for economy, as
also of exports in such items as software. This development also opens up the
doors for the employment of people who will shift from agriculture and
industry as a consequence of rise in productivity in these commodity sectors on
account of technological progress.
 Another consequence of this change in the sectoral composition of domestic
product will be reflecting in the consumption pattern of people. An increasing
proportion of people's expenditures will shift from commodities to services.
 Yet another important implication relates to government budgets. The
expanding services sector indicates a big increase in tax revenue through an
expanded tax base.
 The government has decided to peg foreign direct investment limit in credit
information services companies at 49 per cent, and is adopting a cautious
approach with regard to these companies as they would be handling highly
sensitive credit data. However, limiting the FDI to 49 per cent will make it
difficult for domestic investors to bring in funds and expertise for the venture.
 The constraints on potential opportunities in services trade include lack of a set-
up like the export promotion council other than for computer software; various
visible and invisible barriers to service trade, and selective preferential market
access through regional initiatives. Despite the constraints, there is a scope for
widening the diversification into a variety of areas such as consultancy and R&D
services, health care, entertainment services, ship repair services, satellite
mapping services, telecom, educational services, accounting services and
hospitality services, and also beyond the major markets of the globe. The policy
measures announced in the foreign trade policy 2004-09 to promote services
exports should help it along with proper synergy between economic policies and
trade strategies.
SUGGESTIONS
 For the purpose of developing the suggested classification, it is necessary to first
identify the variety of services already in existence in India by considering all
54
available sources. Once the new but important activities are identified, the next
task would be to classify them appropriately to suit the requirements of the
users. It may be mentioned that at the international level, including WTO, UN
systems, IMF and World Bank, an effort is being initiated for proper coding of
commercial trading in services. They have already been classified into 12
categories and 155 sub-categories in the WTO's list (Appendix-2).
 A constructive partnership between the private and public sectors has to be
established and sustained for growth. There is a need to establish innovative
products and world-class infrastructure. Thrust is required to be given to inland
water navigation, hotels, communication, and entertainment and tourist
promotion. The private sector and the state and central government agencies
have to work together to create the right environment and act as proactive
facilitators and catalysts to promoting sustainable tourism.
 Tourist management leaders should be trained to create a people friendly
approach among the tourists so that he/she becomes a promoter of business
through word of mouth and experience sharing.
 While various sectors within manufacturing/services registered an impressive
increase in the volume of production and exports, this was largely input driven
and the growth in total factor productivity was hardly noticeable. Sustained
efforts to remove bottlenecks hindering the productivity and efficiency of the
manufacturing sector would boost the performance of the manufacturing
sector substantially.
55
Appendix-1
Distribution of NIC 1998 codes for different tabulation categories
Corres-ponding Total number Total number Total number Total number
Tabulation Category Section Code of Divisions of Groups of Classes of Sub-classes
(1-digit Codes) (2-digit Codes) (3-digit Codes) (4-digit Codes) (5-digit Codes)
1 2 3 4 5 6
A. Agriculture, Hunting and 0 2 6 9 41
Forestry
B. Fishing 0 1 1 1 5
C. Mining and Quarrying 1 5 10 12 42
D. Manufacturing 2&3 23 61 127 611
E. Electricity, Gas and Water 4 2 4 4 12
Supply
F. Construction 5 1 5 5 19
G. Wholesale and Retail trade; 6 3 17 29 110
Repair of motor vehicle, motor
cycle and personal & household
goods
H. Hotels and Restaurants 6 1 2 2 11
I. Transport, Storage and 7 5 10 17 28
Communication
J. Financial intermediation 8 3 5 12 19
K. Real estate, Renting and 8 5 17 31 43
Business activities
L. Public administration and 9 1 3 8 19
Defence, Compulsory social
security
M. Education 9 1 4 5 12
N. Health and Social work 9 1 3 6 12
O. Other community, Social and
Personal Services 9 4 9 22 35
P. Private household with 9 1 1 1 1
employed persons
Q. Extra territorial organisations 9 1 1 1 1
and bodies
All 60 159 292 1021
Source: National Industrial Classification [All Economic Activities], 1998
56
Appendix-2
World Trade Organisation's list of services
Description as per WTO's list of services Status as per NIC-98

Code Remarks
1. BUSINESS SERVICES
A. Professional Services
a. Legal services 74110
b. Accounting, auditing and book-keeping 74120 Clubbed with1Ac.
services
c. Taxation services 74120 Clubbed with 1Ab.
d. Architectural services 74210 Clubbed with 1Aefg.
e. Engineering services 74210 Clubbed with 1Adfg.
f. Integrated engineering services 74210 Clubbed with 1Adeg.
g. Urban planning and landscape 74210 Clubbed with 1Adef.
architectural services
h. Medical and dental services 85120
i. Veterinary services 85200
j. Services provided by midwives, 85194
nurses, physiotherapists and
paramedical personnel
k. Others
B. Computer and Related Services 72
a. Consultancy services related to the
installation of computer hardware 72100
b. Software Implementation services 72200
c. Data processing services 72300
d. Database services
e. Others 72400
C. Research and Development Services 73
a. R&D services on natural sciences 73100 Clubbed with 1Cc.
b. R&D services on social sciences and 73200
humanities
c. Interdisciplinary R&D services 73100 Clubbed with 1Ca.
D. Real Estate Services 70 This activity is
elaborated more in
NIC-98.
a. Involving own or leased property 7010 -do-
b. On a fee or contract basis 70200
E. Rental/Leasing Services Without Operators 71 T h i s a c t i v i t y i s
elaborated more in
NIC-98.
57
Appendix-2

Code Remarks
a. Relating to ships 71120 Clubbed with other
water transport
equipments.
b. Relating to aircraft 71130
c. Relating to other transport equipment 71110 N I C - 9 8 i s m o r e
detailed.
d. Others
F. Other Business Services 74
a. Advertising services 74300
b. Market research and public opinion 74130
polling services
c. Management consulting service 74140 Clubbed with 1Fd.
d. Services related to management consulting 74140 Clubbed with 1Fc.
e. Technical testing and analysis services 74220
f. Services incidental to agricultural, hunting 0140, N I C - 9 8 h a s
and forestry 01500, elaborated more on
& 0200 this activity.
g. Services incidental to fishing 05005 ------do------
h. Services incidental to mining NIC-98 has elaborated more
on this activity.
i. Services incidental to manufacturing ------do------
j. Services incidental to energy distribution ------do------
k. Placement and supply services of personnel No such activity
l. Investigation and security 74920
m. Related scientific and technical consulting No such activity
services
n. Maintenance and repair of equipment NIC-98 has elaborated more
(not including maritime vessels, aircraft on this activity.
or other transport equipment)
o. Building-cleaning services 74930
p. Photographic services 74940
q. Packing services 74950
r. Printing, publishing T h i s a c t iv i t y h a s b e e n
elaborated more in Division
22 of NIC-98.
s. Convention services No such activity
t. Others
58
Appendix-2

Code Remarks
2. COMMUNICATION SERVICES
A. Postal Services 64110
B. Courier Services 64120
C. Telecommunication Services 6420
a. Voice telephone services 64201
Clubbed with other
activities under Code
642.
b. Packet-switched data transmission services No such activity
c. Circuit-switched data transmission services No such activity
d. Telex services 64201 Clubbed with other
642.
e. Telegraph services 64201 ------do------
f. Facsimile services 64201 ------do------
g. Private leased circuit services 64204
h. Electronic mail 64202 Clubbed with other
642.
i. Voice mail 64202 ------do------
j. On-line information and data base retrieval 64202 ------do------
k. Electronic data interchange (EDI) 64202 ------do------
l. Enhanced/value-added facsimile 64201 ------do------
services including store and forward,
store and retrieve
m. Code and protocol conversion No such activity
n. On-line information and/or data processing No such activity
(including transaction processing)
o. Others Maintenance of telecom
network is available under
NIC-98 as 64203.
D. Audiovisual Services
a. Motion picture and video tape production 9211 Class 9211 of NIC-98
and distribution service has further elaborated
on this activity.
b. Motion picture projection service 92120
c. Radio and television services 9213 92131-Radio activities,
9 2 1 3 2 - Te l e v i s i o n
activities.
59
Appendix-2

Code Remarks
d. Radio and television transmission services 9213
e. Sound recording 9214 Clubbed with other
activities.
f. Others
E. Others
3 CONSTRUCTION AND RELATED ENGINEERING SERVICES
a. General construction work for building 45201, 45202 4 5 2 0 1 f o r
residential buildings
and 45202 for non
residential buildings
b. General construction work for civil 4520 NIC-98 has further
engineering elaborated on this
activity.
c. Installation and assembly work 4530
d. Building completion and finishing work 4540 ------do-------
e. Others
4. DISTRIBUTION SERVICES
a. Commission agents' services 5110 Class 5110 of NIC
98 is more elaborate.
b. Wholesale trade services 512 to Group 512 to 519 of
519 NIC-98 is more
elaborate.
c. Retailing services Group Group 521 to 525 of
521 to NIC-98 is more
525 elaborate.
d. Franchising No such activity
e. Others
5. EDUCATIONAL SERVICES 80
a. Primary education services 8010 NIC-98 is more
elaborate.
b. Secondary education services 802 NIC-98 is more
elaborate.
c. Higher education services 8030 NIC-98 is more
elaborate.
d. Adult education 80901
e. Other educational services
6. ENVIRONMENTAL SERVICES
60
Appendix-2

Code Remarks
a. Sewage services 9000 Codes 90001, 90002
and 90009 are
provided.
b. Refuse disposal services 9000
c. Sanitation and similar services 9000
d. Others
7. FINANCIAL SERVICES
A. All Insurance and Insurance-Related Services
a. Life, accident and health insurance services 66010
b. Non-life insurance services 66030
c. Reinsurance and retrocession No such activity
d. Services auxiliary to insurance (including 67200
brokering and agency services)
B. Banking and other Financial Services (excluding insurance)
a. Acceptance of deposits and other repayable Descriptions of
services and
funds from the public activities as per the two lists
b. Lending of all types, including consumer do not generally match. NIC
credit, mortgage credit, factoring and 98 provides quite a few 5
financing of commercial transaction digit codes for the related
services under NIC Divisions
65 to 67.
f. commercial transaction
c. Financial leasing
d. All payment and money transmission services
e. Guarantees and commitments
f. Trading for own account or for account
of consumer, whether on an exchange,
in an over-the-counter market or otherwise,
the following:
- Money market instruments (cheques, bills,
certificates of deposits, etc.)
- Derivative products including, but not limited
to, futures and options
- Exchange rate and interest rate instruments,
including products such as swaps, forward
rate agreements, etc. transferable securities
61
Appendix-2

Code Remarks
- Other negotiable instruments and financial assets,
including bullion
g. Participation in issue of all kinds of
securities, including under writing and
placement as agent (whether publicly or
privately) and provision of service related
to such issues
h. Money binding
i. Asset management, such as cash or portfolio
management, all forms of collective investment
management, pension fund management,
ustodial depository and trust services
j. Settlement and clearing services for financial
assets, including securities, derivation
products and other negotiable instruments
k. Advisory and other auxiliary financial services
on all the activities listed in article 1B of
MTN.TNC/W/50, including credit reference
and analysis, investment and portfolio research
and advice, on acquisitions and own corporate
restructuring and strategy
l. Provision and transfer of financial information
and financial data procession and related software
by providers of other financial services
C. Other
8. HEALTH-RELATED AND SOCIAL SERVICES
(OTHER THAN THOSE LISTED UNDER 1. A. H-J)
a. Hospital services 85110
b. Other human health services 8519 NIC-98 is more
elaborate and has
provided codes
85191 to 85196 and
85199.
c. Social services 85310, N I C - 9 8 i s m o r e
85320 elaborate.
d. Others
9. TOURISM AND TRAVEL-RELATED SERVICES
62
Appendix-2

Code Remarks
a. Hotels and restaurants (including catering) 5510, NIC-98 is more
5520 elaborate and a total
number of eleven 5
digit codes are
provided.
b. Travel agencies and tour operators services 63040 Clubbed with
9c.
c. Tourist guide services 63040 Clubbed with 9b.
d. Others
10. RECREATIONAL, CULTURAL AND 92
SPORTING SERVICES
(OTHER THAN AUDIOVISUAL SERVICES)
a. Entertainment services (including theatre, 921 Group 921 under NIC
live bands and circus services) -98 is more elaborate
for this activity.
b. News agency services 92200
c. Libraries, archives, museums and other 923 Group 923 under NIC
cultural services -98 is more elaborate
for this activity.
d. Sporting and other recreational services 924 Group 924 under NIC
-98 is more elaborate
for this activity.
e. Others
11. TRANSPORT SERVICES
A. Maritime Transport services
a. Passenger transportation Not WTO's List is more
available elaborate. NIC-98
(N.A.) does not distinguish
between Passenger
Tr a n s p o r t a n d
Freight Transport.
b. Freight transportation N.A.
c. Rental of vessels with crew N.A.
d. Maintenance and repair of vessels N.A.
e. Pushing and towing services 63090
f. Supporting services for maritime transport 63032
B. Internal Waterways Transport 61200 Same remarks as above
63
Appendix-2

Code Remarks
a. Passenger transportation N.A.
c. Rental of vessels with crew N.A.
d. Maintenance and towing services 63090
e. Supporting services for internal 63032
waterways transport
C. Air Transport Services 62 Same remarks as above
a. Passenger transportation N.A.
c. Rental of aircraft with crew N.A.
d. Maintenance and repair of aircraft N.A.
e. Supporting services for air transport 63033
D. Space Transport Covered under 11C in NIC-98.
E. Rail Transport Services 6010
a. Passenger transportation 60100 WTO's List is elaborate.
b. Freight transportation 60100
c. Pushing and towing services 60100
d. Maintenance and repair of rail transport N.A.
equipment
e. Supporting services for rail transport 63031 Clubbed with 11Fe.
services
F. Road Transport Services 602
a. Passenger transportation 6021
b. Freight transportation 60231
c. Rental of commercial vehicles with operator N.A.
d. Maintenance and repair of road transport N.A.
equipment
e. Supporting services for road transportation 63031Clubbed with
11Ee.
services
G. Pipeline Transport 6030
a. Transportation of fuels 60300 Clubbed with 11Gb.
b. Transportation of other goods 60300 Clubbed with 11Ga.
H. Services Auxiliary to all Modes of Transport 63 Division 63 of NIC
98 is more elaborate.
a. Cargo-handling services 6301
b. Storage and warehouse services 6302
64
Appendix- 3
SERVICES EXPORT PROMOTION COUNCIL (SEPC)
Set up by Ministry of Commerce & Industry,
Government of India
Ministry of Commerce and Industry, Government of India, with a view to give

proper direction, guidance and encouragement to the Services Sector, has set up an
exclusive Export Promotion Council for Services in the name of Services Export
Promotion Council (SEPC). SEPC was registered under the Societies Registration
Act in November, 2006. DGFT, vide Gazette Notification dated 5/3/2007,
included SEPC in the list of the recognised Export Promotion Councils. SEPC has
been mandated to promote export of services in the following sectors:-
1 Healthcare services including 8 Environmental Services

services by nurses, physiotherapist
and paramedical personnel
2 Educational Services 9 Maritime Transport Services
3 Entertainment services including 10 Advertising Services
Audio-visual services
4 Consultancy Services 11 Marketing Research and Public Opinion
Polling Services/Management Services
5 Architectural Services and related 12 Printing & Publishing Services
services
6 Distribution Services 13 Legal Services
7 Accounting/Auditing and Book 14 Hotel and Tourism related services
Keeping Services
Ministry of Commerce & Industry administers a scheme known as Market

Development Assistance (MDA) Scheme for the promotion of exports
including services exports. Service Exporters, who are members of SEPC, are
eligible for financial assistance under MDA scheme for participating overseas
“Buyer Seller Meet” or in any international conference to showcase their service
capability.
With the new Foreign Trade Policy (2009-14), the Government of India has
aimed to accelerate growth in export of services so as to create a powerful and
unique 'Served from India' brand. All services providers who have a total foreign
exchange earnings or earning in Indian rupees which are otherwise considered as
65
having been paid for in free foreign exchange by RBI, of at least Indian rupee 10
lakhs in the preceding or current financial year shall be eligible to qualify for duty
credit scrip. They shall be entitled to duty credit equivalent to 10 percent of the
foreign exchange earned by them in the preceding financial year. Duty credit
entitlement may be used for import of any capital goods including spares, office
equipment and professional equipment, office furniture and consumables,
provided it is part of their main line of business. In addition to this all service
exporters are also entitled for EPCG and other benefits as provided under
Management of Council
The management of the SEPC vests with the Central Governing Council
elected by member. Eminent personalities, Shri Lalit Bhasin, reknowned advocate,
is the Chairman and Dr. Naresh Trehan, reknowned cardiologist, is the Vice-
Chairman of the Council. Shri Rajesh Sharma has been appointed by the Central
Government, who is the Director General and CEO of the Council.
Aims and Objective for which Services Export Promotion Council is

establishes are:
(A) To promote exports of Services from India by such methods as may be

necessary or expedient and without prejudice to the generality of the premises by:-
 Undertaking market studies in individual foreign countries on regular as well as
an ad-hoc basis.
 Organizing visits of delegations of members to explore opportunities for
Services
 Organizing, participation in seminars, conferences and meets in India and
abroad, trade fairs/exhibitions/buyer-seller meets.
 Disseminating information regularly and continuously in foreign countries
regarding the potential image of Indian Services sector and informing the public
in foreign countries the advantages of availing Services from India.
 Compiling statistics and other relevant information regarding international trade
in Services.
 Providing commercially useful information and assistance to members in
developing and increasing export of Services.
 Disseminating information useful to members by literatures, discussions, books,
correspondence or otherwise.
66
 Offering professional advise to members in areas such as technology

upgradation, quality and design improving, standards and specifications of the
products and Services;
 Maintaining liaison with agencies dealing in international trade and Services so as
to promote export of Services from India.
 Communicating with the chambers of commerce and other mercantile
chambers of commerce, professional bodies, other mercantile and public bodies
in India and abroad for promoting measures for the advancement of exports of
Services from India.
 To take up various issues/problems and suggestions connecting with Services,
with government and International agencies to promote interest of Services
Providers.
(B) Promoting interaction between Services providers and government both at
central and state levels.
(C) To channelize financial assistance rendered by the central government to
members for assisting their export market development efforts.
(D) To collaborate in kindered activities with the other export promotion
councils/export promotion organisations in India and similar bodies in
foreign countries and with international organizations working in the field.
(E) To enter into contracts
(F) To draw, make, accept, endorse, discount and execute negotiable instruments.
(G) To invest the money of the Council in any Bank approved by the Governing
Council and the money received from the Central government as per
directions of that government.
(H) To subscribe for, become a member of and cooperate with any other
Association, whether incorporate or not, whose objects are, altogether or in
part, similar to those contained in this Memorandum and to obtain from and to
communicate to any such Association such information as may be likely to
fulfill the objects of this Council.
(I) To obtain from the members and to prepare for the Council as a whole, action
plans for promotion of exports of Services, development of exports markets,
generation of production for exports, setting of export target, generally and in
relation to specific countries and sectors, on an annual basis and for such
67
medium and long terms as may be considered desirable and to

ensure/undertake execution of such plans.
(J) To construct building(s) and to furnish security by way of mortgage, charge,
etc of the Council's properties and assets.
(K) To avail of loans and financial facilities from banks, Financial Institutions,
Companies or Corporations for construction of building(s) and to furnish
Companies or Corporations for construction of building(s) and to furnish
security by way of mortgage, charge, etc. of the Council's properties and assets.
(L) To do all such other lawful acts as would be conducive for the promotion of
exports and to the interests of the Council or incidental to the attainment of
the above objects or of any of them.
References:
1. Economic Survey Reports 1999-2000 to 2012-13
2. Annual Reports of Reserve Bank of India
3. Enterprise Surveys of Economic Census conducted by the MoS&PI
4. Follow-up Enterprise Surveys (FuS) on the Services Sector, carried out by the
MoS&PI
5. National Industrial Classification [All Economic Activities], 1998
6. Indian newspapers like Economic Times, Financial Express and The Hindu
7. Reports of Federation of Indian Chambers of Commerce and Industry
(FICCI)
8. “Administrative and Service Sector of the Economy” – Williamson and
Lindent, Harvard University Press,1980
9. General Agreement and Trade in Services (GATS), 1994
10. Service Sector :- Scope, Steps, Categories, Incentives by FIEO
68
2. SERVICE SECTOR: POLICIES & PROGRAMMES

SUPPORT MECHANISM
- DR.BHAGWAN PRASAD*
Although promotional measures for SSI were initiated in mid fiftees, the
emergence of service sector cropped up and was linked with the Tiny sector. The
concept of tiny sector was introduced in the Sixth plan for SSI when, based in the
data of the First Census of SSI, it was found that 91% of SSI units had an
investment of less than Rs.One lakh in plant and machinery. Subsequently, industry
related services were included in the tiny sector (Table –I). With the upward
definition of tiny sector to Rs.25 lakh, the upward limit of service type of
enterprises was raised to Rs.10 lakh. Thus a new sub-sector in the tiny sector
emerged, known as Small Scale Service and Business Enterprises (SSSBE). Since
then, it has been the contention of the author to enlarge the scope of SSI and term it
as SSE.
Agrarian economies throughout the world have been feeling the strain on
agricultural sector largely because of population explosion and secondly due to
limited land available for Agriculture sector. In the process of development,
developing economies have been rightly initiating the process of industrialization.
Phase one, if one could term it that way, comprises of a phenomenon where the
share of industrial sector as a percentage of GDP goes up. However, one significant
trend in phase two implies the relative share of service sector going up. This is
obvious as the growth of economy warrants support of a host of services for
primary as well as secondary sectors. In fact instances are not lacking where the
share of agriculture is almost nil some economies have found it more effective to
concentrate on secondary and tertiary sectors one. (Table-1)
* Formerly: Principal Director, ni-msme, Hyderabad. Currently: Visiting Faculty,

University of Hyderabad.. Also Founder Director and President, Association for small
Enterprises & Rural Technology (ASSERT).
69
TABLE - I
GDP - % DISTRIBUTION
Agriculture Industry Services

1965 2007 1965 2007 1965 2007
India 47 17 22 27 31 56
China 39 12 38 49 23 39
Bangladesh 53 22 11 26 36 52
Japan 09 02 43 27 48 71
Singapore - - 0 - 29 71
UK 03 01 46 26 51 73
USA 03 01 38 21 59 79
It is in the fitness of things that the MSME Act, 2006 for the first time has
recognized the role of Service sector and has included service sector as an integral
part of MSMEs. However, the upper investment limit has been kept lower
compared to manufacturing sector in each of the micro, small enterprises, the
assumption being that their requirements would be less compared to the
manufacturing sector. Thus the upper investment limit for micro enterprises is
Rs.10 lakh compared to Rs.25 lakh for manufacturing sector, Rs.10 lakh to Rs.2
crore compared to Rs.2-5 crore for manufacturing sector in the Small Scale Sector
and Rs.2-5 crore for medium enterprises compared to Rs.5-10 Crore for medium
enterprises for manufacturing sector.
It may not be out of place to consider the findings of IIIrd census of SSI to
enable development agencies to decide the approach to be adopted for promoting
service type of Enterprises. The Third census reveals that 89% of enterprises have
an investment of less than Rs.2 lakh, another 5% have an investment in the range of
Rs.2 to Rs.5 lakh, another 3% in the range of Rs.5 to Rs.10 lakh and another 2% in
the investment range of Rs.10-20 lakh, and only 1% have an investment of Rs.20
lakh and above. (Table – 2). Thus 99% of SSI enterprises fell in the category of the
then Tiny sector. It is, therefore, obvious that if development organizations have to
orientate themselves to the promotion of service sector, concentration has to be on
hitherto known as tiny sector and currently renamed as micro sector. Promotional
organizations would have to devise a mechanism where they have necessary
70
expertise on service sector. An attempt therefore has been made to highlight the
role of organizations at National, State and District levels vis-à-vis the service
sector
I. NATIONAL LEVEL :
A) DC (MSME) :
Since the office of the DC (MSME) formulates the policies and programmes, a
senior officer could be assigned to evolve ways and means to accelerate the growth
of services sector and suggest in consultation with states, steps to accelerate the
process of developing enterprises in the services sector. It could also identify the
nodal agency at State level which could develop expertise in the field of services
sector. The State agency could, in the light of the direction of development ot the
state concerned formulate a service enterprises oriented action plan.
B) National Small Industries Corporation :

It has been the sole agency for Government purchase programme as well as for
promoting exports through SSIs. It could promote such of the enterprises which
market products and services. Further, it could network with the nodal agency at the
State level to promote marketing enterprises at the state level as well as the district
level.
C) Small Industries Development Bank of India :

As the main agency for the refinancing of SSIs, it could, with the help of State
Financial Corporation, strengthen the process of promoting Financial enterprises.
D) NI-MSME, NIES BUD & EDII : Training of Personnel

With the emergence of services sector, the growing need for personnel to be
trained for promoting service type of enterprises would be a specialized job.
Training institutions at national level could form a realistic Training module which
could be used by training institutions at state and district levels. These institutions
could also dwell upon as to what type of information need to be documented which
could be used by prospective entrepreneurs. Further, EDPs could be specially
organized for the service sector.
II. STATE LEVEL

A) Office of Industries Commissionerate : This could act as a nodal agency for
Service sector as a whole.
71
B) State Small Scale Industrial Development Corporation could specifically

promote Marketing Services and Marketing Entrepreneurs and derive strength
from NSIC.
C) State Financial Corporations or a leading Banking Organization could accept
the assignment of promoting Financial Services.
III DISTRICT LEVEL

A) District industries centre (DICs) :
It may not be out of place to mention the origin of DICs. It was in the midst of
Sixth plan that it was visualized that an agency should be set up at district level which
would meet all the requirements of prospective as well as existing entrepreneurs.
This implied that on one hand the agency would have necessary expertise (project
formulation etc.) and on the other would be armed with necessary powers so that
various types of sanctions could be granted to an entrepreneur at the district rather
than making an entrepreneur shuttle from his place to state headquarters. In order
to achieve the same, the head of this agency known as General Manager would be
sufficiently senior so that necessary powers could be delegated to him. It must be
mentioned to the credit of SIET faculty (later on known as NISIET and now as
NIMSME) that they were not only instrumental in spelling out the structure of
DICs in the Sixth plan but were instrumental in organizing a series of training
programme for General Managers but also for functional Managers. Over the
period, DICs have undergone changes varying from one state to another. Yet this
being the sole agency at the grass roots level, its importance cannot be undermined.
It is with this background that it can be suggested that there could be a Functional
Manager in a DIC who could be wholly responsible for promoting
entrepreneurship for services sector. The Functional Manager could also document
potential for various services in the district
B) District Rural Development Agency:

The DRDA, which is basically concerned with the schemes for the Rural poor,
could identify avocations in the services sector. In fact, when TRYSEM was
introduced, it covered Industry, Services and Business (ISB). With the growing
focus on rural industrialization, services sector could be given a greater push if
expertise for this sector can be developed in this agency. Also with rural-urban areas
which could imply strengthening of service type of enterprises. in rural areas.(the
author had stressed this point as Director (RIE) at NIRD which was based on the
finding of study of Humnabad Block).
72
To sum up the task of promoting entrepreneurship in the Service sector is an

enormous one and nodal agency (ies) can identify specialized agencies to cover
various fields of Health, education, insurance, recreation, transport, tourism, event
management etc. And EDP could be conducted for promoting Entrepreneurship
in specific segments of services sectors (Annexure I).
1) The author was associated with the formulation of sixth plan for Small
Industry. Figures for developing the concept of Tiny sector were worked out
based on data of the Ist census of SSI.
Also refer to author's article on “Writer Tiny Sector”, published in the
Economic Times, dated, May 7,1993.
The Author advocated the concept of Micro Sector, having an investment of
less than Rs. 5 lakh (Economic Times, February 28th, 1998)
2) Refer to author's article on “Institutional Infrastructure for Service Sector”.
Science Tech Entrepreneur, May – June, 1999.
3) The concept of District Industries Centres was developed in the Sixth Plan.
The author not only was instrumental in drafting its role but also formulated
training programmes for General Managers and Functional Managers in
association with the faculty.
TABLE – II
3rd CENSUS OF SS UNITS
Original Value Employment of No. Of. Units

P & M Slabs (In Lakhs) (%) (%)
<2 89 64
2–5 05 10
5 – 25 05 14
25 – 100 01 09
100 above 0.2 03
73
ANNEXURE – 1
TINY SECTOR – SERVICES: INDICATIVE LIST
- ADVERTISING
- MARKETING CONSULTANCY
- INDUSTRIAL CONSULTANCY
- EQUIPMENT RENTAL & LEASING
- STENOGRAPHY, ZEROXING
- COMMERCIAL PHOTOGRAPHY
- R & D LABS, TESTING
- DATA BASE FOR FOREIGN & INDIAN MARKETS
- COMPUTERISED DESIGN, SOFTWARE DEVELOPMENT
- AUTO REPAIR
- DOCUMENTARY FILMS
EXTENDED LIST
- MARKETING
- FINANCIAL SERVICES
- HEALTH
- EDUCATION
- INSURANCE
- RECREATIONS
- CONSULTANCY
- TRANSPORT
- TOURISM
- KNOWLEDGE BASED
- RETAILING
- TRADEFAIRS
- EXHIBITIONS
- AIR TRAVEL AGENTS
- BEAUTY PARLOURS
- BROADCASTING SERVICES
74
- CABLE OPERATORS
- COMMERCIAL COACHING & TRAINING
- SERVICES
- CONVENTION SERVICE
- COURIERS
- CREDIT RATING AGENCIES
- DRY CLEANERS
- FAX SERVICES
- FASHION DESIGNERS
- HEALTH CLUBS & FITNESS CENTERS
- INTERNET CAFÉ
- MAINTENANCE OR REPAIR SERVICES
- MAN POWER RECRUITMENT AGENCIES
- MANDAP KEEPERS
- PHOTOGRAPHY SERVICES
- PRVATE SECURITY AGENCIES
- REAL ESTATE AGENTS
- RENT – A CAB OPERATORS
- SOUND RECORDING SERVICES
- STOCK BROKERS
- TOUR OPERATORS
- VIDEO TAPE PRODUCTION SERVICES
75
3. PROMOTION OF RURAL SERVICE ENTERPRISES

R.S. Singh*
Introduction
As is the experience with the developing economies, the share of the primary
sector i.e. the agriculture sector in the GDP of India which was about 55% in 70's
has slipped to 18% in the year 2007-08 with the secondary and tertiary sectors
forging ahead. As the Country is gradually getting industrialized and the economy is
getting increasingly industrialized and service oriented, the share of agriculture
sector is set to climb down. The economies of most of the developed countries in
the World have emerged as industrialised and service economies and Indian
Economy is following the same trend.
2. The share of various Sectors in the GDP and growth rates are given in the
following table:
Share and sectoral growth rates of real GDP
Sectors 2004-05 2005-06 2006-07

Agriculture & Allied 20.8 (-) 19.9 (6.0) 18.5 (2.7)
Industry 26.0 (9.8) 26.1 (9.6) 26.4 (12.3)
Services 53.2 (9.6) 54.0 (9.8) 55.1 (11.0)
Note: Figures in brackets indicate the growth rates
This shows that apart from the shares in the GDP, the growth rates in the
secondary and tertiary sectors of the economy are comparatively higher and
services sector is fast emerging as the driver of growth. During the period 2002-07,
the share of agriculture and allied activities declined by 3.4 percentage point, with
industry and services sectors surging ahead.
The paradox is that although the share of agriculture in the GDP is on

decline, the percentage of population dependent on agriculture continues to be
high at about 65%. With almost a stagnant share in the work force depending on
agriculture and allied activities, the declining share of agriculture sector in GDP is a
______________________________________________________________
* Assistant General Manager, DPD-NFS, NABARD (H.O), Mumbai
77
pointer to the growing disequilibrium in the economy. There is pressure on land and
pressure on agriculture. The size of holdings is continuously diminishing and the
number of marginal farmers and landless labourers is continuously rising. Against
the scenario of limited agricultural resources catering to a disproportionately high
population depending on it, the sector is marked by unemployment, under-
employment and disguised employment. The solution lies in siphoning of labour
from agriculture to the secondary and tertiary sectors. Non-farm sector comprising
the industry and services sectors therefore, provides the alternative route for
absorbing the surplus work force.
In view of the importance of the non-farm sector, NABARD as the premier

agency with a mandate for rural development has recognized the rural non-farm
sector as a thrust area. NABARD has been extending enormous amount of credit
support by way of refinance as well as promotional support for development of the
rural non-farm sector.
With the emergence of the services sector as a predominant sector, the non-
farm sector has been broad-based to include all activities in rural areas or benefiting
the rural areas that are income generating and/or employment generating as
constituting the rural non-farm sector. Illustratively, the following sectors, most of
them being in the nature of services activities are recognized as non-farm sector
activities eligible for credit by the financing institutions:
Sectors Activities
Educational services  Educational Institutions such as
schools, colleges set up privately.
 Educational loan to students
Health services  Hospitals / clinics
 Healthcare Units (both human /
animals)
 Mobile hospital vans with necessary
equipments, para-health services etc.
Construction sector  Building material supply
Marketing  Shops marketing outlets
Tourism services Theaters, eco-tourism, fairs/ exhibitions
Vehicles/ transport services  Tow wheeler/ 3 wheeler/ 4 wheelers
78
Information technology  All activities providing information &

technology to the users
Infrastructures  Rural Industrial estates, Growth Centres,
Communication Networks, Providing
safe drinking water
Housing  Construction of houses
In the Micro, Small and Medium Enterprises Development (MSMED) Act,

2006 the classifications of service sector enterprises have been separately made with
a view to removing the blurring of boundaries between 'industries' and 'services'
sectors. The classifications are as under:
In case of enterprises engaged in manufacturing or production of goods

pertaining to any industry:
(i) a micro-enterprise is one where the investments in plant and machinery does
not exceed Rs 25 lakh
(ii) a small enterprise is one where the investment in plant and machinery is more
than Rs 25 lakh but does not exceed Rs 500 lakh
(iii) a medium enterprise is one where the investment in plant and machinery is
more than Rs 500 lakh but does not exceed Rs 1000 lakh.
In case of enterprises engaged in providing or rendering Services:

(i) a micro-enterprise is one where the investments in equipments does not
exceed Rs 10 lakh
(ii) a small enterprise is one where the investment in equipments is more than Rs
10 lakh but does not exceed Rs 200 lakh
(iii) a medium enterprise is one where the investment in equipments is more than
Rs 200 lakh but does not exceed Rs 500 lakh.
The promotion of the services sector, especially in the rural areas has to be
examined through two critical lenses; one credit related and the other, in regard to
the support measures. The promoters of the service enterprises have generally a
weak capital base and as such, do not have easy access to capital market nor can they
raise substantial equity. Therefore, assured flow of timely credit at reasonable cost
is a primary requisite.
79
While emphasizing the importance of easy access to need based credit, there
is a need to provide credit plus services which would comprise:
 Development of entrepreneurial qualities,
 Transfer of technology
 Provision of infrastructure
 Dissemination of market information
 Provision of infrastructure, etc.
Alongside the credit which is crucial for any enterprise, the importance of
non-finance inputs can hardly be over-emphasized. We invite the attention of all
concerned to such issues, especially in regard to the services sector in the rural
context.
The rural service sector is a large spectrum. Illustratively, it will comprise:
 Agriculture and animal husbandry related extension services
 Exposure to new technology
 Repairs and maintenance of agricultural implements
 Extension of rural health care/ hygiene services, beauty parlour, fashion
designs etc.
 Provision of construction services, cost effective building materials
 Extension of drinking water, sanitation, water harvesting
 Maintenance of environment and eco-system
 Provision of hospitality, rural tourism, etc.
 Provision of transport services
 Extension of marketing services like organizing village melas, exhibitions,
fairs etc., administration of village service infrastructure
Entrepreneurship and Skill Up-gradation

Success of any enterprise crucially hinges on the Entrepreneur. Creation of
entrepreneurship with right attitude, aptitude, and entrepreneurial traits is
important. NABARD extends grant support to the resource NGOs / specialised
institutions to conduct entrepreneurship development programmes ( EDPs) for
the rural youth. A few examples of such programmes seem relevant:
(a) EDPs/skill development programmes are conducted for repair of pumpsets,
tractors. These programmes are conducted through ITIs, poly-technique and
engineering colleges in many places. In several of these programmes, the
auto-manufacturing companies extend their faculty and resources support.
After the training, most of the trainees either get employment in the auto-
service outlets of the auto manufactures or set up their own units.
80
(b) Under the agri-business and agri clinic scheme being implemented by the
Govt of India which is facilitated by NABARD, extensive training and
entrepreneurship inputs are given to the agriculture graduates who extend
agri-input and extension services in the rural areas. Custom hiring of
agricultural implements, supply of seeds, fertilizers, pesticides , extension of
artificial insemination (AI) facilities for development of better breed ,
veterinary facilities, etc. are the services required by the rural sector which the
ABAC scheme can cater to by way of private participation.
Exposure to new Technologies

The farmers have to have exposure to the new technologies for adopting the
same for higher productivity of their resources. Farmers Clubs are being organized
in the rural areas in increasing numbers to act as a bridge for acquisition of
knowledge and technological inputs. The programme for capacity building for
adoption of technology (CAT) for farmers being organized under the auspices of
the farmers club has proved to be an effective tool for augmenting rural services,
especially for the farmers. NABARD extends sizable amount of grant assistance
every year to the farmers clubs for technology up-gradation.
Common service centre ( CSC) scheme / village knowledge centre

The GOI is implementing the common service centre scheme, in pursuance
of the recommendations of the National Knowledge Commission to set up
1,00,000 Village Knowledge Centres (VKC) to cover all the 6,00,000 villages in the
Country. These knowledge centres will provide information to the farmers on the
agricultural practices, climate conditions, cost of inputs and prices of commodities
in the markets etc. This ambitious scheme will be immense help to the farming
communities. A number of educated rural youth will emerge as entrepreneurs for
setting up the VKCs and providing services to the farming communities. NABARD
has been extending promotional support for the conduct of such entrepreneurship
development programmes in Jharkhand, UP, MP, etc.
Development of software / setting up of touch screen kiosks

With a view to bringing the technology near to the doorstep of the farmers and put
the information within easy reach of the farming community, there is a need for
evolving dedicated software and setting up of kiosks at convenient locations. The
enterprising farmers also need guidance for formulation of agri-based schemes
which could be passed to the banks for credit support. NABARD has assisted a few
professional agencies (Vanarai Trust in Pune) to develop dedicated software and
set up touch screen kiosks (Pasighat in Arunachal Pradesh) which will go a long way
81
in providing knowledge services to the farmers. Once successful, these innovations

could be replicated for pan-India adoption.
Fashion design / beauty care

With economic prosperity striking the rural hinterland, the rural population
is getting increasingly concerned about health care , fashion designs, etc. Experience
has it that entrepreneurship in beauty care / establishing beauty parlours is a much
demanded service in the country side. Expansion is where the demand is. These
services need to be facilitated.
Construction Services
Construction of houses is a thriving activity not in the cities and urban areas alone,
but in rural areas also. Demand for masons, plumbers, electricians, brick layers etc. is
enormous. Skill development training on such construction services will help in
income generation capacity of the rural youth, who with such acquired skills can
also head for urban centers for better incomes. Increasingly, a number of
construction companies are getting themselves associated with such skill
development training, not with the consideration of charity or philanthropy, but on
account of the fact that, it makes a tremendous business sense.
 Low cost building technology is the need of the hour
There are low cost technologies using eco-friendly materials. NIRD,
Hyderabad has developed as many as 17 different technology models and
displayed the same in its Technology Park. These should be seen, examined
and adopted. When less costly, more efficient and environment friendly
technology is available, why to load the house-seekers with heavy burden of
loans ? Such knowledge and services should be available in the rural areas.
 Use of non-conventional energy is another plank. Solar Home lighting with
LED ( light emitting diodes) which is not costly can be introduced with
advantage and economy in the rural areas. NABARD has extended support to
a few agencies for propagation of solar energy home lighting systems.
 There is need for Rural Building Material Centres at nearby towns. NABARD
has extended grant support to a few NGOs to give a try. The rural building
material centres will help not only make available the necessary building
materials but also pushing the technology for adoption.
Health care services

Need for health care, especially in the rural areas can hardly be exaggerated. It
has therefore, been rightly stipulated that the doctors during the course of their
82
service, must have a rural stint for a definite number of years. Paucity of health care
facilities in rural areas is a common matter. The rural populace is prepared to pay for
the health services, if timely and quality services could be extended. The entry of
private sector in rural health care is emerging. These efforts need patronage and
financial support. Even venture funding for such enterprises is the need of the hour.
A premier rural micro-venture capital fund ( Aavishkaar Microfinance Venture
Capital Fund) has extended venture capital support to “Vatsalya”, a rural health
service provider entity which has set out on a mission to extend quality health
services in the country side by opening 20 bed hospitals in rural areas. Such
initiatives need encouragement and support.
Growth of Rural Tourism / eco-tourism

Rural tourism is catching up. In Kerala, Sikkim, north eastern states, West
Bengal and Chatisgarh, a number of rural tourism clusters have emerged. There is a
need for service providers impinging on various facets of rural tourism, particularly
providing home stay facilities, extending bed and breakfast services, sight seeing and
tour guides, trekking, catering, providing local cuisine, organizing local cultural
shows and folk dances etc. Clusters on eco-tourism/ rural tourism are being
formed in various States. Such services need to be given support.
Extension of marketing services

Marketing is a big challenge, especially in agriculture sector in view of the
sensitivity of the agri products and their perishable nature. How the farmers are
denied of fair prices for their farm produce with the middleman calling the shots is a
common phenomenon. Provision of marketing services, right from aggregating,
storing, price discovery, effective marketing and realization of price so that the
producers and consumers in the rural areas do not fall prey to the unhealthy
practices are the need of the hour. Managing, regulating the rural haats,
organizing sale events, holding of fairs and exhibitions have to be on the Agenda
of the PRIs, and the NGOs. These organizations have to be sensitized about their
role on the matter.
Efforts towards Value Addition

Innovations for capacity building of rural migrants – Rajasthan experiment
The migration of rural population to the urban areas is a difficult task to
check. A unique experiment is being successfully conducted by an NGO in
Rajasthan which involves (i) preparing an inventory and profile of the jobs and job
seekers in the particular block / district (ii) arranging skill training in such jobs for
83
the job-seekers and (iii) ensuring that such trained job seekers are engaged in such
jobs. Such initiatives directed towards providing services to the migrant rural youth
are innovative mechanisms which need to be encouraged.
Certification
Many professional institutions and resource NGOs are imparting skill and
entrepreneurship training for the rural youth. There is a need for quality
standardization and certification of these courses. The Rural Development & Self
Employment Institutions (RUDSETIs) could take a lead in this direction to
standardize the programmes and award necessary certification which should be
recognized by the concerned industry.
Extending venture support

The rural sector / rural enterprises are prone to many a risk. Therefore, there
is a need for venture support mechanism , especially for highly profitable but risky
rural ventures. Unfortunately, such venture capital funds for promoting rural micro
enterprises / ventures are either non-starters or few in number. There is a need for
such support mechanism.
Incubation support
The rural service enterprises need incubation support, at least in the initial
phases to get rid of the teething problems and infrastructural bottlenecks. The
institutes which are extending mentoring services to such enterprises /
entrepreneurs could also extend incubation services. As for example, the
RUDSETIs, ITIs, DICs could provide such facilities so that the start-up of rural
enterprises can economise on their cost. After the incubation phase is over, the
individual enterprises can have their own regular support infrastructure.
Provision of social security

The rural service enterprises which are mostly tiny and in the unorganized
sector need to be extended social security by way of life insurance coverage to the
entrepreneurs, since these enterprises are mostly single entrepreneur-run units.
Conclusion
Financial support is the most critical input for any enterprise to come up and
sustain and this is far more critical for rural service sector. This paper has not dwelt
on the financial aspects. Efforts have been made in this paper to underscore the role
of supportive measures for growth and sustenance of rural service enterprises.
84
4. Business Trends in IT / ITeS Industries in India

India as an emerging market offers a large pool of IT savvy resources. IDC
India and NASSCOM predict that Indian Domestic IT/ITeS industry will grow
from 99,254 INR crores in 2008 to 2,06,398 INR crores in 2013 which constitutes
39% of total revenue. The IT/ITeS Exports Revenue constitutes remaining 61% of
revenue share by 2013.
As of today, in India IT/ITeS industries are highly localized and clustered in

seven Indian cities. These places include Bangalore, Hyderabad. Chennai,
Gurgaon/Noida/New Delhi, Kolkata, Mumbai and Pune. Due to infrastructure
limitations and scarcity of land the geographical spread is gradually expanding to
cover Ahmedabad, Bhubaneshwar, Chandigarh, Coimbatore, Jaipur, Kochi,
Madurai, Mangalore, Mysore and Trivandrum.
It is estimated that over 80% of IT units in India are SMEs and they constitute
only 30% of the entire IT exports from India. Access to high quality education has
created a growing pool of resources. Further economic liberalization and initiatives
at central and state levels to improve the case of doing businesses have catalyzed
Entrepreneurship. The spread of e-governance and improvement in infrastructural
capabilities has resulted in significant growth in entrepreneurial activities.
The IT/ITeS industry has a major impact on the labor market in India. It is
estimated that nearly 8 to 10 million employees directly or indirectly support the
IT/ITeS industry in India. In contrast to this, India saw the highest attrition rate of
23% in first quarter of 2010-2011 in IT industry. Some of the challenges faced by
mid-sized companies in current market scenario include competition from low cost
countries, growing attrition rates along with employability issues, increasing cost of
operations, high client concentration to deliver services (52%), higher cost of
acquiring new clients and changes in structure of demand. Alternative means of
adopting new technology that incurs lesser cost is rampant. With this cloud
computing once again plays an important role. However this is with reference to
mid-tier companies.
The larger companies do rely on clients, but the extent of client concentration
is lower and is about 28% (PwC, 2011). Migrating legacy systems and transformations
85
reflecting changes in processes are of very high priority to them. With the advent of
entrepreneurs, competition increases as innovations increase. This has created way
for incubation centers and venture capital creation to help emerging businesses get
the funds required and collaborate with them to gain first-mover advantage in local
and global market.
Source : Ms. Suma Reddy | February 6, 2012 | Technology Trends
86
5. IT & ITeS Industry in India

Introduction
The information technology (IT) and information technology enabled
services (ITeS) industry has been one of the key driving forces fuelling India's
economic growth. India is one of the fastest-growing IT services markets in the
world, with three-quarters of large Indian enterprises planning to increase IT
spending in 2013, with an average IT budget of US$ 12.2 million, according to a
survey by Gartner.
The Indian IT-business process outsourcing (BPO) sector including the

domestic and exports segments continue to grow from strength to strength,
witnessing high levels of activity both onshore as well as offshore. The companies
continue to move up the value-chain to offer higher end research and analytics
services to their clients. India's leadership position in the global IT and BPO
industries are based primarily on the following advantages.
Market Size
The Indian IT and ITeS industry has continued to perform its role as the most
consistent growth driver for the economy. Service, software exports and BPO
remain the mainstay of the sector. Over the last five years, the IT and ITeS industry
has grown at a remarkable pace. A majority of the Fortune 500 and Global 2000
corporations are sourcing IT and ITeS from India and it is the premier destination
for the global sourcing of IT and ITeS accounting for 55 per cent of the global
market in offshore IT services and garnering 35 per cent of the ITeS/BPO market.
India's IT and BPO sector exports are expected to grow by 12-14 per cent in
FY 14 to touch US$ 84 billion - US$ 87 billion, according to Nasscom. The Indian
IT infrastructure market is projected to grow by 9.7 per cent y-o-y to reach US$ 2.1
billion in 2013. Nasscom has created a separate unit to drive its newfound
enthusiasm for software products, and has set a target of US$ 10 billion in revenues
from software products by 2020.
Investments
EMC Corporation's investment in India is expected to reach US$ 1.5 billion
by 2014. The company started its journey in India with a modest investment of US$
100 million in 2005.
87
Some of the major investments in the sector are as follows :

 D-Link plans to set up a testing lab in India in the second half of this year to
ensure better localisation, said Mr A P Chen, Chairman, D-Link
 Hexaware Technologies has set up an onshore delivery centre in Texas, US. The
centre is its third onshore delivery centre in the US
 NIIT Technologies has won a multi-year contract from the Airports Authority
of India (AAI) worth Rs 344 crore (US$ 61.84 million) for the implementation
of Airport Operations Control Centres (AOCC)
 The Software Technology Parks of India (STPI) plans to set up a data centre in
Hyderabad. The centre will address the storage and cloud needs of small and
medium enterprises (SME)
 Wipro has signed an agreement to acquire a minority stake in Opera Solutions, a
global big data and analytics company, for about US$ 30 million
Government Initiatives
FDI up to 100 per cent under the automatic route in allowed in Data
processing, software development and computer consultancy services; Software
supply services; Business and management consultancy services, Market Research
Services, Technical testing & Analysis services.
The Government of India's move to do away with the mandatory

requirement of 10 hectares of minimum land area for setting up an IT and ITeS
special economic zones (SEZ) is expected to provide a major boost to the real estate
and IT sector.
Some of the najor initiatives taken by the Government to promote IT and

ITeS sector in India are :
 The Government of West Bengal plans to spend Rs 41 crore (US$ 7.37 million)
to roll out citizen-centric services electronically across 19 districts including
Kolkata
 Kerala has set an ambitious target of becoming a cent per cent digital state in
governance, said Mr P K Kunhalikutty, Minister for Industries and Information
Technology, Government of Kerala. The State has around 600 small, medium
and large IT firms employing over 80,000 professionals directly and nearly three
times the number indirectly
88
 The Cabinet has recently approved the National Policy on Information

Technology 2012. The Policy aims to increase revenues of IT and ITeS industry
from US$ 100 billion to US$ 300 billion by 2020 and expand exports from US$
69 billion to US$ 200 billion by 2020
 The Government of India plans to set up 15 new laboratories for testing
hardware and software products under public-private partnership (PPP) model
 The Ministry of Finance has issued a circular to chairman of public sector banks
and regional rural banks, that all payments to customers, staff, vendors and
suppliers as well as disbursement of loans and payments towards investments
should be made only through the electronic mode
Road Ahead
Globalisation has a profound impact in shaping the Indian IT industry over
the years with India capturing a sizeable chunk of the global market for technology
sourcing and business services. Over the years the growth drivers for this sector
have been the verticals of manufacturing, telecommunication, insurance, banking,
finance and of late the fledgling retail revolution. As the new scenario unfolds it is
getting clear that the future growth of IT and ITeS will be fuelled by the verticals of
climate change, mobile applications, healthcare, energy efficiency and sustainable
energy. Traditional business strongholds would make way for new geographies,
there would be new customers and more and more of SMEs will go for IT
application and services.
Demand from emerging countries is expected to show strong growth going

forward. Tax holidays are also extended to IT sector for STPI and SEZs. Further,
the country is providing procedural ease and single window clearance for settign up
facilities.
Growth in offshoring is expected to outclass the growth in overall IT spend

across the various verticals. Offshoring as a per cent of total spend is also expected
to rise across the various verticals. India has the opportunity to tap the growing
offshoring market with its cost advantage, expertise and huge talent pool.
Exchange Rate Used : INR 1 = US$ 0.018 as on May 24, 2013
References : Media Reports, Press Releases, Department of Industrial Policy and Promotion
(DIPP) statistics, Department of Information and Technology
Source : IBEF : May 2013
89
6. IT ENABLED SERVICES IN POWER DISTRIBUTIONS

M. V. S. Birinchi *
Power distribution systems have grown in size and complexity in the last two
decades. The consumer base has more than doubled since 1990s. With increase in
the volume of workload, the technologies also should change. Continuance with
conventional manual systems are going to prove a luxury in terms of cost apart
from resulting in consumer dissatisfaction at the quality of service rendered.
This is the right time to start 'distribution automation”, starting with metros
and rolling it out gradually to towns and villages. A clear road map towards achieving
distribution automation is to be laid down with no further delay and its
implementation started forthwith.
The automation system can be designed using the available technology in

computer systems, control systems and metering systems and dovetailing the same
into the existing power systems. All the tools required such as computers, remote
terminal units (RTUs), breakers, switched capacitor banks, OLTCs of transformers,
auto reclosures, sectionalisers, AMR systems and communication systems are
available.
An integrated distribution automation system enables the utilities to have real

time control over the costly energy sold. The improved efficiency results in lower
costs, better reliability in power supply, planned control actions, optimum power
factor and reduction in losses. It enables online energy audit (AMR Systems), which
is now receiving the focused attention of all utilities.
An integrated distribution control system is mainly comprised of systems

necessary for data acquisition, voltage & reactive power controls, system
reconfiguration & load control. The components used for these are primarily
distribution remote terminal units, pole top units and distribution control receivers.
AP Experimental Projects - SCADA

In 1992, a completely indigenous micro-processor based su-station supervisory
system called INSYST 33 was commissioned at Indira Park, Greenlands and
______________________________________________________________
* Dr M V S Birinchi, Formerly Director / Tech of AP TRANSCO is presently Advisor &
Head, Power & Energy Division, Gachibowli, Engineering Staff College of India, Hyderabad – 500
032. Tel Ph No.040-23000465 / 466, Fax No.040-23000336, E-mail : mbirinchi@yahoo.co.in
91
Kalyannagar Substations where RTUs were erected. The interfacing work with CTs,
PTs and auxiliary switches of circuit breakers, etc was done by the Master Plan
Circle. The RTU was rigged up by a team of Engineers of BHEL (R&D) and
Master Plan Circle, who had worked hand in hand to put the precept into practice.
Remote acquisition of data and remote control of the substations from the Vidyut
Soudha were achieved. It was then decided to draw up a scheme for comprehensive
supervisory control and data acquisition (SCADA) covering 120 nos substations in
and around Hyderabad and to control all of them from a Host Station. The scheme
was implemented and has been in operation for the last eight years.
This scheme provides for real time monitoring of operating parameters of

Amps, MW, MVAR, PF, Frequency, Voltages, etc at all points of the substation,
status of circuit breakers, remote operation of circuit breakers and archiving of
historical data, audio alarm and annunciation for limit violations and breaker
tripping, recording of sequence of events, recording of maxima and minima of
operating parameters with time of occurrence, cumulative energy fed, etc. This is
now integrated with the computerised trouble call system, which receives all fuse
off calls in twin cities.
This distribution automation system (DAS) aims at achieving

- Control of DTRs, HT services and individual loads apart from 11KV feeders.
- Operation of lines sectionalisers, motorized isolators, auto Reclosures
- Data acquisition from load end CTs and PTs
- Operation of CBs for switched capacitors banks
- Use of customized EMS software packages with real time data collected
through RTUs
- Issue, control and receiving back of line clears, introduce interlock and safety
algorithm, password protected operating environment.
- Real time logging of data / archived records of hours of service.
- Equipment data base
- Integration with Automated Mapping (AM) and Geographical Information
System (GIS) Software packages
- Integration with Distribution system engineering software for network
planning
The other functions achievable through distribution automation are:

Network
- Distribution Transformer control
92
- Monitoring and Control of LV breakers

- Trouble call management
Consumer Interface
- Load monitoring and control
- Voltage monitoring
- Metering and Billing through AMR
- Immediate detection of attempts for meter tampering
- DSM objectives (Individual pump control or group of pumps or DTRs)
- Monitoring of captive generation when synchronized with system network
A distribution automation system is basically comprised of a distribution

control center (DCC), devices to be monitored / controlled like sub-stations,
switching capacitors banks, line equipment and a reliable communication system
that forms the backbone for successful operation.
Distribution Control Centre (DCC)
Modem Modem
Communication Interface
Data Acquisition Tele Control System

Long Term
Computer Hardware and Software
Data Storage
Disc
Storage Operation and Supervision
Mimic Alphanumeri System

c VDU Console
Board
93
The distribution control centre consists of computer system with software

for data acquisition and applications, storage media for storing the data, visual
display units (VDUs) for displaying the data to the operators and to issue control
commands and communication interfaces.
Communication Options
The communication options for achieving Distribution Automation are:
- Radio (UHF)
- DLCC uses the power lines for transmission of data (where commercially
available)
- Optic Fibre
- Public switched telephone network and paging services for auto dial-up
schemes (where wide coverage is available)
One-way VHF radio can be used for load control because low cost load
control switches are available for this technology. VHF radio switches can also be
used for capacitor control on the distribution network, in lieu of more expensive
RTUs with remote MARS radios, if monitoring is not essential at the capacitor
banks.
Communication Selected for Hyderabad SCADA

The Radio Technology based communication system is chosen for
Hyderabad SCADA project. In this a TDM / TDMA System operating in 2 GHz
band is chosen as the primary communication. The Central Station for this system is
located at the DCC, which has 60 trunks of 64 Kbps capacity to provide high quality
Data and Voice Communication. Connectivity from the DCC is provided by this
system up to the EHV sub-stations which are nodal points of the Power System by
installing TDMA outstations. Two TDMA Repeaters are also provided to overcome
line of sight problems and to ensure better coverage. At the 33/11 KV substations
MAR remotes are installed. These are connected to EHV substation by co-locating
MARs Master Stations at nodal points and by connecting them back to back to
TDMA outstations. MAR remotes at 33/11KV substations or at any field locations
will be polled by the MARs Master Station. Thus data acquisition / sending control
commands to the controlled equipment is ensured in this project.
Sub-Station Telemetry Equipment

RTU are to be provided in each of the sub-stations for the acquisition of
substation data parameters and transmitting them to the control centre. The RTUs
94
will be rugged, intelligent and microprocessor based. All activities including I/O
data processing and communication will be done using the micro processors. A
typical RTU is a self-contained unit with CPU, RAM, EEPROM, RS 232
communication ports, power supply, protective circuitry, analogue and digital I/O
channels with signal conditioning. The I/O modules will be selectable to achieve the
quantity and mix of I/O needs for each substation. The RTU gives priority to tele
commands from the control centre over its data acquisition tasks and, at the same
time, ensures that the background scan of all the events at the controlled sub-
stations are carried out and no event is lost. A typical schematic RTU is given below.
Real Time
Analog Clock
I/O
A/D Program Data
Converte PROM Communication
Modem equipment
R
EEPROM &
Memory D
Interface Card (Rs.232)
Digital Central Processor
Interface
Module
Circuit
Breaker
RTU at sub-stations
The functional capabilities of the DAS (Distribution Automation System) for
distribution operation are:
 Supervisory Control and Data Acquisition (SCADA)
 Historical Accounting and Reporting
 Load Control of HT consumers
 Automatic Meter Reading
 Feeder SCADA including fault localization, restorations of supply and load
balancing
 Integrated volt/VAR control
 Automatic Mapping and Facilities Management
 Trouble Call Management System
95
Pole – Top RTUs

Functions in the field are performed through pole top RTUs. They are similar
in functionality to the RTUs except that their I/O handling capacity is small. These
are installed on distribution poles to control the equipment online, such as line AB
switches, capacitor banks and voltage regulators, etc. To obtain information from
pole top RTUs when needed, the operators shall be able to manually request the
polling of any specific pole top RTU. It would be possible to issue polling requests
for an RTU by selecting a cursor target from any display, tabular schematic, on
which that RTU is displayed. Manual polling requests shall be processed on a higher
priority than any periodic scan activities. Scanning of pole-top RTUs shall be
distributed over time in order to minimize the impact on the faster substation scan.
Distribution Automation – Operational Methodology Voltage Control

A pole top RTU with a MARS remote is installed at each voltage regulator /
capacitor bank location and interfaced with it for getting input data of feeder
voltage at the monitored point, reactive loading, current tap position of the voltage
regulators, on/off status of the capacitor banks and to do switching operations of
capacitors and voltage regulators.
The location and capacity of capacitors / voltage regulators shall be decided

using an optimal strategy. The switching schedule of capacitor banks is to be
obtained for minimal loss strategy while simultaneously satisfying the maximum
/minimum voltage constraints on the feeder. A similar method is required for
determining the voltage regulator taps also. Here, the regulator tap position is placed
in maximum possible position as long as the voltage at the maximum affected node
does not exceed maximum permissible voltage limit. The on / off switching
commands for capacitor banks and raise / lower commands for voltage regulators
shall be issued to pole top RTUs either through supervisory control automatically
or through manual control by the operator. A feedback of the change in status due
to control commands have to be obtained, and the results has to be displayed with
any alarm / even messages as required.
Trouble Call Management System (TCMS)

The outage of supply is reported by the consumers to a centralized Fuse Off
Call Centre. The TCMS helps analyze the reasons for outage reported by the
consumer and take remedial action to restorethe supply speedily using this function.
For instance, when outage of supply is reported by a large number of consumers in
one area, it may be probable to trace the reason to the blowing off of a sectional fuse
of the distribution transformer. By maintaining database of consumers connected
96
to each transformer or feeder, such an analysis could be made easily. By providing

SCADA connectivity to fuse off call centres, the operator at DCC will be able to
analyze the fault and send rectificationteams for speedy restoration. This function
helps to reduce losses due to long interruptions and improve customer relations.
Integrated Customer Care Centres:

Customer Care Centres can be networked with GIS, SCADA and Energy revenue
offices for better customer service.
Conclusions
 Implementation of Distribution Automation cannot be delayed anymore.
Infact delay in automation may prove to be a luxury.
 Substation Automation, 11KV feeder controls, LV System controls, AMR,
DSM, Online Energy Audit can be achieved.
 The cost towards Automation is generally recoverable in two to three years of
pay back period.
 Distribution networks provide an interface between the consumers and the
utility and any amount of sophistication on the upstream side with a less
efficient distribution system cannot provide satisfaction to the consumers.
97
7. MULTIMEDIA DEVELOPING AS IMPORTANT

SERVICE ENTERPRISE
Mr. Srinivas Goud*
Introduction
The world of multimedia is a gold mine of career opportunities for those
who have an aptitude for combining their creative talent with technological skills.
It is a world in which such creative people use text, graphics, animation, audio
and video with computer interactivity to create new visual and virtual worlds. The
work could be great fun so much so that you simply lose track of time while
conjuring up those worlds on your PC. Multimedia tools span a wide spectrum
from video and sound editing to special effects, virtual reality, animation, games and
interactive multimedia programming.
Learning multimedia and working as a professional in this challenging field

could be an enjoyable experience. But it requires hard work, ability to visualise and
understand the concept of design logically, and implement it with a clear head.
Above all else, prepared to persevere. The different areas where you could plan a
career in multimedia are:
Publishing industry :
Print media is one of the oldest areas of work and forms the biggest chunk of
the Indian, Asian and global media market. And it is likely to remain dominant for
years to come. However, publishing has acquired newer and broader dimensions
now owing to networking. There are a number of Government and private
institutions in India where one could learn the art of designing and handling
printing technology, and digital print media.
Entertainment industry
The boom in the IT industry, and the emergence of cable TV and convergent
entertainment segments have made this a medium with a great deal of potential for
growth and creativity, particularly taking the emerging international markets into
consideration. Graphic designers, cameramen, sound recordists, compositors,
games design specialists and animators are an integral part of this happening sector.
______________________________________________________________
*CEO, Prism Multimedia, Ameerpet, Hyerabad-38.Since 1998 in to Multimedia Training,
Development and Services.
99
A number of Government and private institutions are offering training in

media and mass communication. A beginner could easily earn up to Rs. 20,000 per
month within two years, and sky is the limit if you can make the grade.
Interactive multimedia and web industry

Talk of multimedia and it is often the Internet that springs to one's mind.
Apart from the Internet, creation of interactive CDs has contributed significantly
to the growth of the multimedia industry. Career opportunities are aplenty. There
are plenty of institutions that provide training in web designing and engineering.
But one must be cautious and choose an institute that has credibility in the industry,
and that can assist you in finding a suitable job. A fresher in this area could earn
approximately Rs. 7,000 per month and after a year or two it could go up to Rs.
15,000. An entrepreneur could earn much more.
Fashion and interior designing industry

Fashion industry in India is supported by the Department of Textiles of the
Government of India and also by various garment and textile organisations.
Although there are a plethora of institutes that claim to be teaching fashion
designing, one must choose an institution that is closely linked with the fashion
industry. Experts in the field should be associated with the training. This is a
lucrative career and a talented trainee could earn about Rs.15,000 per
month.Interior designing :With the advent of design tools, interior designing has
captured the imagination of one and all. Static 3-D, modelling of objects and scene
designing through computer graphics have given a boost to this segment.
Animation industry : Animation is one of the fastest growing IT-enabled

services in India. About 3,00,000 professionals are expected to be in this industry by
end 2008. Animation application areas include entertainment (films and television),
business (marketing demonstrations, product promotions), sales (presentations),
education, tourism, publishing (graphics and printing), web design and virtual
reality for simulation in defence, engineering, advertising (commercials and
advertisements), interior and fashion designing. Visualisers, ink-and-paint artists,
people specialising in special effects, character animators and modelling artists are
some of the professionals required in this industry. The starting salary of an
animator may be around Rs. 6,000 per month.
Special effects : Although special effects (SFX) may be part of other

industries such as entertainment, advertising and animation, its increasing use in all
forms of interactive presentation has earned for it a special place in today's
100
multimedia-savvy world. Advertisement films, games, CBTs and a wide range of

other media use special effects to spice up their content.
You could learn SFX from good high-end animation institutes. Those who
are talented can make it big in this industry. Think of any film, be it `Matrix
Reloaded' or `Shrek', or Hindi films such as `Raju Chacha', `Devdas' and
`Mohabattein', special effects form an integral part . For a SFX person being salary
could be between Rs. 3,000 and Rs. 10,000 per month.
Gaming industry India has a huge potential for developing games for
domestic and international markets. There are five main departments in the average
game company: art, design, programming, sound, and support. Many companies
divide each into sub-categories. Given the huge demand for trained games
developers in India, salaries for trainees may range from Rs. 6,000 to Rs. 10,000 per
month.
Advertising industry The field of advertising, both on-line and off-line, has
been one of the key beneficiaries of multimedia technology, and digital advertising
is being used extensively by organisations today. Multimedia specialists use multiple
types of media, text, graphics, sound, animation, and video, in various
combinations in advertisements. Salary for beginners ranges from Rs. 5,000 to Rs.
8,000 per month and could go up to Rs. 20,000 with a couple of years of experience.
101
8. RETAIL SERVICES SECTOR IN INDIA

Dr. G.U.K. Rao*
"The presence of more than one retailer for every hundred persons is indicative of the lack of economic opportunities
that is forcing people into this form of self-employment, even though much of it is marginal".
"It's inevitable, there is no way that an open market for retailing will be stopped." - Dr Mohan Kaul, chairman of the
Commonwealth Business Council.
Introduction
Service sector forms the backbone of social and economic development of a
region. In recent times, 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.
Besides, 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. The retail sector has been at the helm of India's growth
story. The sector has evolved dramatically from traditional village fairs, street
hawkers to resplendent malls and plush outlets, growing from strength to strength.
According to the Indian Council for Research on International Economic Relations
(ICRIER), India is the seventh-largest retail market in the world, and is expected to
grow at a CAGR of over 13% till FY12. According to the Central Statistical
Organisation (CSO) estimates, the total domestic trade (both retail and wholesale)
constituted 13.0% of country's GDP in 1999-2000, which has gone up to 15.1% in
FY07.
Industry experts predict that the next phase of growth in the retail sector will
emerge from the rural markets. The total number of shopping malls is expected to
expand at a compound annual growth rate of over 18.9 per cent by 2015. The retail
sector in the nation of 1.2 billion people is estimated to have annual sales of $500
billion, with nearly 90 percent of the market controlled by tiny family-run shops.
The retail industry in India is currently growing at a great pace and is expected to go
up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion
by the year 2018 at a CAGR of 10%.
______________________________________________________________
*Director, SED, ni-msme, Yousufguda, Hyderabad
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As the country has got a high growth rates, the consumer spending has also
gone up and is also expected to go up further in the future. In the last four year, the
consumer spending in India climbed up to 75%. As a result, the India retail industry
is expected to grow further in the future days. By the year 2013, the organized sector
is also expected to grow at a CAGR of 40%. With rising disposable incomes,
expansion of stores and supporting economic factors, India's retail sector is
expected to grow to about $ 900 billion by 2014, according to a report by global
consultancy and research firm PricewaterhouseCoopers.
Organised retail, or large chains, makes up less than 10 percent of the market,
but is expanding at 20 percent a year. This is driven by the emergence of shopping
centres and malls, and a middle class of close to 300 million people that is growing at
nearly 2 percent a year.
Among the service enterprises, retailing is the largest private sector industry
in the world economy with the global industry size exceeding $6.6 trillion and a latest
survey has projected India as the top destination for retail investors. The retail sector
of Indian economy is categorized into organized retail and unorganized retail
sectors with the latter holding the larger share of the retail market. At present the
organized retail sector is catching up very fast. The impact of the alterations in the
format of the retail sector has changed the lifestyle of the Indian consumers
drastically. With the onset of a globalized economy in India, the Indian consumer's
psyche has been changed. People have become aware of the value of money.
Nowadays the Indian consumers are well acquainted with the concepts of quality of
products and services.
Retailing has played a major role in the global economy. In developed markets,
retailing is one of the most prominent industries. In 2008, the US retail sector
contributed 31% to the GDP at current market prices. In developed economies,
organised retail has a 75-80% share in total retail as compared with developing
economies, where un-organised retail has a dominant share. The retail sector
accounts for over 10 per cent of the country's GDP and around 8 per cent of the
employment. Being the most dynamic and fast paced. The sector in India attracting
several players entering the market. But all of them have not yet tasted success
because of the heavy initial investments that are required to break even with other
companies and compete with them.
The total concept and idea of shopping has undergone an attention drawing
change in terms of format and consumer buying behaviour, ushering in a revolution
in shopping in India. Modern retailing has entered into the retail market in India as is
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observed in the form of bustling shopping centers, multi-storied malls and the huge
complexes that offer shopping, entertainment and food all under one roof. A large
young working population with median age of 24 years, nuclus families in urban
areas, along with increasing workingwomen population and emerging opportunities
in the services sector are going to be the key factors in the growth of the organized
retail sector in India. The growth pattern in organized retailing and in the
consumption made by the Indian population will follow a rising graph helping the
newer businessmen to enter the India Retail Industry.
The Indian retail industry is the fifth largest in the world. Comprising of
organized and unorganized sectors, India retail industry is one of the fastest
growing industries in India, especially over the last few years. The retail scenario is
one of the fastest growing industries in India over the last couple of years.
According to Government of India estimate the retail sector is likely to grow to a
value of Rs 2,00,000 crore (US$45 billion) and could yield 10 to 15 million retail jobs
in the coming five years; currently this industry employs 8% of the working
population. The sector is estimated to be US$ 200 billion, of which organized
retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion, which is a serious
concern for all the authorities and governments.
Traditionally the retail market in India was largely unorganized; however with
changing consumer preferences, organized retail is gradually becoming popular.
Unorganized retailing consists of small and medium grocery store, medicine stores,
subzi mandi, kirana stores, paan shops etc. More than 90% of retailing in India fall
into the unorganized sector, the organized sector is largely concentrated in big cities.
Organized retail in India is expected to grow 25-30 per cent yearly and is expected to
increase from Rs 35, 000 crore in 2004-05 to Rs 109, 000 crore ($24 billion) by 2010
More than 80% of the retail sector in the country is concentrated in the large
cities. A study reveals that among the more than 20 locations, for organized retail in
India, Mumbai was found to be the most preferred location followed closely by
Bengaluru in the second position.
In the Indian retailing industry, food is the most dominating sector and is
growing at a rate of 9% annually. The branded food industry is trying to enter the
India retail industry and convert Indian consumers to branded food. Since at
present 60% of the Indian grocery basket consists of non- branded items.
______________________________________________________________
105
An Overview of Retail Sector

Retailing is defined to include all the
business activities relating to selling of
goods and services to the final consumers.
It is the final link in a product supply chain.
In India, retailing is one of the fastest
growing enterprises. It is estimated to be
the largest single sector (after agriculture)
both in terms of turnover as well as
employment. After leading the IT
bandwagon, India is poised to grow as a
retail hub.
The growth factors of the retail sector of Indian economy include:
 Increase in per capita income which in turn increases the household
consumption
 Demographical changes and improvements in the standard of living
 Change in patterns of consumption and availability of low-cost consumer
credit
 Improvements in infrastructure and enhanced availability of retail space
 Entry to various sources of financing : the most encouraging format now to
be the hyper-markets
 The hypermarket format to be further encouraged with the entry of the
TNC's
Growth of Indian Retail

The country is favourable for the growth of the sector because of the these
drivers leading to a consumption boom: Favorable demographics specially in urban
areas; Growth in income by having households double income; Increasing
population of women and Raising aspirations for quality products and services.
As per a report by KPMG the annual growth of department stores is

estimated at 24% Ranked second in a Global Retail Development Index of 30
developing countries drawn up by AT Kearney. According to the 8th Annual Global
Retail Development Index (GRDI) of AT Kearney, India retail industry is the most
promising emerging market for investment. In 2007, the retail trade in India had a
share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it
rose to 12%. It is also expected to reach 22% by 2010.
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Indian retail is expected to grow 25 per cent annually. Modern retail in India
could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India
dominates the shopping basket. The Mobile phone Retail Industry is already a US$
16.7 billion business, growing at over 20 per cent per year. The future of the India
Retail Industry looks promising with the growing of the market, with the
government policies becoming more favorable and the emerging technologies
facilitating their operations.
In India the vast middle class and its almost untapped retail industry are the
key attractive forces for global retail giants wanting to enter into newer markets,
which in turn will help the India Retail Industry to grow faster. Many national and
global players have been investing in the retail segment and are making all efforts to
further expand the sector. Out of the total retail outlets in the country, may are
related to food items.
Rural markets emerging as a huge opportunity for retailers reflected in the

share of the rural market across most categories of consumption. The ITC is
experimenting with retailing through its e-Choupal and Choupal Sagar in rural
hypermarkets. IT is a tool that has been used by retailers ranging from Amazon.com
to eBay to radically change buying behavior across the globe. The E-tailing is slowly
making its presence felt. Mahamaza is leveraging technology and network
marketing concepts to act as an aggregator and serve the rural markets.
The infrastructure of the retail sector will

evolve radically. The emergence of
shopping malls is going steady in the metros
and there are further plans of expansion
which would lead to 150 new ones soon. As
the count of super markets is going up
much faster than the rate of growth in retail
sector, it is taking the lions share in food
trade. The non-food sector, segments
comprising apparel, accessories, fashion
and lifestyle felt the significant change with the emergence of new stores formats
like convenience stores, mini marts, mini supermarkets, large supermarkets, and
hyper marts. Even food retailing has became an important retail business in the
national arena, with large format retail stores establishing outlets all over India.
With the entry of packaged foods brands like MTR, ITC Ashirwad, fast food chains
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like McDonald's, KFC, beverage parlours like Nescafe, Tata Tea, Café Coffee and
Barista, the Indian food habits have been altered. These stores have earned the
reputation of being 'super saver locations'.
With the arrival of the transnational companies (TNC), the Indian retail
sector will confront the following round of alterations. At present the Foreign
Direct Investments (FDI) is not encouraged in the Indian organized retail sector but
once the TNCs get in they would try to muscle out their Indian counterparts. This
would be challenging to the retail sector in India
The future trend of the retail sector of Indian economy indicates a growth
up to 10 per cent of total retail by the year 2015.
No one single format can be assumed as there is a huge difference in regional

cultures. India's booming economy, growing middle class and increasing disposable
incomeares fuelling a retail boom in the country. And, following close on the heels
of this boom are cold-chain suppliers, software providers and educational institutes
that are expected to benefit directly from it. The rapid growth of modern retailing,
especially in food and groceries, calls for an organised cold chain infrastructure.
India is one of the largest producers of fruits and vegetables in the world.
Moreover, India's food market is valued at $70 billion, which is doubling every three
years.
The Indian retail sector is highly fragmented with over 12 million retail outlets
with average size of less than 500 sq.ft. Out of the total retail outlets in the country,
nearly 40 per cent relate to food items. There are about nine million small grocery
shops in India Whichever way you measure it, retail business in India is booming.
And as the economy grows, so does India's middle class. It is estimated that 70
million Indians in a population of about 1 billion now earn a salary of $18,000 a
year, a figure that is set to rise to 140 million by 2011. Many of these people are
looking for more choice in where to spend their new-found wealth.
Unorganised service sector

The Indian retail sector is highly fragmented and the unorganised sector has
around 13 million retail outlets that account for around 95-96% of the total Indian
retail industry. However, going forward, the organised sector's growth potential will
increase due to globalisation, high economic growth, and changing lifestyle.
Moreover, high consumer spending over the years by the young population (more
than 31% of the country is below 14 years) and sharp rise in disposable income are
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driving the Indian organised retail sector's growth. Even small towns and cities are
witnessing a major shift in consumer lifestyle and preferences, and have thus
emerged as attractive markets for retailers to expand their presence.
The Indian retail market is estimated to be worth Rs 1,330,000 crore (US

$332.8 billion) in 2007 at current prices, as per the Food For Thought - India Food
Report 2008. Out of this, food & grocery retail is the single largest block estimated
to be worth Rs.7,43,900 crore, but the share of organised sector in this is miniscule.
Clothing, textiles and fashion accessories constitute the second largest block, but
the largest segment as far as organised retailing is concerned is the time wear sector
with nearly 46 per cent share of the segment being organised. Today, organised
retail constitutes approximately 3 per cent of the total retail sales in the country and
is growing up at a fast rate due to the entry of corporates into the sector. It is
expected to reach $100 billion by 2015 and is likely to account for 12-15 per cent of
the total retail sales by 2015. This growth in modern retailing is linked to several
factors particularly, the increasing purchasing power; rapid global interaction and
integration as well as the changing consumer needs, lifestyle and attitude.
In the retail sector of India, the main services prominent are: Clothing and
accessories; Food and grocery; Footwear; Electronics; Catering Services; Home and
office improvement; Telecom; Entertainment; Jewellery; Books, music and gifts;
Watches; Pharmaceuticals and Beauty & wellness.
In the overall retail pie, food and grocery is the dominant category with 59.5
percent share, followed by clothing and accessories with a 9.9 percent share .
Interestingly, out-of-home food (catering) services (Rs 71,300 crore / US $17.8
billion) has overtaken jewellery (Rs 69,400 crore) to become the third largest retail
category, with a 5.4 percent market share - this largely reflects the massive
employment opportunities for youngsters in the services sector, larger number of
nucleus families where normally both male and female partners are employed, and
accompanying changes in consumer lifestyles.
Organized retail sector

In the organised retail segment, the picture is different altogether. Clothing
and fashion accessories is the largest category with 38.1 percent of the market share,
valued at Rs 29,800 crore (US $7.5 billion), followed by food and grocery
accounting for 11.5 per cent of the organised retail market at Rs 9,000 crore (US
$2.3 billion), footwear with 9.9 per cent at Rs 7,750 crore (US $1.9 billion),
consumer durables with 9.1 per cent market share in the fourth place (Rs 7,100
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crore), and out-of-home food (catering) services and furniture, furnishings and
kitchenware follow in that order.
The mobile and accessories retail market had shown the fastest growth in
2007 (25.6%) from the previous year; the other two prominent categories being out-
of-home food (catering) services where growth was 25.1 per cent and books, music
gifts and leisure category which achieved 23.3 per cent growth.
In the organised retail segment, however, the fastest growth was recorded in
the tiny health and beauty care services category (Rs 660 crore), which grew at the
rate of 65 percent in 2007 over the previous year - again a reflection of rise in
services sector employment that demands proper grooming. The second fastest
growing organised retail category is that of entertainment (53.8 percent), followed
by the mobile phones and accessories and the food and grocery retail categories,
both of which achieved 55.2 percent growth in 2007.
Much of the growth opportunity in catering services (25.1 percent) category

was utilised by the unorganised retailers because organised players could not keep
up with the desired growth momentum. A closer study of the retail growth story at
constant prices shows that in this category, growth of organised retail was higher in
2006 (41.7 percent) as compared to 2007 (37 percent).
Besides, the large organised retail segment, using sophisticated technology

and communication network, offers several benefits to the consumers in the form
of availability of quality products at lower prices; wider choice to the customers;
shopping with convenience, space and entertainment; etc. It is also beneficial for the
growth of the economy as a whole because it provides forward linkages for mass-
marketing of processed and packaged goods. Its expanded reach and increased
volume translates into more manufacturing, more jobs, better standard of living and
hence more prosperity.
Key Players in Indian Orgainsed Retail sector

Since liberalisation in early 1990s, many Indian players like Shoppers Stop,
Pantaloon Retail India Ltd (PRIL), Spencer Retail ventured into the organised retail
sector and have grown by many folds since then. During the last few years, the
Indian retail market has seen considerable growth in the organised segment. Major
domestic players have entered the retail arena and have ambitious plans to expand in
the future years across verticals, formats, and cities. For example, companies like
Reliance, Tata, Bharti, Adani Enterprise, have been investing considerably in the
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booming Indian retail sector. Besides, a number of transnational corporations have

also set up retail chains in collaboration with big Indian companies.
AV Birla Group has a strong presence in apparel retail and showcases

renowned brands like Allen Solly, Louis Phillipe, Trouser Town, Van Heusen and
Peter England. The company has investment plans to the tune of ` 8000 – 9000
crores till 2010.
Tata group is another major player in Indian retail industry with its
subsidiary Trent, which operates Westside and Star India Bazaar. Established in
1998, it also acquired the largest book and music retailer in India 'Landmark' in
2005. Trent owns over 4 lakh sq. ft retail space across the country. Trent is a
subsidiary of the Tata group; it operates lifestyle retail chain, book and music retail
chain, consumer electronic chain etc. Westside, the lifestyle retail chain registered a
turnover of ` 3.58 mn in 2006.
Landmark Group invested Rs 300 crores to expand Max chain, and Rs 100
crores on Citymax 3 star hotel chain. Lifestyle International is their international
brand business.
K Raheja Corp Group has a turnover of Rs 6.75 billion which is expected to

cross US$100 million mark by 2010. Segments include books, music and gifts,
apparel, entertainment etc.
Reliance has more than 300 Reliance Fresh stores; they have multiple formats
and their sale is expected to be Rs 90,000 crores ($20 billion) by 2009-10. RPG
Group is one of the earlier entrants in the Indian retail market, when it came into
food & grocery retailing in 1996 with its retail Foodworld stores.
Pantaloon Retail has 450 stores across the country and revenue of over Rs 20
billion and is expected to touch 30 million by 2010. It has more than 5 million sq. ft
retail space located across the country. It's growing at an enviable pace and is
expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched
country's first hypermarket 'Big Bazaar'. Segments include Food & grocery, e-
tailing, home solutions, consumer electronics, entertainment, shoes, books, music
& gifts, health & beauty care services. Pantaloon Retail India (PRIL) plans to invest
US$ 77.88 million this fiscal to add up to existing 2.4 million sq ft retail space. PRIL
intends to set up 155 Big Bazaar stores by 2014, raising its total network to 275
stores.
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. It has the following retail segments:

Food & Grocery: Big Bazaar, Food Bazaar
Home Solutions: Hometown, Furniture Bazaar, Collection
Consumer Electronics: e-zone
Shoes: Shoe Factory
Books, Music & Gifts: Depot
Health & Beauty Care: Star, Sitara
E-tailing: Futurebazaar.com
Entertainment: Bowling Co.
Lifestyle International, a division of Landmark Group, plans to have more

than 50 stores across India by 2012–13.
Shoppers Stop has plans to invest ` 250 crore to open 15 new supermarkets
in the coming three years.
Timex India will open another 52 stores by March 2011 at an investment of

US$ 1.3 million taking its total store count to 120. In the first six months of the
current fiscal ending September 30, 2009, the company has recorded a net profit of
US$ 1.2 million.
Australia's Retail Food Group is planning to enter the Indian market in

2010. It has plans to clock US$ 87 million revenue in five years. In 20 years they
expect the India operations to be larger than the Australia operations.
The retail revolution in rural areas

Earlier on retailing in India was mostly done through family-owned small
stores with limited merchandise, popularly known as kirana or mom-and-pop
Chart-1: Share of formats in organized retail space in India
Supermarkets/Con
Separtment stores venience stores
16% 16%
Hypermarkets
10%
Discount stores
5%
Specialty stores
53%
112
stores. In those times, food and grocery were shopped from clusters of open kiosks
and stalls called mandis. There were also occasional fairs and festivals where people
went to shop. In the twentieth century, infusion of western concepts brought about
changes in the structure of retailing.
There were some traditional retail chains like Nilgiri and Akbarallys that were
set up on the lines of western retail concepts of supermarkets. The government set
up the public distribution system (PDS) outlets to sell subsidised food and started
the Khadi Gram Udyog to sell clothes made of cotton fabric. During this time, high
streets like Linking Road and Fashion Street emerged in Mumbai. Some
manufacturers like Bombay Dyeing started forward integrating to sell their own
merchandise. Shopping centres or complex came into existence, which was a
primitive form of today's malls.
With several states in the country permitting retailers to purchase produce

directly from farmers, the farmers too are adapting to the new opportunity to
cultivate assigned crops and take special care of the same. This gets them instant
credit at higher prices than what they used to receive from the erstwhile
traders/middlemen. Corporate retailers like ITC, Godrej, reliance, AV Birla and
many others have already established the farm linkages. The Indian government too
has chipped in with a massive loan waiver worth Rs 60,000 crore to lighten the
farmers' debt burden.
India's rural markets offer a sea of an opportunity for the retail sector. The
urban-rural split in consumer spending stands at 9:11, with rural India accounting
for 55 per cent of private retail consumption. Currently the Indian retail market is
estimated at Rs 1,330,000 crore, and almost half of this growing retail market at
present lies in rural India, which is a tremendous growth sector that needs to be
tapped with care.
According to the National Council of Applied Economic Research

(NCAER) reports, rural India is home to 720 million consumers across 627,000
villages. Seventeen per cent of these villages account for 50 per cent of the rural
population, as well as 60 per cent of rural wealth. This implies that reaching out to
just 100,000 plus villages will ensure access to most of the rural opportunity.
The retail revolution in urban areas

The urban market undoubtedly continues to grow but with most of the retail
initiatives concentrated in the metropolitan, and tier-I and tier-II cities, these
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markets are fast becoming saturated. Realising this, most of the big retail companies
have started targeting the tier-III cities and the rural towns to spur their growth. The
'bottom of the pyramid' market is now looking attractive for companies wanting to
explore new turf. DCM Hariyali Kisan Bazaars and Godrej Aadhars have already set
up rural retail hubs, ITC Choupal Sagar has done the same and so have Tata Kisan
Sansars, Reliance Fresh, and others like the Naya Yug Bazaar.
Retailing Format in India

As mentioned earlier, India has the highest number of retail outlets in the
world at over 13 million retail outlets, and the average size of one store is 50-100
square feet. It also has the highest number of outlets (11,903) per million
inhabitants. The per capita retail space in India is among the lowest in the world,
though the per capita retail store is the highest. Majority of these stores are located
in rural areas.
Even though the organised retail segment has a minuscule share in the total
industry, it has enormous potential considering the rising urbanisation, the efficient
supply-chain, the readily-available retail space, and modern technology, which help
in reducing consumer prices to a great extent.
Share of formats in organized retail space in India by area
Format No. of area Share in total
stores ('000 sq ft) space (%)
Supermarkets / convenience stores 4,751 4,751 15.5
Hypermarkets 75 3,000 9.8
Discount stores 1,472 1,472 4.8
Speciality stores 20,612 16,490 53.7
Department stores 166 4,980 16.2
Total 27,076 30,693 100
Source : ICRIER and Technopak Advisers Pvt Ltd
square feet. It also has the highest number of outlets (11,903) per million
inhabitants. The per capita retail space in India is among the lowest in the world,
though the per capita retail store is the highest. Majority of these stores are located
in rural areas.
Even though the organised retail segment has a minuscule share in the total
industry, it has enormous potential considering the rising urbanisation, the efficient
supply-chain, the readily-available retail space, and modern technology, which help
in reducing consumer prices to a great extent.
114
The space in terms of area of Square feet of the organized retail sector has
been depicted in the above chart. The figure describes the Pie diagram for
Percentage of share in total space of Formats Organized Retail Space in India. It is
evident from the chart that Specialty stores has high percentage of share in total
space and Discount stores has low percentage comparing to other formats in
organized retail space in India
Share of formats in organized retail space in India by type of merchandise & Size
Average
Channel/ Type of stock-
Pricing Size (sq ft) keeping Location Example
Format merchandise
units (SKUs)
Store
Supercenter All types of Discount 200,000- 2,00,000 Outskirts Wal-Mart
merchandise pricing 300,000 supercenter
Mostly food &
Hypermarket grocery andapparels Discount 60,000- Hypercity,
with focus on pricing 1,20,000 80,000 Malls Big Bazaar
value products
Supermarket Discount
Food & grocery pricing 10,000- 20,000 Malls
30,000 Food Bazaar
Neighbourhood/
co-nvenience store
Daily use items 500-
3,000 4,000 all localities
within a city Subhiksha
Bulk buying, 1,00,000- Metro cash
Cash and carry Mostly food heavy 3,00,000 1,50,000 Outskirts
and carry
and grocery discounts
Heavy
Discount store Food & grocery and
fashion & accessories discount NA NA NA Subhiksha
Department store Apparel and Competitve 20,000- 50,000 Malls Shoppers

accessories 1,00,000 Stop
Any one type of 500- Main markets, Mobile
Speciality store merchandise Competitve 5,000 1,000 Malls
Store
Any one type of Discount 30,000- 10,000 Malls, high Vijay Sales
Category killer merchandise pricing 1,00,000 streets
Non-store
Small food Malls,
Kiosks/stalls items and Normal 20-100 50 multiplexes, Popcorn
accessories cinema halls
Stations, Chocolate and
Vending commercial newspaper
Small items Normal - 10 and office
machines vending
complexes machines
Order retailing
(Catalogue/TV/ Any type of Competitive - - - Argos
Website) merchandise
Door-to-door Mostly low- Normal - - - Amway

value items
Source : ICRIER and D&B Research
115
INVESTMENT OPPORTUNITIES
At the heart of Indi's growth story is its population, the generators of wealth,
both as producers and consumers. With the largest young population in the world -
over 8900 million people below 45 years of age, India indeed makes a resplendent
market. The country has more English-speaking people than in the whole of
Europe taken together. Its 300 million-odd middle class, the 'real' consumers, has
attracted the attention of the world, and as the economy grows so does India's
middle class. It is estimated that 700 million Indians earn a salary of over US $19,500
a year, a figure that is set to rise to 1400 million by 2011. The number of effective
consumers is expected to swell to over 6000 million by this time - sufficient to
establish India as one of the largest consumer markets of the world.
India is one of the most attractive destinations for retailers from all across the
globe. Thanks to the entry of corporate, changing consumer behavior & lifestyle,
increasing influence of western culture and rising income, the Indian retail industry
has seen phenomenal growth in the last five years and organized retailing has finally
emerged from the shadows of unorganized retailing and is contributing
significantly to the growth of the overall retail sector, according to “Booming Retail
Sector in India”, a new market research report by RNCOS.
The Government of India, on November 24, 2011 approved 51 percent

foreign ownership in multi-brand retail, with conditions, and full ownership in
single-brand retail, paving the way in for foreign retailers such as Wal-Mart Stores
Inc. Previously, India allowed 51 percent FDI in single-brand retail and 100 percent
in wholesale operations, but no ownership in multi-brand retail. In recent budget,
2012, India also allows FDI in cash-and-carry, or wholesale, ventures. Government
opened up doors for foreign direct investment (FDI) in $28 billion retail sector in
India (Nov 2011). The condition is that the foreign companies owning more than 51
percent of their shops in India source a minimum of 30 percent of their products
from small-scale local "cottage industry" suppliers. Major Western brands such as
Adidas already own shops in the booming retail centres and shopping malls of
major cities, but they are currently obliged to operate with a local partner.
The key growth areas include the urban, luxury segment on one end of the
spectrum and serving the rural sector on the other. In addition, government policy
encouraging FDI in the segment has resulted in a plethora of international retailers
keen on entering the market; American retail giant Wal-Mart has tied-up with Bharti
Enterprises and global coffee giant Starbucks' has tied up with PVR Limited. In
addition, Carrefour, Boots and others are also expected to come in. With so much
116
action, it is natural that there is a huge scope for employment opportunities, and
experts estimate that the sector will generate employment for ~ 2.5 million people
in 2010. The top retail companies in India include the Raheja Group, Reliance
Retail, Tata Trent, Future Group, RPG Retail, and Ebony Retail Holdings.
The country's dynamic retail landscape presents a unique opportunity to

investors from across the globe, to use India as a strategic business hub. Currently,
the India retail market is US $332.8 billion (Rs1,330,000 crore) strong, growing at
the rate of 10.8 percent per annum, as per Images F&R Research estimates. Of this,
the share of organised retail in 2007 was estimated to be only 5.9 percent, which was
US $19.6 billion (Rs 78,300 crore) only. However this modern retail segment grew at
the rate of 26.2 percent in 2010, and is expected to maintain a faster growth rate
over the next three years, especially in view of the fact that major global players and
Indian corporate houses are seen entering the fray in a big way. Even at the going
rate, organised retail is expected to touch US $57.5 billion (Rs 2,300 crore) by 2015,
constituting roughly 14 percent of the total retail market.
Given the present scenario, India is one of the most attractive markets for
retail investment. Many national and global players have been investing in the retail
segment and have ambitious plans for further expansion. The vast middle class with
rising purchasing power is attracting global retail giants into the almost untapped
retail industry. According to a study undertaken by the NCAER “The Growing
Indian Middle Class”, the upper middle and high-income urban households in India
will touch 3.8 crore by 2007 (from 1.46 crore in 2000). Besides the number
advantage, the purchasing power of Indian middle class is also growing
substantially with a year-on-year growth rate of 5 per cent in its household income.
According to NCAER, the 9.2 crore strong Indian middle class (whose annual
income ranges between Rs 2 lakh and Rs 10 lakh) is expected to cross 15.3 crore by
2009.
Undoubtedly, such healthy trends corroborate that the retail sector boom is
here to stay in India on sustained basis. Going by trends in consumer spending, the
food and grocery segment is the biggest growth driver. Footwear and clothing
categories have also seen a higher organised retail penetration (ORP). Footwear has
a 22% ORP which is driven by high levels of franchising activities. Some of the
international players already present in the Indian market include fast food chains
like McDonalds and Pizza Huts; Dominos; Levis; Lee; Nike; Adidas; Benetton;
Sony; Sharp and Kodak.
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In recent times, with the opening up of foreign direct investment in single-

brand retail and cash–and-carry formats, a new chapter unfolded in the retail space.
Many single-brand retailers like Louis Vuitton and Tommy Hilfiger took advantage
of this opportunity. The cash-and-carry format has proved to be an entry route for
global multichannel retailing giants like Metro, Wal-Mart and Tesco. Since the 1990s
big industrial houses like Rahejas, Piramals and Tatas have started entering the retail
industry. Besides, several Indian and foreign companies have been franchising for
establishing exclusive outlets for their brands, both within the country and overseas.
For instance, 'Bharati Group' has entered into a joint venture with the world's largest
retail chain the 'Wal-Mart'.
The retail opportunity in our country is expected to increase to $440 billion by

2010 from the existing $300 billion, while investments in the sector are slated to go
up nearly 10 times to $25 billion over the next five years. Some of the big players
such as Reliance and Bharti Enterprises have already announced plans to foray into
the sector, while foreign retail chains are eyeing the huge opportunity.
As a result, the Indian retail sector has been undergoing a rapid

transformation in the past few years. The traditional formats of kirana stores,
hawkers, grocers, etc., are being gradually taken over by the modern formats of
department stores, discount stores, malls, supermarkets, convenience stores, fast
food outlets, specialty stores, warehouse retailers, hyper-markets, etc.
For example, Pantaloon started the 'Big Bazaar' discount stores in 2002;
Reliance opened its first supermarket named 'Reliance Fresh' outlet in Hyderabad
and has since fanned out to several States; Subhiksha outlets have been fast
spreading across the nation. Thus, the current face of Indian retail comprising the
unorganised small and medium retailers is slowly changing into a more organised
form of retailing.
The hyper-market route has emerged as one of the most preferred formats
for global retailers entering India. Foreign direct investment into the retail sector
would further improve its productivity, competitiveness and efficiency. Such
investments from abroad are a means to supplement and complement the domestic
efforts for providing opportunities for technological upgradation and access to
global managerial skills and practices; optimal utilisation of human and natural
resources; opening up export markets; generating backward and forward linkages;
providing access to international quality goods and services; etc.
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The investment opportunities in the domestic retail industry lay in most of

the product categories, particularly food and grocery (the largest category); home
improvement & consumer durables; apparel and eating out; supply chain
infrastructure (cold chain and logistics); etc. India also has significant potential to
emerge as a sourcing base for a wide variety of goods for international retail
companies.
The Tata group announced an alliance with the Australian retail major
Woolworths, to start a specialised retail chain for consumer durables, while the
Dubai -based Landmark group — which runs Lifestyle stores in India is trying to
acquire its franchise with Europe's biggest retailer Carrefour. UK retail major Tesco
indicated it will announce its plans for the Indian market. Tata's new venture, Infiniti
Retail Limited will be a 100% subsidiary of Tata Sons and offer over 6,000 products
across eight categories. "This will be a specialised retail chain for consumer
electronics and durables," said Tata Sons' director R K Krishna Kumar. Carrefour is
in talks with Landmark Group for opening up to 200 stores in India, Landmark
chief executive Micky Jagtiani said.
As foreign investors exploring their potential in the retail sector are keen on
developing malls in India, the size of organized retailing is expected to touch $30
billion by 2010 or approximately 10 per cent of the total. This has initiated market
entry announcement from some retailers and has signaled to international retailers
about India's seriousness in promoting the sector. While there are reports of
international retailers like Wal-Mart analyzing business opportunities in India,
Reliance, the largest Indian conglomerate is investing $3.4 billion to become India's
largest contemporary retailer. There are also reports of investments for 'Hypercity
Retail' by K. Raheja Group to establish 55 hyper markets by 2015. All these factors
will contribute in taking Indian retail business to unexpected growth based on the
consumer preference for shopping in congenial environs and also availability of
quality real estate. local companies and joint ventures are expected to be more
advantageously positioned than the purely foreign ones in the evolving organized
retailing industry in India.
EMPLOYMENT OPPORTUNITIES
It's a challenge that some of India's own industrial conglomerates are taking
up. Last January, Reliance Industries said it was investing $5bn in creating a chain of
hyper-markets and back-end retail services. Its plans called for the creation of a
whole new supply chain, with new stores, cold storage facilities, food processing
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units and contract farming. It will initially launch pilot projects in three Indian states
before potentially rolling the strategy out to 500 Indian towns and cities.
The investment could create up to 400,000 jobs, it believes. Elsewhere,

consumer goods group ITC has set up its "e-Choupal" scheme to try and improve
the productivity of farmers that supply its food processing operations. It has built
internet kiosks in rural villages to help give farmers access to the latest information
on things like the weather, current market prices and what foods are in demand.
According to the ITC chairman YC Deveshwar "India's greatest need is to

take the benefit of retailing to the doorstep of the farmer.There is such potential if
we can invest in greater food processing. India has the most irrigated farm land in
the world."
Tentative steps
So while Indian businesses forge ahead with their own plans to take a big
share of Indian consumers' spending, and the Indian government slowly refines its
retail roadmap, where does that leave the supermarket giants such as America's Wal-
Mart, Germany's Metro and Britain's Tesco? For years, their plans for domination
of the Indian retail scene have been gathering dust.
German store group Metro has made tentative steps, via its chain of
wholesale cash and carry centres in cities like Bangalore. About 90% of the goods it
offers come from local producers and suppliers, which could give it a head-start if
the rules on selling to individual shoppers are relaxed in the future.
Tesco and Wal-Mart also have a limited presence in India. German retailer
Metro has opened cash & carry stores in India But they are not selling anything to
anyone: Wal-Mart's 80 staff in India are there to look after the retail behemoth's
purchasing in the region. Even so, it has been lobbying the Indian government to
allow it to open an office in Bangalore where it could research the Indian retail
market and the possibilities for developing its operations there in future.
Bangalore is also home to Tesco's Indian outpost, an office which looks after
some of its back-office finance operations. It says it has no firm plans for the region
- it will not open up a wholesale operation like Metro - but admits it is watching for
any further relaxation of retail regulations.
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POTENTIAL OF RETAIL SECTOR

Till a few years back, the retail sector in India was more of an unorganized one
with petty vendors dominating the chunk of the industry but now the scenario has
fast been changing. Finally, the sector is converting into what we call as organized
retailing.
Accounting for over 10 per cent of the country's GDP and around eight per
cent of the employment retailing in India is gradually inching its way toward
becoming the next boom enterprise. The Indian retail sector is now worth about
$250 bn (£140bn) a year, but it is still to be developed. Well over 95% of the market
is made up of small, uncomputerised family-run stores. Now there are finally signs
that the Indian government is dropping its traditionally protectionist stance and
opening up its retail market to greater overseas investment.
Now our policy for overseas expansion has changed and hence the retail
chains like McDonalds, Marks & Spencer, Body Shop and Ikea can, if they want to,
open and control their own operations in India. Previously, many of them had taken
the path of working with franchise partners, a policy followed by M&S, which
supplies clothes to eight "Planet Sports" stores. They look like M&S stores on the
inside, but local retailers own them, and the UK retailer has no plans for that to
change.
The Indian retail market is the fifth largest in the world, and it is estimated that
by 2015 it will grow to US$637 billion. India has currently 12 million retail outlets,
out of which nearly 5 million sells food and other related products. But even with
such large number of retail outlets, Indian retail sector contributes only 4% of the
total market. Thus there is a huge potential of growth in this sector. The life style of
the people is changing very rapidly and this is contributing hugely to the expansion
of retail sector. The mall space is expected to touch nearly 60 million square feet by
the end of 2008.
As the contemporary retail sector in India is reflected in sprawling shopping

centers, multiplex malls and huge complexes offer shopping, entertainment and
food all under one roof, the concept of shopping has altered in terms of format and
consumer buying behaviour, ushering in a revolution in shopping in India.
Another credible factor in the prospects of the retail sector in India is the
increase in the young working population. In India, hefty pay-packets, nucleus
families in urban areas, along with increasing working women population and
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emerging opportunities in the services sector. These key factors have been the
growth drivers of the organised retail sector in India. Not only the Indian corporate
majors like Reliance, ITC and Pantaloon have entered into the segment but more
and more foreign players are also showing interest in USD 350 billion Indian retail
market.
India is the second-largest country in the world in terms of population, and is

the largest consumer markets in the world owing to its favourable demographics. In
2008 India's working population (in the 15-49 years age group) constituted around
53% of the population as compared with 48.6% in the UK, 49% in the US, and 53%
in Russia. Further, the increase in the number of working women has fuelled the
growth in sales of discretionary items. There has been a 20% increase in the number
of working women in the last decade.
India population pyramid 2008-2020
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 0.0 10.0 30.0 40.0 50.0 60.0 70.0
In mn Female
Male
2008 2020
Source : US Census Bureau
Historically cities and towns have been the driving force of overall economic
and social development. Currently over 335 million people of India reside in cities
and towns, which translates to around 30% of the total population. This would
undeniably emerge as the India's largest market for organised retail, and therefore
the challenge for the retail players to leverage the full potential of flourishing urban
areas. Furtherance, the annual urban growth in India would touch 2.6% during
2020-25, while globally it would fall consistently to reach 1.6% While the Indian real
estate markets boom with organize retailing, the segment ensures a fluffy growth
pad for itself. According to the estimations of KSA-Technopark, a retail consulting
and research firm, organized retailing in India will grow three-fold in the next 3-
years, achieving the size of USD 21.5 billion from the current USD 7.5 billion.
Given the favourable growth patterns, expanding middle class and easing
economic policies, India is ranked as one of the most attractive emerging market for
retail investment, even above Russia and China.
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India is being seen as a potential gold mine for retail investors from all over
the world, and latest research has rated India as the top destination for retailers.
India's vast middle class and its almost untapped retail industry are key attractions
for global retail giants wanting to enter newer markets. Even though India has well
over 5 million retail outlets, the country lacks anything that can resemble a retailing
industry in the modern sense of the term. This presents international retailing
specialists with a great opportunity. The organized retail sector is expected to grow
stronger than GDP growth in the next five years driven by changing lifestyles,
burgeoning income and favourable demographic outline.
Another cap to Indian retailing industry is allowing 51% FDI in single brand
outlet. The government is now set to initiate a second wave of reforms in the
segment by the liberalizing investment norms further. These will not only favour the
retail sector develop in terms of design concept, construction quality and providing
modern amenities, but will also help in creating a consumer-friendly environment.
Retail industry in India is at the crossroads but the future of the consumer markets is
promising as the market is growing, government policies are becoming more
favorable and emerging technologies are facilitating operations in India. And this
upsurge in the retail industry has made India a promising destination for retail
investors and, at the same time, has impelled investments in the real estate sector.
Industry trends for retail sector indicate that organized retailing has major
impact on controlling inflation because large organized retailers are able to buy
directly from producers at the most competitive prices. World Bank attributes the
opening of the retail sector to FDI to be beneficial for India in terms of price and
availability of products as it would give a boost to food products, textiles and
garments, leather products, etc., to benefit from large-scale procurement by
international chains; in turn creating job opportunities at various levels.
Challenges facing Indian retail industry

The tax structure in India favors small retail business: Retailers should give
up self-defeating beliefs about the profitability of tax evasion and bargaining with
customers
Lack of adequate infrastructure facilities: An efficient supply chain linking

producers to consumers calls for a commercial code, business relationships,
reputation of products and their brands, transportation, warehousing, financing,
and software to operate and control the system. All these elements are already
present or available in India. Efficient mass merchandising calls for a large scale with
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hundreds if not thousands of outlets. Control of large networks requires stocking

and pricing policies, software for managing logistics and transactions, as well as
databases in which all goods and related events throughout the network, including
billions of transactions, are captured and permanently recorded in a traceable and
auditable manner. Modernization of retail industry, accompanied by integrated and
transparent information systems, makes it easier for governments to collect their
due.
Dissimilarity in consumer groups: According to the '2012 Outlook:India

Retail' report, consumer discretionary income is likely to be lower due to higher
inflation and interest rates."However, inflation provides a direct fillip to same-store
sales growth. Growth will also be helped by capital expenditure undertaken by
retailers," it said.
Restrictions in Foreign Direct Investment: It may take the entry of foreign

retailers to alter the beliefs of Indian retailers about their business model. Once that
happens, Indian retailers can be expected to develop modern chains of their own;
they may even take their business abroad. If they do, Walmart may have to watch out
for its own territory.
Shortage of retail study options : A few studies only are taken so far in this
sector. It needs concurrent evaluation studies of the schemes, market research and
also cluster approach studies to benefit the retailers in abig way.
Shortage of trained manpower : Indian retailers can and should break out of
the self-defeating confines of the beliefs about the profitability of tax evasion and
bargaining with individual customers. When they do, they can earn much larger total
profits on higher sales volume from expanded operations in spite of narrower
margins. Narrowed margins, combined with economies of scale of operations, and
expanded bargaining power vis-a-vis producers will enable them to lower the price
to consumers. Consumers will respond to lower prices by buying more, and
increasing total profits of retailers.
Low retail management skill : The system that serves to manage large retail
organizations is also convenient for the tax payment and collection. Complete
record of goods, cash, and transactions facilitates easy and fast preparation of
internal and external financial reports as well as returns for sales, income and any
other taxes. The system creates a difficult-to-manipulate audit trail making it easier
for management to track any misappropriation of inventories or cash handled by
thousands of employees in locations spread across the country.
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Small and medium business (SMB) in retail sector

The study conducted by Zinnov Management Consulting provides a detailed
analysis of the Indian SMB market and reveales that the total size of the Indian SMB
space today is about 35 million units, with retail contributing 52 percent of the total
landscape. The specifics share of IT spend in the segment in 2007-08 was $6.6
billion, which is around 30 percent of the total IT spend in India. Also, Internet has
been growing with a CAGR of 46 per cent for the last seven years, according to the
study. Growth in Internet and mobile penetration even in tier-3 cities and rural areas
has led to awareness and affordability of technology. Globalization in trade is
further increasing the pressure for better efficiency with the help of IT, according to
the study.
Industry sector wise distribution of SMBs
Service Retail
27% 52%
Manufacturing
27%
Total= ~ 35.1 million units
For giving further boost to the retail segment of the Indian economy, several
important steps are being taken. Like, for the first time, under the aegis of the
“Indian Retail Forum”, the entire retail industry, Images F&R Research and some
of the world's top global research and consulting firms (like AT Kearney, Ernst &
Young, Price Waterhouse-Cooper, Technopak, KPMG, ICICI, AC Nielson-ORG
Marg, Synovate, Cushman & Wakefield, etc) have come together for a detailed study
of the Indian retail sector. The launching of the 'India Retail report 2007' and a
portal 'indiaretailing.com' for the retail industry are other related developments in
this direction.
Regulatory Framework
The Indian government has not focussed on retail as an industry. Until now,
there are no specific rules and regulations that are to be followed by retail
125
companies. However, there are certain laws that the retailers need to follow, which
are general in nature and which pertain to the establishment of stores and the
conduct of activities. These laws are as follows:
 Shop and Establishment Act
 Standards of Weights and Measures Act
 Provisions of the Contract Labour (Regulations and Abolition) Act
 The Income Tax Act
 Customs Act
 The Companies Act
The small retailers would continue to occupy a niche position as corner-side

shops, because with personalised services and at convenient walking distance they
are able to provide a special kind of service, which will always be in demand.
Providing a new place and creating new employment opportunities for the
street hawkers and vendors in the organised sector is the only way to encourage the
unorganised sector and create a booming economy where competition is persistent.
With the increasing income of an average Indian household and the changing
lifestyles, people are getting more quality-conscious. The whole idea behind
growing retail is to make India an organised global market that will be beneficial for
the Indian economy as a whole. Although the difference between the organised and
unorganised sectors is well marked, with the food streets hopefully getting
consolidated, the unorganised sector is going to be clubbed with the organised.
The Potential
Over the last few years Indian retail has witnessed rapid transformation in
many areas of the business by setting scalable and profitable retail models across
categories. When it comes to development of retail space specially the malls, the
Tier II cities are no longer behind in the race. Development plans till 2007 it show
the projection of 220 shopping malls, with 139 of the metros and the remaining 81
in the Tier II cities. Indian consumers are rapidly evolving and accepting modern
retail formats. New and indigenous formats such as departmental stores,
hypermarkets, supermarkets, specialty and convenience stores, and malls,
multiplexes and fun zones are fast dotting the retail landscape. By 2011, India will
have an additional 280 hype-markets, 3,200 supermarkets, 400 department stores,
and approximately 1,200 mega speciality stores (the category killers) and 20,000
exclusive brand outlets across the various retail categories. Malls alone will provide
an additional 200 million square feet of gross leasable quality retail space (GLA) by
the year 2011.
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The size of India's retail sector is currently estimated at around $450 billion
and organised retail accounts for around 5% of the total market.
Despite the fact that India has one of the largest number of retail outlets in
the World, organized retail accounts for only 5% of the total market. This makes it
especially difficult to apply sophisticated merchandising and sales tools, enhance
consumer interaction and also, make very accurate analysis. That said, analysts
believe the sector is likely to show significant growth of over 9 % p.a over the next
10 years and also see rapid development in organized retail formats, with the
proportion likely to reach a more respectable 25% by 2018.
There are many opportunities for those seeking to enter this sector, and entry
level positions such as sales executives don't even require a degree. MBAs are
increasingly being recruited, which marks a change of HR policy, from the
traditional preference to hire those from the FMCG and hospitality sectors. In fact,
senior executives in retail such as operations heads are extremely well looked after,
and HR consultants believe they are paid in excess of Rs. 60 lakhs.
Currently, there are about 275 operational malls (including some on the verge
of completion), and this number is expected to rise to almost 500 by end-2010. Of
the new malls coming up, 40 per cent are concentrated in the smaller cities.
According to an ICICI study, malls are estimated to become a Rs 38,447-crore
sector by 2010.
By 2011 about 200 million sq ft additional gross leasable area (GLA) will come
up within malls. Of these, approximately 15 million sq ft will be devoted to food
court/catering services, and approximately 11 million sq ft will be devoted to food
and grocery retail which will thrive more as part of hyper-markets or as stand-alone
stores.
While Indian telecom major Bharti is all set to foray in the retail segment, a
number of companies from the US, England and Australia have laid plans to sell
their products directly at the retail outlets. With this there lies an exciting times
ahead for the Indian retail markets with almost all the preferences of life - apparel
and accessories, appliances, electronics, cosmetics and toiletries, home and office
products, travel and leisure and many more. With this the retail sector in India is
witnessing a rejuvenation as traditional markets make way for new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores.
127
Retailers Association of India (RAI)

The 'Retailers Association of India (RAI) is the voice of Indian organised and
modern retailers putting forward their demand. Launched by the key retailers of the
country, rai has founder membership** of 55 companies starting from Aditya Birla
Retail Limited; Bharat Petroleum Corporation Ltd, Reliance Webstore Ltd; RPG
Retail; Shoppers' Stop; Subiksha Trading Services Pvt. Ltd; Raymond Ltd., To
Unilever India Exports Ltd as leading members. It is governed by a Governing
Board consisting of eight members and managed by Mr. Gibson G. Vedamani,
CEO. On August 2008, a Retail Summit was organized in New Delhi and their
suggestions for faster growth of the sector are given in the Appendix.
___________________________________________________________________________________
**RAI Founder Mmebers: Aditya Birla Retail Limited, Arvind Brands Ltd., Avenue Supermarts Pvt. Ltd. (D-
Mart), Bharat Petroleum Corporation Ltd. Classic Fashions, Damas Goldfields Jewellery Pvt. Ltd. Ebony
Retail Holdings Ltd. G R Thanga Maligai, Gini & Jony, Globus Stores, Guardian Lifecare Ltd., Heritage Foods
(India) Ltd. Infiniti Retail Ltd., ITC Ltd – LRBD, Kalanjali Arts & Crafts, Kewal Kiran Clothing Pvt. Ltd.,
Kirtilal Kalidas & Co., Koutons Retail India Ltd., Lakewood Malls Pvt. Ltd. (Haiko), Levi Strauss (India) Pvt.
Ltd., Lifestyle International Pvt. Ltd., L N B Textiles Pvt. Ltd., Madura Garments, Major Brands (India) Pvt.
Ltd., Manipal Cure & Care Pvt. Ltd., McDonald's India (West & South), MnM Marketing Private Ltd. (MnM),
Nalli , NEXT Retail India Ltd. Odyssey India Ltd., Pantaloon Retail (India) Ltd., Personality Ltd. (Weekender),
Piramyd Retail Ltd., Planet M , Provogue India Ltd., Rajmal Lakhichand Jewellers Pvt. Ltd., Raymond Ltd.,
Reliance Petro Marketing Pvt. Ltd., Reliance Webstore Ltd., RPG Retail , Shoppers' Stop , Subiksha Trading
Services Pvt. Ltd., TCS Textile Pvt. Ltd. (The Chennai Silks), The Bombay Dyeing & Manufacturing Co. Ltd,
The Mobile Store, Titan Industries Ltd., Trent Ltd., Unilever India Exports Ltd., Vishal Retail Ltd., Vivek Ltd.,
Wadhawan Food Retail Pvt Ltd, WITCO (India) Ltd., Zodiac Clothing Co. Ltd.
128
CONCLUSION
Unlike the kirana stores that served us for decades, the new breed of retail
chains is heavily dependent on IT. The best examples are: Wal-Mart with Bharti
Enterprises and Reliance Retail, the retail wing of Reliance, which had planned to
establish 10,000 stores by 2010. It had already opened 11 pilot stores under the
“Reliance Fresh” format in Hyderabad. All these trends and developments present a
great business opportunity for software and hardware vendors from across the
globe. For faster growth as expected in the country the following points may be
considered
 There is a need to find a model that does not displace our existing retailers.
 The government should conduct an impact analysis of the super market
chains like Tesco and Carrefour, which would hit its retail sector.
 Retail reforms are to be introduced by protecting the livelihoods of the small
shopkeepers they represent.
 At the same time, the government should attract foreign investment to
provide the infrastructure - the warehousing, distribution and processing
operations - that are needed to upgrade India's chaotic retail industry.
 Governmental regulations, lack of funds, and micro markets in India are
some of the key reasons for a large SMB sector in India.
 Globalization in trade is forcing the SMBs to improve their efficiency in
conducting business. As of now, there is no policy for foreign direct
investment in retail. The government allows 100 per cent FDI in cash and
carry through the automatic route and 51 per cent in the retail trade of single
brand products. Besides, the franchise route is available for the big operators.
 The government also proposes further liberalisation in the retail sector
allowing 51 per cent FDI in consumer electronics, sports goods, stationery
and building equipment. The current policy regime also bars foreign retailers
from selling multiple brands directly to consumers. Also, this policy
framework involves numerous licensing formalities for the retailers and
hence there is demand for a single window clearance system, which makes
the whole process hassle-free.
 As the government is in the process of initiating a second phase of reforms,
129
it is desirable that the Government seek these options keeping in view the
existing social framework of India and ensure that the entry of global retail
giants does not displace the existing employment in the retail business.
 Since the basic objective is to make data available to users and customers,
proper IT implementation and superior IT infrastructure are needed to
ensure that in spite of getting minimal details, the retailer captures the right
information, which flows to everyone from the back office staff to the head
office managers.
 As the FDI influence on the Indian retail sector sets in, the total size of the
retail trade is expected to grow extensively in the coming years and the
consumer segments patronising the big malls will create frenzy for organized
retailing predicting a growth of 25 to 30 per cent per annum over the next
decade. Moreover, Indian retail chains would get integrated with global
supply chains since FDI will bring in technology, quality standards and
marketing, thereby leading to new economic opportunities and creating more
employment generation.
 With more foreign companies investing in retail, consumers will get more
choices and will have to spend less. That is indeed, a good news - especially
when the inflation is bent upon climbing up and up.
 Industry trends for retail sector indicate that organized retailing has major
impact on controlling inflation because the large organized retailers are able
to buy directly from producers at the most competitive prices.
130
Appendix
TiE Retail Summit 2008 initiates Retail sector towards a faster growth
trajectory
The TiE Retail Summit, 2008 saw a unanimous thought on combining the
best from both the markets-domestic as well as the western markets, to create a
sustainable growth for the retail industry in the country.
New Delhi, August 1: The TiE Retail Summit, 2008 saw a unanimous thought
on combining the best from both the markets-domestic as well as the western
markets, to create a sustainable growth for the retail industry in the country.
In India there are around 15 million retail outlets, which cater to the day-to-
day needs of the customers. They are convenient, affordable, provide add on
services, which a customer does not find in a big retail shops. Big chains on the other
hand enjoy large-scale efficiencies.
The one-day event saw several thought leaders from the retail market in India
sharing their experiences and thoughts on the galore of opportunities the Indian
retail sector has to offer.
Arvind Singhal, Chairman, Technopak Advisors, talked about the future of large
retail chains in India, their strength and weaknesses and what it meant for small and
medium retailers in terms of opportunities. In his keynote session on "The India
Story", William Bissell, Managing Director, FabIndia shared his experiences on the
success of his venture built around an India centric philosophy. He said that, "The
opportunities the retail sector has to offer are like never before and the
entrepreneurs need to look at them with a fresh perspective."
Elaborating on the "The learnings from Indian and Western retail models",
Viney Singh spoke about the distinctive features of the Indian and Western Retail
Models.
He went on to emphasize the need to amalgamate the features to suit the

consumer patterns in the Indian markets, the key learnings and the way forward to
maintain a global perspective, while nurturing the diversity to maintain connection
with the local markets.
131
Mark Ashman, CEO, Marks and Spencer India, shared the success story of Marks
and Spencer and the knowledge that the Indian market had to offer to the western
giant.
Commenting on the boom in the retail sector he said, "India has a huge retail
margin. The Indian market is growing and has a room for everyone which in turn
leads to greater employment and entrepreneurial opportunities."
TiE platform also showcased several relevant success stories in the retail
sector. Ashutosh Garg, Chairman and Managing Director, Guardian Life Care
highlighted the essential elements required for a start-up venture. Taking analogy of
Guardian Life Care, he explained the factors that come into play to gain a greater
foothold within the local and national markets.
Milagrow, a Knowledge Solutions Venture Catalyst firm, presented a white

paper during the summit focusing on how small retailers can survive the
competition from the bigger retail players from the organized sector.
The white paper throws light on the strengths and weaknesses of smaller
players as compared to the big organized chains, the strategies adopted by smaller
players and their road ahead.
References
1 FDI in Retail Sector – The Hindu Business Line, November 9, 2011
2 “Retail sector all set for intense competition in near future” – The Hindu
Business Line, September 15, 2006.
3 “Countdown to India's retail Revolution” - Retail Sector in India - By Toby
Poston BBC News business.
4 “India Retail Sector – IT Usage and Trends 2007-2011: Forecast and Analysis
– An Overview “ by Arpan Gupta Parijat Chakraborty and Parishesh
Mishra, IDC, January 2007.
5 “Report on Impact of big retail on small operations” by Indian Council for
Research on International Economic Relations (ICRIER), 2008.
6 “Organized retail to capture 25 pc Markets by 2011” – Indian Reality News
May 13, 2008 --- indianrealtynews.com/category/retail-market reporter,
August 19,2007.
132
7 TiE Retail Summit 2008 initiates Retail sector towards a faster growth
trajectory - Yahoo News, August 1, 2008.
8. Maps of India's.com–Business Directory at business.mapsofindia.com/
sectors/retail
9. “India's Retarted Retail Sector”- Shyam Sunder is J. L. Frank professor of
accounting, economics and finance at the Yale School of Management.
10. REUTERS, November 30,2011
11. http://www.rncos.com/Report/IM112.htm
13. “Indian retail sector to grow to about $900 bn by 2014: PwC”, PTI Feb 3,
2011
14. “India opens retail sector to foreign brands like Adidas, Ikea and others” –
AFP, 11Jan,2012
15. “India Retail Sector Outlook in 2012 stable: Fitch” – PTI, Jan 18,2012
16. FDI scenario in India, CSO, 2010-11
133
9. DEVELOPING SUCCESSFUL MICRO-

ENTREPRENEUR IN HEALTH CARE THROUGH
MICROFRANCHISING - A GLOBAL EXPERIENCE
Srikanta Kumar Padhi*
Abstract
Poverty is the prime hazard in development. Two third of world population is
affected by poverty and other related issues like health, education etc. In order to
improve their standard of living as well as quality of life, their socio-economic
development is necessary. The social environment, livelihood, infrastructural
inadequacy, employability source of income etc., are prime factors of socio-
economic development. It is the high time to build up entrepreneurship activities
among the poor communities in developing countries like India. However
exposure to micro-credit and micro enterprise is the need of hour and these
enterprises can provide employment opportunity to the people and improve their
economic condition.
For the Indian Government, the healthcare sector is a priority area. India is
still finds the joint eighth position along with Malaysia as moderately attractive
destination in attracting multinational pharmaceutical companies operating in the
Asia Pacific region, as published in the report by Business Monitor International
(BMI)'s regional Business Environment Rankings table for third quarter of 2008.
Key highlights of the Indian market are the absolute market size, strong annual
growth indicators, recently introduced healthcare insurance scheme for the poor,
and the improving economic as well as intellectual property (IP) environments. If
we look at the other side of the mirror, World Health Organization (WHO)
criticized India's pharmaceutical regulatory system recently in April 2008. India
needs to strengthen its basic economic structure of the poor people.
In this contour, Microfranchising can be act as a sustainable business model

for creating and empowering successful micro entrepreneurs in the Health care.
This model will provide stimulation for a sustainable entrepreneurial cycle and help
______________________________________________________________
Keywords: Microfranchising, emerging trends, economic self reliance, Economic
empower, Microfinance, Sustainable Health care, Base of the Pyramid (BoP)
* Srikanta Kumar Padhi, Research Associate, Icfai Research Center, 4th Floor, Stellar
Sphinx, Road No.1, Banjara Hills, Punjagutta, Hyderabad. Pin-500082, Andhra
Pradesh, India , Phone No: +91-9985484938, Email: Padhi_srikanta@yahoo.co.in
135
towards socio-economic development and act as a catalyst in alleviating poverty to

the rural community. Furthermore, microfranchises model can result in mutual
benefit for the franchisee and franchisor. This paper tries to decasualize reason that
why and how microfranchising can be utilized as an appropriate delivery system,
especially when paired up with microfinance institutions and its scope in India. By
taking this objective into consideration, this paper explains some successful case
experiences namely CFW Shops, VisionSpring (earlier Scojo Foundation), and
Bicycling Empowerment Network (BEN) in developing the Health care services
for the people living at the base of the pyramid by creating successful and
economically self-reliant micro-entrepreneurs.
INTRODUCTION
Poverty is one of the stubborn problems in the developing world. As per
World Bank1 “Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and
not being able to see a doctor. Poverty is not having access to school and not
knowing how to read. Poverty is not having a job, is fear for the future, living one day
at a time. Poverty is losing a child to illness brought about by unclean water. Poverty
is powerlessness, lack of representation and freedom.” The dimensions and face of
poverty may vary from country to country, from region to region still, poverty, in all
of faces, reasons for a foremost social challenge and a major threat for any country.
Therefore it can be explained as an action to change the world, so that more people
can access for enough food, shelter, education and health, and other minimum and
basic requirements of their communities.
Poverty not only affects individuals or groups, or is not only confined to the
developing nations but developed countries are also evident in experiencing the
problems of poverty through a set of social problems especially in rural areas.
Poverty has been looked at through a number of perspectives by considering
various indicators such as income levels, consumption patterns, social indicators,
and indicators of vulnerability to risks and of socio/political aspects.2
However, the foremost reason behind poverty is lack of employment

opportunities in rural areas and these communities are the major victims of poverty.
There was an interesting declaration by the International Labour Organization
(ILO) by emphasizing its objectives and purpose at Philadelphia in, 1944, “Poverty
anywhere is a threat to prosperity everywhere”. Likewise, Gandhi called poverty
“the worst form of violence.” It is not the sole responsibility of the government to
alleviate poverty but also significant contribution must be provided from the
corporate world. The corporate world has equal responsibility to initiate the social
136
Fig 1: Rural Poor Community
Poverty is a call to action -- for the poor and the wealthy alike -- a call to change the
world so that many more may have enough to eat, adequate shelter, access to education
and health, protection from violence, and a voice in what happens in their communities.
Source:http://web.worldbank.org
up-liftment or social business initiatives. In this regards some significant steps were
establishment of micro credit and microfinance institutions. Although
microfinance has helped many clients improve income and living standards through
self-employment, many microfinance institutions have become aware of a new
problem for clients that its products do not currently address. The disconcerting
trend in their clients' businesses is that a majority of self-employment businesses
stop growing after several consecutive loans.3 Therefore, it is realized that there
should be a business model with an objective to empower poor by creating
successful micro-entrepreneur, who can be economically self-reliant, can improve
their living standard, and the business can be sustainable. With this idea the concept
of “Microfranchising” as potential socio-economic development form of business
model is emerged. The main objective of Microfranchising is to provide sound
business opportunities by introducing scaled-down business concepts with
successful franchise organizations that does overall improvement of the clients in
education, health care, gender equality, child mortality, etc and also promote the
environmental sustainable behavior. Therefore, in an easy terminology, we can
______________________________________________________________
1
Understanding Poverty, available at
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTP
A/0,,contentMDK:20153855~menuPK:435040~pagePK:148956~piPK:216618~theSit
ePK:430367,00.html, as accessed on 25th July 2008.
2
Understanding Poverty, available at
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTP
A/0,,contentMDK
137
define, Microfranchising as the establishment and/or means for establishing

sustainable and small or micro entrepreneur by focusing on a successful market
using proven operational methods, financial assistance, mentoring and other
managerial assistance with the support of a brand.4
Figure 2 shows that Microfranchising is a

step ahead of the concepts of microfinance
and micro credit and is the leading choice
of modern organization in elevating and
empowering the poor along with tapping
the Base of Pyramid (BOP) market which
has hug e potential for business
opportunity. Further Microfranchising
offers great promise in alleviating poverty Source: www.marriottschool.byu.edu
by creating successful micro entrepreneurs. Fig 2: Economic Ladder
MICROFRANCHISING: A STEP AHEAD

Microfranchising is a new buzzword that is
catching enough notice in the present decade. It is a
new tool designed specifically to assist the rural and
small entrepreneurs to become more successful
and reach economic self-reliance, along with their
overall social development through the assistance
of successful business models with the necessary
initial and on-going training. It encompasses huge
potential in alleviating poverty by combining the
so cia l en tr e p ren eursh ip with b usin ess
Source: www.marriottschool.byu.edu entrepreneurship.
Fig 3 : Jason Fairbourne on Microfranchising

There various forms of business franchise models. (APENDIX II).
However as per UNDP's Millennium Development Goals initiated from 2004
_____________________________________________________________
contentMDK:20153855~menuPK:435040~pagePK:148956~piPK:216618~theS
itePK:430367,00.html, as accessed on 25th July 2008.
3
Hatch, John. “Slogging Toward a Poverty-Free World: The Need for Microfinance-
Microfranchise Partnership.”January, 2006. Internal document.
4
As defined by the author.
138
onwards, UNDP is coming out series of reports to clarify how businesses are
creating value in the difficult market conditions chiefly characterized by poverty and
how, in the process, they can also create value for the poor. In this contour
Microfranchising is one such potential form. Under this model mainly there are two
players having business relationship, namely, one is the franchisor and the other is
franchisee and both are mutually benefited in the process of promoting, running
and developing the business without comprising the overall social development of
clients.
EXHIBIT 1: UNDERSTANDING MICROFRANCHISING

The overall objective of Microfranchising is to promote economic development
by developing sound business models that can be replicated by entrepreneurs at
the base of the pyramid; therefore, the start-up costs of Microfranchises will be
minimal. The key principle behind this form of business model is replicating
success to scale. It is well known that there is a lack of employment
opportunities in developing countries leaving nearly one half of the world's
population (3 billion people) living in severe poverty (living on less than two
dollars a day). Therefore, many people have no choice but to start micro
enterprises in order to survive. According to The International Labor
Organization's 2002 report, 72 percent of Sub-Saharan Africa's population
operates within the informal sector, survived on a hand-to-mouth basis.
Whereas in Latin America it was 51 percent and in Asia it was 65 percent.
Furthermore, many of the small businesses operated by people in developing
countries fail or exist on subsistence levels, leaving hundreds of millions in
poverty. Microfranchising is a new tool designed specifically to assist these
entrepreneurs to become more successful and reach economic self-reliance,
through the provision of successful business models with the necessary initial
and on-going training managerial and other assistance to succeed. Available at
http://marriottschool.byu.edu/selfreliance/ wiki/controller.cfm?faq
Source: http://marriottschool.byu.edu, Microfranchising Wiki
It is a common parlance that everyone does not have the entrepreneurial

strength to come up with a brilliant business idea or the necessary expertise for the
overall activities of a business. But this problem can be solved through
Microfranchising business model. In this model, a franchisor can offer to a
franchisee financial assistance, a brand for the products for a wider and ready
market, and largely a step-by-step guidance that greatly enhances the chances of
success and ultimately make them economically independent. Further, it will not
only create micro entrepreneurs but sustainable businesses rather these initiatives
also takes care the other social parameters of their clients. Thus Social
139
entrepreneurs are those who bring positive social change, likewise business
entrepreneurs are those who can contribute to the development of the economy.
Largely, Microfranchising is a collaborative sustainable business model that fulfills
both of the above two objectives.
MICROFRANCHISING: CREATING AND EMPOWERING

SUCCESSFUL MICRO ENTREPRENEUR IN HEALTH CARE
Most of the people in the informal sector or informal economics in countries
like India, Bangladesh, are either self-employed or casual daily wage labours who are
engaged in more than one occupation (multiple jobs). Many informal economies
have benefited by leveraging microfranchising model to make people come out
from poverty to prosperity. Streamlining delivery mechanisms, which is bundled
with products and services where involving corporate, MFIs and poor families as
clients (beneficiaries of microfranchising) can create a quadruple effect, where
overall societal development will take place in the long run with the new forms of
financing. This whole initiative can be the solution to global poverty where all the
stakeholders are benefited.
Many companies around the globe are exploring their business operations
and relationships in a fundamental way in the light of Sustainable Development,
seeking to amalgamate their way of profitable growth with safeguarding
environmental and rural empowerment and quality of life for present and future
generations. These perspectives make some companies to make significant changes
in their business strategies, policies, as well as commitments. By looking at the above
types of common characteristics, the feasibility of microfranchising form of
business model can be an appropriate justification in alleviating poverty and
creating successful micro entrepreneurs in with more appropriate in rural
communities.
Under this model a franchise package includes any number of the following:
operations manual, a training, access to the supply chain, hardware, sales strategies,
product sourcing, and credit, branding or marketing. Following are some of very
good experiences in creating successful Micro entrepreneur in Health Care through
Microfranchising model:
Microfranchising: CFW Shop's Healthcare Services Experience

The ®HealthStore Foundation's initiatives makes high-quality, basic
healthcare and essential drugs accessible in an affordable way for a majority of the
world's poor. Its business-format franchise model can maintain business and
140
clinical standards and scale geometrically while assuring economies of scale.5 Under
this Business Format Franchising, the business processes follows through a Three
Point Test. Under this format the franchisor that is the HealthStore's under its brand
“CFWshops” provides all kinds of assistance franchisor's supply chain, compliance
program to financing. This system includes easy-to-follow standards, policies,
procedures, and forms that enable franchisees with little to no business experience
to properly operate their medical outlets.6 Through this initiative Franchisees can
earn a profit by rendering his services and by selling products by either acting as the
owner/operator of his or her own business in compliance with franchise norms and
standards.
EXHIBIT 2: THE HEALTHSTORE FOUNDATION® FOUNDED

THE CFW SHOPS
The HealthStore Foundation® founded the CFWshops business-format
franchise network in Kenya and operated it from 1999 to 2002 when
HealthStore founded the Sustainable Healthcare Foundation (“SHF”), a
Kenyan charitable organization (i.e., NGO), to operate as the franchisor entity
in Kenya. Presently, SHF operates the CFWshops network in Kenya as a sub-
franchisor of The HealthStore Foundation®. As of December 2007, the
network is comprised of 65 medical clinics and drug shops, and served
approximately 450,000 customers and patients in 2006.
Medical Clinics: Two-thirds of the outlets are medical clinics owned and
operated by nurses with at least ten years of professional experience.
Drug Shops: One-third of the outlets are drug stores owned and operated by
Community Health Workers (CHWs). CHWs do basic diagnosis and treatment
as allowed by law, referring patients they are not qualified to treat to other health
providers. They stock over-the-counter drugs such as pain killers, antacids,
cough syrups, oral re-hydration solutions, and skin ointments for fungal
infections.
Source: Microfranchising Health Care Services to Low Income Communities,
by Scott D. Hillstrom and Michael H. Seid
with the growing of the business the franchisee may also hire employees who also
earn a living wage. Very often it has been found that franchisees become community
______________________________________________________________
5
Microfranchising Health Care Services to Low Income Communities by Scott D.
Hillstrom and Michael H. Seid, Microfranchising – perspectives and experiences by
Icfai university Press, 2008,
141
leaders, as they deliver what may be the only high-quality, affordable medicine in
their communities. Some become so dedicated that they stay open seven days a week
and some choose to serve patients who can't pay for the care they need.7 If the
franchisee don't follows the norms, the franchisor may revoke the franchise
agreement and terminate support, by putting the franchisee out of business. So
franchisees can ensure and exercise strong control to comply with clinical and
business standards. The major benefits of this model includes
1. Improved medical care and drugs are more effective
2. Outlets are more easily replicated
3. Networks can scale geometrically
4. Economies of scale are achieved.
Healthcare franchises like CFWshops not only improve economic conditions

for the whole community but also bring a revolutionary change in health care for
children suffering from most common diseases in sub-Saharan Africa like malaria
and respiratory infections in an easy to treatment way in local CFW Clinics
(APENDIX II) rather going for an overburdened healthcare system (e.g.,
government dispensaries and hospitals). This allows those healthcare providers to
care for patients requiring specialized medical care as a result the entire community
becomes more productive with affordable,
easy to access health care system. CFW
shops has earned recognition as an award-
winning, path-breaking innovation for
providing affordable health care services.
In an Interview with Scott Hillstrom, the

founder and CEO of The HealthStore
Foundation says "The HealthStore
Foundation combines microfinance with
established, franchising practices to address
the simple problem of getting the drugs to
sick people when and where they are
needed".8
Fig 3: CFW Shop
Source: Columbia Business School Social Enterprise Program www.habanahaba.wordpress.com
______________________________________________________________
6
Step-by-step instructions are provided for things like opening the store each day,
hiring and supervising employees, managing inventory, providing customer service,
marketing the store to surrounding communities, etc.
142
Microfranchising: BEN Namibia's Bicycle Ambulance

BEN Namibia is a non profit organization established in 2005 in Windhoek
with the mission to empower disadvantaged Namibians by providing Community
based, sustainable transport and bicycle-related income generation opportunities.9
Bicycling Empowerment Network (BEN) Namibia's bicycle ambulance project is
the replication of First African Bicycle Information Organization (FABIO) began
initially in Uganda that manufactures and distributes bicycle ambulances in Uganda.
It is not intended to replace motorized ambulances rather to provide affordable and
ultimate means of transport facility for poor community in remote areas, places
where tracks are not too sandy and mostly places located within 10 km of a health
facility in Namibia, as most of Namibia, do not have public emergency ambulance
system, and people often die because they can not afford to pay for private
transport. Until Government is able to develop adequate policies and procedures on
emergency medical transport, it seems that bicycle ambulances will have a role to
play.10 However the major services it facilitate to people suffering from HIV/AIDS-
related illness to scorpion bites, in the remote
areas.
As per BEN Nambia's Network11 “log

book entry with trip details has been made for
every trip the ambulance made then a copy of
the same has been sent to BEN Namibia on
periodic basis to understand its modes
Source: www.benbikes.org.za
Fig 4: BEN Namibia's bicycle ambulance
___________________________________
7
The HealthStore Foundation® is considering implementing an appropriate 3rd party
payment financing mechanism to improve access to drugs and services by very low-income
patients, as well as to improve alignment of franchisor, sub-franchisor, and franchisee
incentives.
8
Interview taken by Dilip Dasgupta, and Srikanta Kumar Padhi from Mr. Scott
Hillstrom,CEO, CFW Shops on Microfranchising in the Global CEO July 2008 , Icfai
University Press
______________________________________________________________
9
Mission and Objectives of BEN Namibia, available at
http://www.benbikes.org.za/namibia/about.html
10
Emergency healthcare transport, Available at
http://www.benbikes.org.za/namibia/ambulance.html
143
BEN Namibia operates with partnership of community based organizations

throughout the country to deliver each bicycle ambulance. It provides Healthcare
for training volunteers, maintenance and reporting on the performance of the
ambulance through the participatory management session covering issues like
storage, access and covering costs of maintenance, etc. This is also a good example
of microfranchising form of business model to provide emergency healthcare
transport facility simultaneously an income generating opportunity for the local
community by joining with BEN Namibia initiative.
MICROFRANCHISING: VISIONSPRING (earlier Scojo Foundation)

Vision Spring was founded by Dr. Jordan Kassalow, a practicing optometrist
who has dedicated his life to improving vision and economic opportunity in the
developing world.12 Jordan's exposure to the following two facts motivated him to
start Scojo foundation which has been renamed as Vision spring from June 14th
2008.These two reasons are:
1. Jordan realized that a large number of the patients he treated over 40% simply
needed a pair of non-prescription eyeglasses, the kind found in drugstores all
over the US. Yet the people he met were losing their jobs and their livelihoods
simply because this affordable, mass-produced product was not available in
their area.
2. He examined that, above all, people needed jobs. Without any income, they
could not access critical goods and services, such as water, health care, and
education.
Without clear vision, millions of the
world's poorest people lose income or
drop out of the labor force altogether,
forcing their families and communities
deeper into poverty. However if a simple
pair of ready-made eyeglasses made
available in every drugstore it can probable
Fig 5: Business in a Bag restore their vision, productivity, and
Source: www.visionspring.org dignity. By keeping this as his vision,
Jordan, started a microfranchise form of
business model “Business in a Bag” concept by creating Vision entrepreneurs.
______________________________________________________________
11
Emergency healthcare transport, Available at
http://www.benbikes.org.za/namibia/ambulance.html
12
http://www.visionspring.org/about/our-story.php
144
This bag is a small business toolkit that allows an entrepreneur (client) with
little-to-no previous experience to launch a profitable business. Like microcredit,
Vision Spring also provides financial assistance along with training in sales,
marketing and business skills, as well as continual support from local staff to clients.
The Business in a Bag contains all the products and materials needed for marketing
and selling eyeglasses as well as tracking customer information, managing inventory,
and running a small business. After selling the glasses, the vision entrepreneurs
(clients) pay back the cost of glasses to Vision Spring.
To reach the hundreds of millions in need of eyeglasses worldwide, Vision

Spring licenses, partnering with varieties of organizations starting from micro
finance institutions to large networks of borrowers to multinational corporations
working in some of the poorest regions of the world, to local NGOs providing vital
health and economic services in communities. VisionSpring reaches its potential
market of over 400 million customers through three channels:
1. Direct Sales Channel through which it trains and supports its own network of
entrepreneurs
2. Franchise Partner Channel through which it partner with local organizations
to increase its market base;
3. Wholesale channel through which it partner with retail organizations to
distribute low-cost glasses to poor communities.
Some of its major partners include Acumen Fund, BASIX, Vedanta, AMS &
Co, Drishtee, CEDES, Hindustan Lever Limited, William Davidson Institute,
BRAC in various geographic location namely India, Bangladesh, South Africa, Latin
America, El Salvador, Guatemala, etc. Franchise Partners allow VisionSpring to
reach people in need of eyeglasses in the world's poorest, hardest-to-reach
communities. In return, Franchise Partners receive a product with social and
economic benefit to their constituents, an additional revenue stream for
entrepreneurs and the organization itself, the transfer of VisionSpring's extensive
knowledge, skills, and experience in Base-of-the-Pyramid sales and marketing.13
SUGGESSATIONS FOR FUTURE COURSE OF ACTION

For the Indian Government, the healthcare sector is a priority area. India is
still finds the joint eighth position along with Malaysia as moderately attractive
destination in attracting multinational pharmaceutical companies operating in the
Asia Pacific region, as published in the report by Business Monitor International
______________________________________________________________
13
http://www.visionspring.org/
145
(BMI)'s regional Business Environment Rankings table for third quarter of 2008.
Key highlights of the Indian market are the absolute market size, strong annual
growth indicators, recently introduced healthcare insurance scheme for the poor,
and the improving economic as well as intellectual property (IP) environments. If
we look at the other side of the mirror, World Health Organization (WHO)
criticized India's pharmaceutical regulatory system recently in April 2008. India
needs to strengthen its basic economic structure of the poor people. In this context
Microfranchising in India is still an emerging concept with huge potential for many
sectors. It's not a hypothetical assumption rather a proven model. If we look into
various countries, it can be found that this model has transformed the picture of
micro and small entrepreneurs in delivering and improving the health services in
countries like Bangaladesh, Ghana, Sub-Saharan Africana Countries, Guatemala,
and Latin American Countries etc. It can be successful model if implemented in
India with proper support from political part along with corporate world.14
This can become the next big thing in the list next to microfinance or micro credit.
If we glance at the millennium Development goal report as released on July 2008, it
has illustrated a lot of success stories through this type of collective and
collaborative approach of business enterprise and social enterprise along with
government has drastically transformed the life of people living at the base of the
pyramid. In this regard some points to be given due considerations in appropriate
framing policy agendas may be:
1. Microfinance institutions and NGOs/social enterprises should consider
offering Microfranchised business opportunities to their clients. A proven
methodology is to become a master franchisee or area developer for one or
more reputable brands.
2. Indigenous franchisors should realize that their model works outside the bell
jar and create Microfranchise brands to go down market.
3. Domestic companies and multi-national corporations should note that many
businesses successfully engaging the BOP are not convoluted cross sector
partnerships. Viable Microfranchise networks that leverage core lines of
business are often fairly straightforward commercial implementations of a
familiar business model.
4. The development community should wean itself away from aid models in
favor of genuine enterprise sustainability through pervasive local ownership.
146
5. Governments in the developing world should create franchise-friendly

business climates. Franchises from abroad are highly desirable forms of
foreign direct investment (FDI) that introduce rare and precious franchise
know-how into emerging markets. Problematic government policies include
limits or taxes on repatriated royalties and attempts to enact a comprehensive
franchise law prematurely before the indigenous franchise economy has gone
through a period of florid innovation.
Conclusion:
In the words of Jonathan Lash, “empowering solutions” work better than
“imposed or donated solutions.”15 The most efficient way to ignite and fuel this
virtuous entrepreneurial cycle on a scale large enough to make a difference in a poor
country may be through micro-franchises. Stephen Gibson sees micro-franchises as
an efficient way to accelerate local enterprise creation, and that, ultimately, is the
solution to world poverty.16 In a Micro-franchised relationship provides a situation
where each party emerges as a winner. While the franchising organization/company
meets its client requirements in terms of quality and volumes on the other hand the
micro entrepreneur acquire increased income, visibility (enhanced profile) as well as
enhanced knowledge through various capacity building initiatives. The concept and
model of doing business by including the poor in the value chain along with
business objective requires significant change. They should progress beyond the
conventional dimension of doing business and should act through a sustainable
business model, policy and objective to address the challenges of global poverty.
Therefore, business as a key partner and solution-provider in this endeavor needs to
Handbook, (Provo, UT: The Academy for Creating Enterprise, 2005). A
particularly effective poverty intervention may be to link a production facility (shop,
______________________________________________________________
14
Microfranchises as a Solution to World Poverty, Kirk Magleby, Board of Directors,
Ascend, a Humanitarian Alliance, 2006
15
Jonathan Lash, President, World Resources Institute. Presentation at WRI
Eradicating Poverty through Profit, San Francisco, December 2004. “Externally
imposed development models have not gotten us very far.” Gebreselassie
Tesfamichael, “In Africa, Just Help Us to Help Ourselves,” Washington Post, July
24,2005.
16
Stephen W. Gibson and Jason Fairbourne, Where There Are No Jobs, Volume
4: The MicroFranchise…..
147
mill, plant, service center, factory, farm, etc.) with a network of MicroFranchised
support enterprises. When the yuan floats, which Tim Layton and others think is
inevitable, the price of Chinese goods will rise overnight, and it will become more
feasible to locate manufacturing production facilities in many other parts of the
world. A second concept that shows enormous promise is to link production
overruns, model obsolescence and slow moving inventory clearance with
MicroFranchised distribution networks in the developing world. Seed Programs
Inc. And Globus Relief are two organizations that currently employ this overstock
distribution model enlarge the opportunities for the world's poor people in
developing affordable and sustainable services. In this context Microfranchising is a
potential business model, which is based on the principle of win-win approach by
creating and empowering successful micro entrepreneur as well as the company in
terms of revenue and market growth along with a sustainable delivery channel for
sustainable Health care services with huge potential for other services too .
Appendix I
CFW Clinics
CFWshops Kenya Statistics
Customers and Patients 2006 2005 2004
Total Visits to Shops 121,155 233,299 105,000*
Total Visits to Clinics 269,407 202,228 72,000*
Total Outreach VIsits 80,086 # #
Total Visits by Customers and Patients 470,648 435,527 177,670
Treatments for Prevalent Diseases
Malaria 53,311 63,948 32,714
Bednets Sold 14,542 20,475 2,203
Respiratory Infections 77,763 84,980 45,824
Worms 40,033 31,944 17,544
Diarrheal Diseases 18,064 33,244 16,115
Total Treatments for All Diseases 349,018 404,501 186,037
*approximate
# outreach numbers for 2004 and 2005 are included in the overall totals for these years.
Please note: While we are ever striving to improve the accuracy of our data, we are aware or
deficiencies in our system that make the above numbers less than 100% reliable.
148
APPENDIX II
Examples of Global Franchise models
Global Franchise Business Model (variations on franchising)
Business Relationship Examples Characteristics
1. Product Automobile Dealerships Relative Autonomy
Franchise Professional Sports Teams Capital-intensive
Botling Plants
2. Business Format Restaurants, Lodging CFW Shops Strict Operating System
Franchise Pharmacies (Kenya) Fees, Royalties
Cellular City Storefronts (Philippines)
3. Informal Business Paleterias La Michoacana Loose Affiliation
Format (Mexico Multinational)
4. Buyer's Coop Associated Food Stores Member-owned Logistics
(Utah Regional)
5. Producer's Coop Moroni Feed (Utah) Member-owned Sales
Lijat (India)
6. Owner/Operator Truckers Logistics
Collective Drivers (Latin America) Driver Owns Vehicle(s)
7. Delivery Route Dairy Roundsmen (England) Fixed Periodic Circuit
Snack Foods Delivery Food & Perishables
D'onofrio Ice Cream Carts (Peru)
8. Manufacturer's Specialized Equipment Local Sales Consultant
Rep Specialized Material Protected Territaries
Unlever Shakti Amma (India)
9. Joumeyman Mechanics Tradesman Owns Tools
Electricians, Plumbers Independent Contractor
10. Piecework Jobber Apparel Manufacturing Cottage Industries, Semi-
Worldstock.com (Utah Multinational) Finished or Finished Goods
11. Independent Hair Stylists Rents Chair or Space
Operator Retail Market Stalls
12. Local Agent Insurance Agents Commissioned Sales
Real Estate Agents
13. Local Distributor Avon Ladies Open Territaries
Paper Boys Informal Sales
14. Local Purveyor Grameen Phone Ladies (Bangladesh) Scarce Village Resource
15. Local Promoter Cemex Patrimonio Hoy (Mexico) Commissioned Agent
Organizes Self Help Groups
Source : Micro Franchises as a Solution to Global Poverty by risk Magleby
149
References:
1. “An Outstanding Example of SME Development via the Franchise Business
Model”,(http://www.omidyar.net/group/poverty/file/)
2. Bangasser, P E (2000), 'The ILO and the Informal Sector: An Institutional
History', Geneva, ILO Employment Paper.
3. Bracken, Emily et. al. (2006), Microfinance and Microfranchising: A Feasibility
Study, Elliott School of International Affairs, The George Washington
University.
4. “Critically Ill – Public Health Care in India is in Shambles”, Times of India,
November 27, 2007
5. Fairbourne ,Jason et. al., (2007), “Microfranchising: Creating Wealth at the
Bottom of the Pyramid”, edited by Edward Elgar Publishing Ltd.
6. Jaya Krishna,S and Agarwal,Naveen Kumar,(2008) Microfranchising-
Perspectives and Experiences(2008),Icfai University Press
7. Magleby, Kirk (2006.) “Microfranchise as a Solution to World Poverty, Ascend, a
Humanitarian Alliance
8. Magleby, Kirk (2004): “Micro-Franchise as a solution to Global Poverty,
(http://go.webassistant.com/4u/upload/users/u1000468/mfsgp.pdf).
9. Ministry of Labour, Government of India, 1999-2000, http://labour.nic.in
10. “Subhasish Roy, “Formal finance for informal sector”, Business Line,
December 19, 2006.
WEB REFERENCES:
1. www.ascendalliance.org
2. www.defeatpoverty.com
3. www.knowledge.allianz.com
4. www.microfranchises.org
5. www.marriottschool.byu.edu
6. www.nextbillion.net
7. www.wbcsd.org/web/publications/sl-field- guide.pdf
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10. INFOTAINMENT
P Udaya Shanker*
Infotainment – concept
Infotainment (a portmanteau of information and entertainment) refers to a
general type of media broadcast programme which provides a combination of
current events news and "feature news", or "features stories".
The term Infotainment also refers to the segments of programming in

television news programmes which overall consist of both "hard news" segments
and interviews, along with celebrity interviews and human drama stories. Critics
have claimed that the combination of the two aspects is a conflict of interest by
corporate news outlets — focusing on marketing, not journalism. The term
"infotainment" thus may be pejorative among those who hold professional
journalistic values in esteem. Infotainment is not documentaries, educational
television, or hard news programming. These go more in depth of the subjects they
cover and can even provide classroom level instruction in areas such as
mathematics, science, biology, or writing.
Infotainment is not only found in broadcast media, but also in retail

environments where display material containing information about the features and
benefits of various products on display is combined with style, colour, even sound,
to provide a shopping "experience". Such "retail infotainment" is often referred to
as “retailtainment”.
Usually, Infotainment covers a long term change or point of interest, or a

general trend —an aspect of the zeitgeist. Many such stories as those that cover
topics such as health tips or gardening tips, exploring television show genres, travel,
shopping, yachting or exploring new wines — topics that are not actually "news" at
all, in the sense of things that are currently happening. Other stories deal with
something that is happening, but is gradual, rather than tied to a single event — a
new music genre coming into prominence, a shift in tide in the political views of the
nation, a new turn in teen attitudes about sexuality, a commonality among political
candidates, the returning appeal of the retro styles and memories of a past decade,
crazes like Tamagotchi or Furby, or a common thread among current events that
reveals something about the times.
______________________________________________________________
*Director School of Enterprise Management, ni-msme, Hyderabad
151
Brands and celebrities one and the same

Celebrities attract customers to products, often becoming synonymous with
not only the brand, but also with that segment of lifestyle and culture. Examples are:
Martha Stewart - home and garden, Emeril Lagasse - gourmet food, Dr. Ruth - sex
and relationships, and Dr. Phil- self-improvement. Each of these brands/celebrities
has a loyal following, with their audience buying nearly anything that person
endorses or recommends.
Brand turned into celebrity

The concept behind Infotainment is to create a company spokesperson and
an entertainment vehicle that revolves around the spokesperson. Infotainment
gives the spokesperson a highly visible forum in which to educate and engage the
consumers about the company business. It not only allows the company to promote
its own products, it positions the business spokesperson as an expert in the industry.
Viewers will see these programmes not as advertisements, but as entertaining news
programmes which contain useful information about a particular topic of interest,
be it fitness, gardening, cooking, or home improvement. Businesses which can
deliver the most entertaining and informative content will be the most successful in
building brand awareness and loyalty.
Opportunities for automotive OEMs - McKinsey & Company

Consumer electronics players have increasingly focused their development
power on car infotainment innovations. These players threaten to crowd traditional
tier-one suppliers and OEMs out of this lucrative market by offering alternatives to
embedded infotainment systems that include similar functionality at lower prices.
Furthermore, other fast-paced players from the telecoms and Internet fields, such
as Nokia and Google, threaten to replace embedded infotainment devices with
GPS-enabled mobile handsets and location-based services.
Beyond the traditional embedded high-end infotainment systems, consumers

can now cheaply access GPS-based navigation data via portable navigation devices
or GPS-enabled mobile handsets, so why pay to have a redundant system installed in
the car? Navigation systems are not the only "take your content everywhere"
applications going portable. Everything from iPods to mobile phones and satellite
radio players offer take-along capabilities, with the car acting as one of the many
physical or wireless docking ports.
McKinsey & Company believes that this consumer electronics driven market
disruption not only constitutes a threat to automotive OEMs but, in fact, is an
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opportunity for additional demand and differentiation. Capturing the car

infotainment opportunity may require OEMs to refine their product market
strategies and make conscious choices on how to best deploy the new technology.
Innovations in automotive infotainment can be leveraged to enhance brand
perceptions and foster actual car purchases.
 Enhance brand perceptions: To the customer, the development of high-end

innovations signals an OEM's technological competence and underlines its
brand aspiration and perceptions. One strategy may involve focusing solely
on brand enhancement. In this case, innovations do not necessarily have to
capture additional sales volumes or profits.
 Foster actual purchases: Infotainment leadership can also help the OEMs sell
more cars, including low-end/high-volume innovations for which high
consumer demand exists or innovations that trigger the final purchase
decision.
The OEMs should address a number of important questions in order to craft

an appropriate infotainment product market strategy. Regarding products, should
OEMs offer low-cost, embedded solutions for the medium-priced car segment? Or,
will navigation commoditise and become "standard" on mobile phones? As mobile
players seek to integrate navigation with local search and other features, will the
"take anywhere" mobile handset make the embedded car system obsolete? Should
OEMs strongly push for integration of consumer electronics devices via the
standard interfaces in the car? Furthermore, how will the car OEMs achieve high-
end differentiation? Regarding pricing issues, how should the OEMs adapt their
pricing strategies to best capture customer willingness to pay? Also, what is the
trade-off between infotainment system margins and penetration rates, and what is
the price elasticity in each segment? Finally, in terms of partnering and technology,
how should the automotive OEMs respond to the threat of substitution by after
market and consumer electronics infotainment products?
Telematics and Infotainment markets

Consumers' safety needs
The growing safety, security, convenience, and entertainment needs of the
consumers - especially from the passenger vehicle segment - are driving the
telematics, navigation, and infotainment markets. The Telematics and navigation
markets are in the initial stage of development, whereas the infotainment systems
market has been existing since 2001. Sellers offer these systems as value-addition
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accessories to build brand loyalty and retain customers in the original equipment
(OE) market.
Rising new vehicle sales drive Telematics market

Availability of low-cost substitutes and limited consumer awareness of
product functions and benefits are hindering the growth of the telematics markets.
Absence of collaboration between the market participants and reluctance of car
accessory dealers to promote telematics are restricting consumer adoption.
Nevertheless, the rise in the new vehicle sales especially the high-end ones and the
subsequent increase in vehicle population are likely to drive the telematics
equipment sales. Diverse factors such as increasing service revenues, product
variety induced by technological advancements, rise in the car thefts and hijacks are
also boosting the demand for telematics products. The market is further
encouraged by the enhanced consumer buying power on account of the growing
economy.
In case of in-car navigation systems (ICNSs), factors such as continuous

infrastructure development, road construction activities, frequent thunder storms,
floods, and the growing product acceptance among the youngsters are encouraging
the market growth. Further, the low level of competition presents a lucrative
opportunity for early entrants into the ICNS market.
In-car Infotainment vendors target lower-vehicle segments

Despite having a limited number of participants, in-car infotainment (ICI)
market is a highly competitive one with an influx of inexpensive and unbranded
products from China, Taiwan and Korea. To counter this competition, established
companies are offering price discounts and have come up with infotainment
products with fewer features for lower-vehicle segments.
The growing demand from consumers for superior infotainment quality is

initiating a shift toward technologically and functionally superior ICI systems.
Additionally, the burgeoning popularity of multi purpose vehicles (MPVs) and
sport utility vehicles (SUVs), which are witnessing an introduction of new models, is
spurring the demand for the ICI products.
Modern ICT solution - Lindner Hotels

Lindner Hotels AG runs four-star and four-star plus hotels in 27 locations in
Germany, Austria, Spain and Switzerland. Majority of the hotels' guests are people
on business, who value their service and comprehensive conference and
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communication facilities. This group was the first to equip all its hotels and resorts
with hotspots for wireless LAN applications. Internet access from every hotel room
has been standardised since the mid 1990s.
In order to further improve its service and exploit new opportunities for
turnover, the hotel has awarded T-Systems a contract for the creation,
implementation and operation of a future-oriented communications and
infotainment concept for all its hotels.
Identical multimedia equipment everywhere

The results are striking – with their numerous new services. The hotel can
further extend their reputation as a leader in innovation and so attract loyal
customers. The Lindner Info Channel, for example, informs guests about what is on
offer in their hotel, in the region and at other locations in which Lindner has hotels.
By equipping all its hotels with identical multimedia equipment, guests can enjoy a
wide selection of TV and video entertainment, with more than 50 films with top
quality technology.
At the same time, conventional Pay TV gave way to genuine video-on-

demand, where the guest can determine when to start watching and can interrupt
the film at any time. And guests can continue watching a film that they started in one
hotel in another Lindner hotel.
IP is the heart of the matter

The Internet Protocol (IP) is at the heart of this solution.
T-Systems takes on the operation and maintenance of all the technology and
the central Internet connection. Furthermore, the hotels' local networks are
connected to the ICT service provider's international MPLS (Multi-Protocol Label
Switching) platform.
As part of the modernisation process, T-Systems had also merged the

formerly separate voice and data networks. This enables the hotel to save
administration and running costs.
Fit for the future

Everywhere, new hotels are getting themselves equipped with the latest
technology. In addition, in a project started by the Fraunhofer Institute “InHaus2”,
HOCHTIEF, Lindner and T-Systems are working jointly to develop concepts for
155
the hotel of the future. Because, even after the solution has been set up, T-Systems
accompanies customers every step of the way, to achieve an ICT solution covering
all the sites. This partnership therefore frees Lindner from tasks that do not form
part of its core business, and promotes the group's expansion plans by – among
other things – giving it technological advantages over its competitors.
Compact
 Multimedia hotel concept
 Win new customers and gain loyalty from existing ones
 Genuine video-on-demand: determine when to start watching, interrupt a
film when you wish and continue watching in the next Lindner Hotel
 Info channel notifies guests about services offered in other Lindner Hotels
 Real ICT complete solution from a single source one service provider, one
contract
 ICT solutions assist with rapid expansion
 Identical multimedia equipment in all hotels in the chain
 Everything based on the Internet Protocol
 One network for voice and data
 “InHaus2” – developing joint concepts for the hotel of the future
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11. CONSULTANCY NEEDS FOR SERVICE SECTOR

N R Dattatreya* &
Dr. G.U.K.Rao**
Introduction
Management consulting has become a huge business, boosted by the chill
winds of change, slower growth and tougher competition and the challenge of
advancing technology. Management consultants are brought in by organisations
needing wider expertise than is available internally, or to provide an objective
appraisal, advise on a new strategy, improve the performance, install new systems or
equipment, launch new projects, or supply experts to cope with temporary
workloads. In every country in the world service sector is playing a wider role in day
to day living. Right from aviation to rural areas different types of services are being
contemplated. Management consultancy as a service is playing a vital role in many
areas.
Counting profits
In 2006, leading management consultancy firms had enjoyed their third
consecutive year of 12 per cent fee income growth, much of which is attributed to
financial services companies and central government. The financial services sector
contributed more than a third of their total fee income. Although the most
profitable market for consultants, this sector is also the most volatile. When the
economy slows, spending on consultants can fall off dramatically.
Fee income from the local government, manufacturing, health care, and the
pharmaceutical industry spending on consultancy had increased at well above
average rates. The second largest market – central government – has been awash
with consultants. But will this continue? After more than a decade, can there be
much more improvement under the government's reform agenda? There is clearly
more to be done in areas like Health Service and Education.
The third largest market for consultancy has, for some time, been the
communications, segment and the fourth largest the manufacturing industry,
including aerospace and defence. Many smaller practices offer a strong value
proposition and even big clients are using them for service, skills and functional
knowledge.
______________________________________________________________
* Former-Director, Consultancy Dept., ni-msme (Formerly known as nisiet)
** Director, School of Enterprise Development, ni-msme
157
But can the profession count on continuing year on year double-digit growth?
The more optimistic have few doubts. The pessimists point to key markets for
consultancy,, which have learnt some valuable lessons from consultants or
appointed, or strengthened their own internal teams of consultants, rather like
internal auditors. Management consultants have had a field day, or rather several
years of super growth. The question is, can it last? There must be a question mark
about future levels of business from the public sector. Can other key markets, like
financial services, yield more consultancy projects, following huge demand from
banking, notably institutions requiring advice on compliance, besides outsourcing
and IT?
Manufacturing has been a profitable source of business. Major multinationals

must constantly need to improve their performance, and more SMEs will look for
help to achieve profitable growth.
Like many service companies, management consultants have had their share
of criticism. Why is management consultancy enjoying explosive growth all over the
world, making it one of the most successful businesses to be associated with, a
secretive profession which just grows and grows and prospers, charging high fees,
promising the blue skies, but not always leaving its clients bubbling over with joy?
Consultants must do a lot of things right, or they wouldn't enjoy the success they do.
But they are also very good at selling and promising 'to improve your bottom line'.
Good advice can be priceless. Bad advice can be a waste of money, as one of
the best books on the subject – 'Dangerous Company' by O'Shea and Madigan,
testifies. The dominating consultancies – Accenture, IBM Consulting, Deloitte,
Xansa, PWC Boston and McKinsey – operate in many parts of the world. At one
point, Accenture's forerunner, Andersen, had 4,000 people in Asia and McKinsey is
believed to have played a key role in India's growth record.
If a company ever contemplates bringing in consultants, the question must be

how to choose and use them? How does the relationship work and what are the
pitfalls to guard against? How wide is service sector? What are the problems in it?
Should it be streamlined? Should it have consultancy support? And so on,
questions come to mind. How to bring down and reduce failures in services
provided by remedy solutions?
Major consultancy services are provided even in the Government and, Quasi-
governmentals in our country like:
158
 Railway services
 Transport services
 Water supply services
 Power supply services
 Public distribution services
 Banking services
 Postal services
 Educational services
 Defence services
 Maintaining law and order services
 Industrialization services
 Employment creation and training services
 Developmental services
 Health and medical services
 Communication services and
 Many other essential services which are essential for good standard of living
Even in the private sector, one can find a wide range of services like:
 Private airlines
 Private transport services
 Private educational services
 Private medical services
 Courier services
 Entertainment services
 Banking services
 Hotel services
 Labour supply services
 Export import commercial services and
 Many other services which are helpful in daily life to public
When there are so many such services are in use, still we find lot of criticism
from the end users about these services. Therefore, to analyse properly on these
aspects there should be specialized management consultancy services and
consultants support are needed.
Challenges in Consultancy Services

Invariably the consultants' most senior people make the presentations and if they
159
win the business, stay briefly to reassure the client. Thereafter, younger colleagues,
not long out of university or business school, take over. Recent years have also seen
a fast-growing demand for consultants who don't only analyse and prescribe
solutions to problems but stay to implement their advice. These are referred as
interim managers, who can be hired for days or weeks and come with board level
experience, a general management background or specific strengths, whether in
production, marketing, finance, distribution or sales.
The following check list is designed to help us make the right choice:
- Check with other local businesses, leaders in the section of the market, or trade
association, whether they've used consultants for a particular problem and can
they make any recommendations.
- Invite two or three consultancy firms or individual consultants to pitch for the
business.
- Ask them how many successful assignments they have handled personally, in
which industries and over what period and with what level of success. Can these
former clients be referred to for a reference?
- How long will the assignment under discussion take and what will it cost? Who
will be working on it?
- If you decide to go ahead, reach a clear understanding about costs, expenses and
invoicing. Otherwise you might be shocked to receive an invoice for huge
amount on account. Expenses and disbursements, as some professions like to
call them, can cover a multitude of items that were never mentioned before.
- Insist on stage reports and keep a close eye on progress. Consultants are not
infallible. Even the biggest and best have been responsible for some awful
howlers in their recommendations, reports and studies.
- Beware of fancy textbook ideas that are more likely to enrich consultants than
your business. Bad advice can lead to worse problems that you started with. On
the other hand, consultancies aim to build long-term relationships with clients.
- Be wary of the products or services consultants may try to sell you on top of the
business you've agreed. They can be quite shrewd in developing so-called
packages, for example information technology service, 'hot' market research,
new telecom systems or energy-saving schemes.
Methodology to find lacuna and requirement of different service sector

groups
1. Send questionnaires to Government and Private sector groups and get feed
back
160
2. Survey to be conducted over a period to assess consultancy requirement of

service sector
3. Random sampling may be done in case of private similar function doing
service sector and develop consultants
If they are good, the risk is that they stay too long, because you come to rely
on them. Often the individual on the job may be good at analysis or report writing,
but poor at problem solving and getting your own people properly involved.
Remedial Measures
A survey has to be conducted in each sector either Government or private
sector for finding gaps as lacuna in the functioning of these sectors. Specialized
consultants and consultancy agencies are required. Big organizations have their own
consultants but other sectors are running haphazardly and controlling sometimes
becomes a problem and get out of control and reach. India is an agricultural country
and majority of 80% population lives in rural areas, yet many services are not up to
the expectations in semi urban/rural areas like:
 Transport services to rural areas
 Communication services
 Health services and medical facilities
 Power and water supply services
 Educational services
 Shopping services
 Other services
We should have general and specialized consultants and consultancy agencies

to study and evaluate the lacunae, put up to the authorities and streamline and solve
the problems and gaps.
Common facility service provider centres in rural, semi urban and urban
areas with consultants and services by them may be charged. About 20 villages can
have common facility service provider sector agency.
State and Central Government funding may be there to run common facility
centers with specialized consultants to tackle problems and improve service sector.
Failures in services can be analysed and brought down by 90 per cent though not
completely eliminated.
161
Institutes like ni-msme can have trainers training programmes for

consultants to manage common facility service support centres. The Learned
audience are requested to give points for strengthening the service sector and give
opinion whether there should be external consultancy agencies with experienced
consultants.
This should be pre-followed by survey of the above cited service sector and
find whether consultancy support is required to streamline the services, as a country
like ours with a large population will take time for the effective running of service.
A model questionnaire may be developed to assess the external consultants

and consultancy services required which can be taken up by ni-msme with the
approval of Ministry of MSME, GoI to streamline the services rendered. Advanced
countries in the west, China with huge population and the developing countries may
be also found out about the methodologies.
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12. LSCM APPLICATION AS e-BUSINESS FOR

MANUFACTURING AND SERVICE SECTOR
ENTERPRISES OF INDIA- SCENARIO &
CHALLENGES
- Dr N.Srilakshmi*
Introduction
Supply chain management (SCM) is about optimizing the business processes
and business value in every corner of the extended enterprise -- from your supplier's
supplier to your customer's customer. SCM uses e-business concepts and web
technologies to manage beyond the organization - upstream and downstream.
Manufacturers and vendors can share sales forecasts, manage the inventories,
schedule labour, optimize the deliveries, and improve the productivity. Some of the
processes included SCM are:
 Procurement
 Inventory Management
 Forecasting
 Warehousing
 Logistics
SCM become e-business enabled

Companies with a network of suppliers, vendors, and distributors need a fast,
efficient way to disseminate information and enable two-way communications. This
is done over the web using:
 customized extranet sites
 Web servers
 groupware (e-mail-integrated collaborative software)
You can start web-enabling legacy systems to provide visibility to selected

partners, suppliers, and customers and to integrate the supply chain into your
company's other processes.
______________________________________________________________
*Registrar Head, Centre for Logistics & Integrated Materials Systems (C-LAIMS),ni-
msme and also an UK Certified and approved (IRCA Regs) Lead Auditor & Tutor:ISO
9001:2000/14001:2004,2800,0OHSAS,TQM/Six Sigma/NAAC Assessor.
163
e-business based SCM solutions

 Lower operating costs through reduced inventory requirements
 Improve customer satisfaction by maintaining adequate stock. This will keep
your offerings fresh and attuned to market trends and changes.
 Improve productivity through better data integrity, fewer order entry errors,
less rework, and faster communications. !
Resistance to change by employees is the most commonly cited reason for

business project cost overruns and failure. Change Management and Process
Adoption is the process of facilitating and accelerating major business initiatives
within an organization. This process specifically targets the root causes of
resistance and provides the necessary strategies and tools needed to communicate
and achieve employee acceptance. Companies that implement effective Change
Management can dramatically reduce implementation costs and achieve a rapid
return on investment.
The strategic supply chain initiative of an international automotive

aftermarket organisation undertaken in 1996-97. Consisted of four distinct stages; a
review of the current state: definition of the future vision, development of the
operational blueprint, and its implementation. The characteristics of the supply
chain in terms of number of players, consolidation, market and customer
requirements are given.
Suitable measures of performance (MOPs) are defined and classified as

either market qualifiers or order winners. Aggregate MOPs include Quality, service
time, service level and total logistics costs. Agriculture, including crop and animal
husbandry, forestry and agro-forestry, fisheries, and agro-industries, provides
livelihoods to over 70 per cent of the Indian population. Multifunctional - an
economic activity (producing goods) and a service to the community (food security,
rural employment, and environmental obligations such as soil conservation,
sustainable natural resource management and biodiversity protection) - is thus
crucial to sustainable agricultural and rural development in our country.
Multifunctional agriculture is the bottom line for integrated rural development .
Agricultural development, along with village and cottage industries, tiny and micro
enterprises, are the cornerstone for promoting sustainable rural livelihoods. Our
vision is to realize an economically and socially vibrant agricultural industry i.e. to
accelerate commercialization of innovative, alternative and value-added agricultural
and farm related enterprises, in rural areas. This development strategy, inter alias,
facilitates skill improvement, providing employment in rural areas, transfer of
164
technology, rural industrialization and promoting self-reliance among the people

and to build up a strong rural community base. An agricultural knowledge and
information system for rural empowerment and improved livelihoods i.e. e-farmer,
is the need of the hour.
Major initiatives in information technology sector

E-Governnance :
One of the areas in which Information and Communication Technologies
(ICT) are having a profound impact is the way Governments function and the
manner in which government services are made available to citizens. This has had a
revolutionary impact on citizen's lives through the computerization of the Railways
Reservation System at the national level, and through projects like e-Seva and
Bhoomi at the State level. Considering the potential benefits which can accrue to the
citizens of this country through the use of ICT, the government has approved the
National e-Governance Action Plan.
The plan envisages formulation of certain core policies and strategies to

ensure a coordinated approach, creation of core infrastructure required for the
long-term growth of e-Governance services and implementation of a number of
identified mission mode projects to bring about a citizen-centric and business-
centric environment within the government.
The initiative also envisages the provision of necessary guidance and

assistance to the state governments for implementing in parallel a set of projects of
national priority, as well as a set of integrated services projects, which would help
bring these various initiatives onto a common platform for delivery of services in an
integrated manner to citizens and businesses. The Government has accordingly
identified 22 mission mode projects which would be taken up on a priority basis by
the concerned Line Ministries/Departments and the state governments.
Community information centres:

Based on the experience of the CICS in the North-Eastern States, it has been
decided to set up 139 CICs in all the block Head-quarters of Jammu and Kashmir at
an outlay of over Rs 40 crore.
Rural connectivity:
An integrated approach for universal rural connectivity is being worked out
by dovetailing the initiatives of Community Information Centres, Public Tele-
information Centres (PTICs) of the Universal Service Obligation Fund (USO) and
the scheme for Providing Urban Amenities in Rural Areas (PURA).
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Indian computer emergency response team:

Internet has emerged as the preferred medium of communication. This open
system of sharing information needs a secure environment that prevents prowlers
from taking away or compromising digital assets. It is essential to raise the
confidence level of our own public so that they can use the network with absolute
faith for commerce, communication, entertainment, software development and
governance, and ensure the safety of the government network. The Indian
Computer Emergency Response Team (CERT) has been set up in Delhi with a
mirror location at Bangalore to ensure that India's IT assets are appropriately and
adequately protected.
High performance computing:

C-DAC has established a Terascale Supercomputing Facility (CTSF) at its
Knowldge Park in Bangalore using an indigenously developed high performance
interconnect switch and system software tools to extract maximum performance
from the supercomputing cluster of nodes. The applications, which run on this
system, are in the areas of weather forecasting, seismic data processing,
evolutionary computing, structural mechanics, computational fluid dynamics and
bioinformatics. This system, PARAM Padma, figures at serial number 171 in the list
of World's Top 500 supercomputers, announced by the International Consortium
of Top 500 Supercomputers at the International Supercomputing Conference
(ISC-2003) held at Heidelburg, Germany.
Braille Transcription:
A computerized Braille transcription and embossing system has been
developed. This system operates in English and all major Indian languages and
enables blind persons to read the files from a computer, using an indigenously
developed Tactile Braille Reader.
Task Force on Human Resource Development in IT:

A task force on human resource development in IT was constituted in August
2003 to prepare a long-term strategy for significantly increasing the number of
trained IT professionals in the country. The task force had finalised its key findings
and recommendations and submitted its report in December 2003.
On-line election results, budget and examination results:

On-line transmission of Election results for the States are being facilitated
through NICNET. The election feedback from the NIC was used by Doordarshan
and other channels for providing live transmission of election results to the viewers.
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On-line transmission of the Union Railway Budget and the General Budget was
facilitated through NICNET all over the country and was widely used by the media,
industry and other agencies. NIC also published the results of various examinations
on its web server (http://results.nic.in). The network also provided the facility of
downloading admit cards for certain examinations directly from the net.
The Indian IT industry has the following constituents:

 Software and services
 IT enabled services
 Internet services
 E-commerce
 IT hardware
 IT applications
IT software and services

The Indian software and services industry is responsible for placing India on
the global map. The world is today looking towards Indian companies for
outsourcing their software requirements and Indian software majors are gradually
moving up the value chain in terms of capabilities and breadth of solutions offered.
The software and services sector was expected to have employed around
5,22,000 professionals by March 2002. It is estimated that almost 1,70,000 of them
are working in the IT software and services export industry, nearly 1,06,000 in the
IT-enabled services segment and over 2,20,000 in user organizations.
Apart from the high growth export segment, the domestic software market
also continued on its growth path, albeit gradually.
The domestic software and services market had registered revenues of Rs.
9,891 crore during 2000-01, up from Rs. 7,138 crore in the previous year. For the
year 2001-02, the domestic software sector was estimated to have grossed Rs.
11,634 crore (US$ 2,449 million).
IT enabled services
India is now globally well established as an IT services destination. In fact, it is
this success in the IT services sector that has empowered the country to take its
initial steps into the IT-enabled outsourcing domain.
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The Indian IT-enabled outsourcing market has its roots in the mid-1990s
when companies such as American Express, British Airways and GE Capital set up
captive units for customer support and transaction processing services.
Independent BPO vendors began emerging 3 to 4 years ago, though some
healthcare BPO and CRM services companies were existing earlier. In the later
period, IT services companies have also made a foray into the IT- enabled
outsourcing realm.
Over the past decade, then India has emerged as a preferred location for
organizations planning to outsource a variety of services ranging from call centers
and other customer interaction services, insurance claims processing, pay roll
processing, medical transcription, e-CRM and SCM to back-office operations such
as accounting, data processing, and data mining.
SUPPORT FROM GOVERNMENT

Recognizing the growing importance of the IT- enabled outsourcing sector,
the Government of India has introduced various policy concessions and initiatives
to accelerate its growth. The Indian software and services industry, spearheaded by
associations such as Nasscom has also taken various steps to ensure that India
becomes the global hub for IT-enabled outsourcing in the future. Some of the steps
take by the Government and industry for the ITES/BPO sectors are as follows:
In the month of May 2002, the Government of India had accepted

Nasscom's recommendations and removed certain procedural bottlenecks that
were hampering the growth of the Indian call center industry.
 The telecom recommendations

 Allow sharing of bandwidth for disaster recovery and mission critical
applications between multiple entities
 Permit sharing of bandwidth between multiple locations of a single entity
and also within the same group of companies
 Call Centre approval should not be customer-specific
 Allow internet and IPLC connectivity on the same LAN
 Allow connectivity of a LAN in an international call center to a domestic ISP
 ITeS companies be allowed to set up their own gateways
 The Government of India has allowed total income tax exemption on the
export of IT initiative enabled outsourcing services under Sections 10A/10B of
the Income Tax Act. They are:
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 Customer interaction Services

 BPO / back office operations
 Medical transcription
 Legal databases
 Digital content development
 Engineering & design services
 Support centres
 Pay roll/ HR services
 Web-site services
 Data digitization/ GIS and online education
 Foreign Direct Investment (FDI) for 100 per cent of the equity has been
permitted in BPO companies.
 Duty-free imports of capital goods are permitted (under the Export Promotion
of Capital Goods scheme) for BPO companies.
 The Government has promoted several Software Technology Parks (STPs)
which provide ready-to-plug IT and telecom infrastructure. The STPs also allow
single-window clearance for all regulatory compliance issues. Currently, STPs
have been established in 20 locations across India covering most of the major
towns/cities.
 Various Indian states have introduced regulatory and infrastructure-related
initiatives to encourage ITES investments within their territories
India's irresistible and sustainable value proposition

India currently offers a strong value proposition of all IT enabled services hubs
owing to the following reasons:
 India's abundant skilled manpower is drawing corporate hubs to back end their
operations in India. The country's English speaking manpower rates high in
areas such as qualifications, capabilities, quality of work and work ethics. This
places India ahead of competitors such as Singapore, Hong Kong, China,
Philippines, Mexico, Ireland, Australia and Holland, among others.
 India's telecom and physical infrastructure is approaching parity with other
countries.
 The regulatory environment, specially relating to ITS and ITES is highly
progressive and most of the earlier policy recommendations made to the
Government have been accepted and acted upon.
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 Incentives such as income tax holiday until 2010 have been provided for the
export of IT enabled services.
 The Government of India has announced a special policy for call centers
 Many state governments in India are offering incentives and infrastructure for
setting up IT enabled services.
A comparison amongst some countries in Asia - Pacific region based on these
factors, highlights the following (ratings are on a scale of 1 to 3, with 1 being the
lowest and 3 the highest):
Country Workforce Market Local Infra- Cosmo- Cost

Access Market structure politan base
New Zealand 2 2 - 2 3 2
Kuala Lumpur 1 2 - 2 2 2
Japan 1 2 1 3 1 3
Hong Kong 1 2 2 2 2 2
India 3 2 2 2 3 1
Source: Mckinsey & Co.
Market segments
Customer contact centers
Currently, the hottest growing segment within ITES is the contact center services
activity, which accounts for almost over 80 per cent of the revenues generated by the
sector. This section takes a detailed look at the contact center services market and
the opportunities it offers to existing and potential players.
 Contact centers
 Medical transcription
 Back office operations, GIS, animation, engineering & design, on-line training.
Contact centers
Contact centers have become the catalysts for business transformation, freeing up
the businesses to focus on core activities. A contact centre can be any of the
following:
 A telemarketing centre
 A tele-servicing centre
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 A help desk, both internal and external

An outsourced center (also known as a service bureau) that uses its large capacity to
serve multiple companies
 A reservation center for airlines or hotels
 A catalogue retailer
 An e-tailing centre
 A fund raising and collection organization
 An e-commerce transaction center that handles automated customer
interactions
The contact centre is traditionally defined as a physical location where calls
are placed or received, in high volume for the purpose of:
 Sales
 Marketing
 Tele marketing
 Customer service
 Technical support
 Specialized business activity
Medical transcription
The process whereby one accurately and swiftly transcribes medical records
dictated by doctors and other medical professionals is thus known. The material
transcribed includes, among others, patient history and physical reports, clinic
notes, office notes, operative reports, consultation notes, discharge summaries,
letters, psychiatric evaluations, laboratory reports, X-ray reports and pathology
reports and other similar kinds of medical records of rural dwellers too.
Back office operations, GIS, animation, engineering & design, on-line training
The offsite delivery of a range of non-core service functions, including
routine administrative tasks, customer service and technical support are called back
office operations, thus manage an activity or function on a turnkey basis for their
clients. Any aspect of service operations that involves high volume transactions is
an opportunity for back office delivery.
Business Process Outsourcing

BPO involves turning over an entire function or business process to a back
office supplier (for instance the resource management of an organization which
may involve payroll and finance, information technology, human resources and
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inventory management). As corporations merge and consolidate their operations,

this trend towards outsourcing basic business processes is becoming a new business
model for international corporations
Back office operations evolution

Initially, back office operations were created as captives of parent companies
and were treated as cost centres. Over the period, they have evolved as profit centres
due to:
The emergence of third party back office facilities making it possible for
corporations to avail of their services on a flexible or "as required" basis.
Corporations are increasingly converting captive back office operations into profit
centers by accepting external clients
Types of back office services as e-service activity cover the follo0wing;

 Administration
 Tax processing
 Claims processing
 Asset management
 Transcription and translation
 Document management
 Other administration
 Finance
 Billing services
 Accounting transactions
 General accounting
 Tax consulting and compliance
 Risk management
 Financial reporting
 Financial analysis
 Financial management
 Other finance services
 HR
 Benefits administration
 Education and training
 Recruiting and staffing
 Payroll services
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 Hiring administration
 Records management
 Other HR services
 Payment services
 Credit/debit card services
 Check processing
 EDI
For other transaction processing to calibrate the feasibility of outsourcing

and the cost saving potential of any process, a rigorous four step procedure needs to
be followed:
 Lay out the entire value chain for the process.
 Break down each segment of the value chain into its constituent activities.
 Identify the activities that can be performed remotely.
 Estimate the cost (labour and associated infrastructure) of activities that can be
outsourced to offshore locations.
For example, in claims processing, most activities in origination and closing

can be offshored, while others require a physical interface with the claimant and
therefore cannot be offshored.
Manufacturing
IT finds wide applicability of IT in manufacturing including process control,
machining, assembly and simulation.
Other Utilities
IT obviously has wide applicability in various utility related activities that may
include automation and control, analysis, monitoring, billing etc. With several
utilities planning modernization and upgradation of their systems or with
privatisation, restructuring and reforms, IT is going to play an increasingly
important role.
Other areas
Some of the other areas of IT applications include education, medicine,
networking of universities and academic & research facilities, high performance
computing, multi-lingual applications, entertainment, media, animation, rural
networks, government networks, regional networks, agriculture, trading and e-
commerce, engineering and material testing, computerisation of records and their
173
analysis. Industries such as banks, insurance, airlines, telecom services require large-
scale data processing and data-based decision making capabilities. Raw data and/or
paper documents are sent to locations where the back office operations (image
retrieval, scrutiny of data, data input, customer reports, internal MIS, reconciliation
etc) are carried out. Significant potential exists for cost savings through outsourcing
across industry verticals for rural enterprises too
Internet services
The Internet has been hyped as a tool as revolutionary as the wheel, the
printing press, the telephone and the microchip. It was to enable businesses and
customers to conduct commerce virtually without the need for intermediaries or
physical assets, and hence to generate significant value for new businesses and
incumbents. The Net has virtually become a household name in all parts of India.
The sudden splurge in the internet front is in a large way owed to the increasing
number of private ISP markets mushrooming all over the country, offering the
cyber voyage for more and more competitive prices. In a splash of time, Internet in
India has come to be viewed as the most vital medium for information,
entertainment, communication and the sole means for electronic commerce. Some
of the key industries that have high potential for early adoption of e-commerce are
financial (stock exchanges and banks), automobiles, retail, travel, IT and
manufacturing.
Hardware industry
The IT revolution in India rests on four pillars: hardware, software, service
and training. It is imperative that there is uniform growth in all these sectors. The
Wireless Tag & Base Station developed by the National Informatics Centre (NIC)
has applications potential in the monitoring vehicles for traffic control as well as
verification in various state government check-posts located through out the
country.
IT Applications can triggered of accessibility to Communication and

Broadcasting, Power Electronics including Power Semi-Conductor Devices. State
of the Art digital control system, System studies using computer and simulators
Transport
Automated vehicle tracking counting traffic assessment as an activity which
will be on demand with privatization progressing in the rural road sector. MIS
programmes using web technology have been implemented for rural areas of
Andhra Pradesh state viz,
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a) Monitoring rakes and wagon positions

b) Movement of essential commodities
c) Monitoring passenger complaints
d) Movement of trains and Government Buses
However, over the past 25 years, the types of service activities being
outsourced have changed considerably. Outsourcing, as we know it today, began in
the 1980s, when organizations took to contracting out specialized functions that
were not part of their core business. The availability of more cost efficient
telecommunications had supported corporate decisions to scan globally for the
technical skills they needed and hence optimise their use of talent. The growth of
the Internet and on-line connectivity made possible the provision of technical
support and problem resolution for customers from remote locations. And the
contact center activity began to accelerate it.
Finally, this was followed by entire support processes getting outsourced

(business process outsourcing), as corporations began to focus primarily or
exclusively on their core businesses. Pay roll processing and credit card
processing/ATM centers
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13. WOMEN IN SERVICE ENTERPRISES

Dr. C. Rani*
Introduction
Women have emerged as dynamic and vibrant entrepreneurs in the industrial
sector playing a key role as the driving force behind the revitalization of Indian
economy, generating revenue, creating employment, contributing to empowerment
of women in socio-economic and political spheres, while shouldering multiple roles
as mother, home maker, working women, providing stability and progress to home
and society. Women can achieve anything if they make up their mind to succeed.
Though bearing and raising children for women is a biologically determined

shortcoming that imposes certain limitations on their work, they show tremendous
leadership qualities, including the uneducated. They are no more confined to
kitchen or caged at home, but demonstrated the ability to soar to heights of glory.
However, the emergence of women as successful entrepreneurs remained a

saga of adventure and trauma. Because men still continue to hold all the formal
lever of power and domination – continue to be the driving ordained authority.
Women tend to be sentimental and emotional in their work, which makes them
stand at the crossroads of life where making clear choices is very difficult. But bright
future awaits women entrepreneurs as agents of social change, performing their
two demanding roles at home and enterprise retaining traditional heritage of
ethical, spiritual and human values.
Rationale
There are several research studies on women entrepreneurship, but
unfortunately there is no concrete data on the percentage of women entrepreneurs
in different sectors, hence a need is felt to examine women entrepreneurship in
India.
______________________________________________________________
Director, School of Entrepreneurship and Extension, ni-msme
177
A dispassionate study without favour and fear of consequences, aiming at in-

depth information with authentic data and presentation of facts with honesty is
essential in research, focusing on important indicators for identification of gaps and
other aspects of motivation and impedimental factors in the development of
women entrepreneurs for their empowerment. The feed back with output data
analysis will help the government in policy framework to eliminate potential
impediments in the way of women entrepreneurship development.
There is also a need for concrete evidence to claim that women can even be
better entrepreneurs in view of their capabilities in managing enterprises effectively.
The Government at state level is on the look out for appropriate policy decisions
and programmes to be formulated for identification, promotion and development
of women entrepreneurs.
The study aims to suggest a significant indication of what is happening in the

women enterprises with regards to policies, programmes, procedures and services
rendered by the regulatory departments and financial institutions. Besides, may also
help the government to re-look into its policies and incorporate desired
modifications for monitoring the growth of women enterprises as generators of
employment, and structure appropriate programmes. The experiences of women
entrepreneurs in various sectors in selecting, starting and running their enterprises
will aid in the formulation of schemes and implementation of the desired policies
for industrialization through women entrepreneurs.
Methodology
A sample of 2,500 successful women entrepreneurs was decided upon,
drawing a hundred from each district in Andhra Pradesh covering the above
mentioned sectors. Since the required number of women entrepreneurs were not
available in every sector, the number varied from district to district in different
sectors, and a total sample of 2,234 entrepreneurs was finally identified for the
study.
Observations of the study

The portrait of women entrepreneurs that had evolved during the study, on
the basis of observation and interaction by the research team, presents a composite
profile. The findings and recommendations are listed below:
1. Entrepreneurship is not gender specific. It depends on the attitude of the
individual and support from the family. But it should not disturb the social
system.
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2. Women entrepreneurs constitute a miniscule segment, yet the demonstrative

effect on the women entrepreneurs to prompt them towards this adventure
and step in the domain of men.
3. Women entrepreneurs are a blend of tradition and modern, inheriting the old
time cultural heritage and tolerance.
4. It is construed that only 12% of the women entrepreneurs were literally
dynamic and vibrant with long cherished ambition to recognize themselves
and be recognized by others. Her multi-dimensional abilities are a matter of
identity that drives especially the upper middle class women to undertake
entrepreneurial adventure to express their innovative and creative and
management abilities, and prove that women can achieve anything if they are
determined to be successful. Women empowerment and women's liberation
have become synonymous with the changing the attitude of women.
5. Only 12% of the women were managing their own enterprises while 38% of
the women enterprises are run with active support of their husbands and
family members. Some of the enterprises were registered in the name of
women by their men for enjoying the concessions from the government and
other agencies. Five per cent of the women were unaware of their name
being used as proprietor and 10% did not dare to respond to the
questionnaire before their husbands though they were non-existing or non-
performing enterprises and sold away.
6. It is inherent in any growth process that some enterprises may age stagnate
and fall sick, while others might be shut down because of careless or
adventurous management.
7. Some women entrepreneurs feel proud that they are performing their
multiple responsibilities: as housewife preparing their children for school in
the morning, looking after the needs of in-laws and husbands and so forth,
about their needs. Some had frankly expressed that they too had undergone
agonizing moments of domestic shackles, facing displeasure from the
husband at being a career woman.
8. As a matter of fact one striking feature is that few women entrepreneurs had
shown tremendous leadership qualities managing different sections of
instinct timing, courage, resistance and stamina of a brilliant entrepreneur
who knows how to succeed in the fierce competition of business
environment despite personal adversity.
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9. Some had maintained good rapport with regulatory authorities and financing
agencies, keeping harmonious atmosphere in the industry. Credibility of
quality and supply with time consciousness and speed of response to the
customers are the prime factors of their success in their business.
10. The phenomenon of the conspicuous growth of corruption and collapse of
value system had eroded the concept of “single window system”. It has not
converted the menace (plight) into joy overnight.
Women entrepreneurs are very receptive to new business ideas and
technologies to improve the performance of their enterprise if they are really
beneficial and helpful in luring the competitive edge. They are very keen to
learn new things that enhance their creativity and innovativeness, with good
demand in the market.
11. It is the long cherished desire for empowerment through self-reliance and
economic independence that drives the women towards entrepreneurial
adventure besides the financial needs of their families and a craving for
recognition of their status.
12. A strong growth momentum has created greater opportunities for women in
the Information Technologies and Software Sectors in A.P. Women are ready
to capture the full potential of the IT and outsourcing trends.
13. A.P is at the threshold to being a content development centre in India for the
world, and women entrepreneurs are forging ahead in their mission to
succeed in the IT sector and promote themselves with A.P. as an
entrepreneurial destination in the IT sector.
14. Modern egalitarian ideologies have led to a process of questioning by the
lower castes about their legitimate rights for equality of opportunities in the
business sector in the interest of their family welfare. But they have not
broken the hold of hierarchy and hypocrisy on the minds of women.
15. ALEAP has earned a unique distinction in A.P. with a strong support base and
counselling, motivating, training the women entrepreneurs in identification
of the products based on their skills, and even providing support in the
marketing of their products inviting potential buyer's Agencies.
16. Successful women entrepreneurs have started to meet the competition in the
global market with international quality and perceiving the need for
reinventing innovations besides reconnecting with the potential customers,
and redesigning their work culture.
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17. In spite of all fierce competition in the market, our women entrepreneurs
remain hopeful of catching up with enhanced new orders from the domestic
channels and other states. Some have already entered the global market facing
the challenges and competition.
18. Women in A.P had started business in traditionally indigenous industrial field
while the technically qualified women ventured into non-traditional and
market driven ventures.
19. The greatest asset of women has been their ability to adapt to different
circumstances with a hope struggle of hope to solve the problems with
patience creating peace at home and enterprise.
20. The interaction with some women entrepreneurs has revealed that high
growth women entrepreneurs had selected strategies that focused on market
expansion and new technologies to compete in the global markets and are
committed to business ownership. Their style of management is a team based
approach to business. They are more concerned about quality and credibility
and image. They have started on rethinking of competition in the global
market and the need for reinventing the innovations, besides reconnecting
with potential customers and redesigning the work culture. There has been a
visible difference in the quality of enterprises managed by women.
21. Some women entrepreneurs had boldly expressed their problem of
corruption in obtaining permission and initial financial support for capital
investment for start up funds, which is a discouraging factor and liability to
discourage women's entrepreneurial adventure.
22. The regulatory authorities and financial agencies are overlooking the use of
name of woman/wife by the husband as the entrepreneur for obtaining the
benefits and concessions from the Government and the Banks. They never
bother to observe the norms or monitor the performance of the enterprise
whether it is really managed by women or men and deliberately sanction and
recommend for all the concession accruable to a woman enterprise. There is
political or bureaucratic pressures if not corruption, which is not a healthy
sign for the development of women entrepreneurs.
23. Some women owned enterprises were found to face higher odds of
discontinuation due to household problems, lower scales of volume and
lower income, if not loss resulting in closure of the enterprise and sale of the
unit.
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24. Women desire to become their own boss in the business and profitability is of
paramount importance and is an entrepreneurial necessity to sustain its
growth. They had realized that emotions should not be allowed in the
business and an entrepreneur should remain an entrepreneur to achieve the
growth of the enterprise.
25. Some women entrepreneurs seem to be bold enough and frank in expressing
their views. During the discussion on motivational factors and the dark side
of women entrepreneurship, one woman had said while her husband and in-
laws were sitting nearby that she had full support and encouragement from
her husband and family members, but village politics had delayed the starting
up of the enterprise. Men and women are two elements of a society. They
should have equal rights to march shoulder to shoulder.
26. No society can progress if it does not give women their due rights and
respect. Man is the only stabilizing factor in the life of a woman. There is
misapprehension that woman, while seeking her individuality is neglecting
her family, which is not true at all.
30. The women entrepreneurs are marching ahead with firm confidence
anticipating the possible trends and changes, and the demand to stay in the
global market. They have realized that gone are the days when Indian
enterprises could live in cocoons, totally unaware of global developments and
sure of a protective umbrella from the government.
31. There has been a visible change in the quality of enterprise managed by
technically qualified women. They do not like to surrender their power of
making decisions.
32. Women entrepreneurs have been found to be logical, practical and emotional.
They take care of their employees better, especially the women employees,
because they have the intuitive power, which comes in handy when they are in
a position of authority.
33. However, the future of women entrepreneurs is reasonably secure and is
capable of facing the emerging issues and the challenge before them through
their associations and training. Associations like ALEAP are making sincere
efforts with priorities of consolidating the strength of women entrepreneurs
and streamlining its sensitive areas to emerge stronger to face the impact of
global marketing.
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34. There is nothing wrong in a married couple running a business together, with
the enterprise in the name of wife. Two sets of talents, two people's time and
two pools of labour, the wife earns, the husband manages, the wife invests
judiciously and the husband earns.
Recommendations
1. The mindset of regulatory machinery and financial agencies supporting
women entrepreneurs need to be changed and reoriented to an environment
conducive to rapid and sustained growth.
2. The change in the system with dedicated men at the helm of the
implementation of policy is the need of the hour to reduce the frustration
sufferings of more potential entrepreneurs for creating employment. The
trouble is that we take this normally for granted, in a casual manner, but it
cause a huge damage to the enthusiasm of new entrepreneurs. There is a need
to frame a policy on women entrepreneurship with a mechanism for proper
implementation and follow-up.
3. To really enhance the image of women entrepreneurs in A.P. efforts should
begin with tailor-made training modules aimed at potential women
entrepreneurs for skill enhancement in specific areas housing the competitive
edge both in the existing and emerging requirements (to compete with global
market, as there will be considerable learning for every one. Thrust should be
on new technology, new business models, value addition and rural marketing.
4. A.P has silently achieved a steady foothold in the world of women
entrepreneurship with growth and consolidation. Percolations of new
technologies and business models have not touched the lowest levels in every
nook and corner of the state, besides the accessibility of facilities. More
training programmes on awareness of new technologies need to be
organized. They should be assisted in accessing, assessing and adopting the
latest technologies
5. Some women entrepreneurs had informed that the lending agencies
perceived them as risk-takers in respect of advancing loan for capital, and less
credit-worthy than their male counterparts and insisted on collateral security.
Inspite of guidelines from the RBI, the bankers are still insisting on security.
RBI should issue further orders on this, so that more and more women would
be willing to start up a business.
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5. Fluctuations in production or price are not unknown in business, but the

performance of some women entrepreneurs is a grim scenario: sick due to
lack of vision and management failures, besides the influx of large foreign
retaile chains. The revival of six units cell in the financial institutions, banks
and the industries department need to be strengthened and revitalized to help
women entrepreneurs in diagnosing the problems and finding sustenance.
6. Access to capital is a major challenge and inhibiting factor for starting an
enterprise and sometimes had treated the old financial agencies. Women
entrepreneurs had felt that they with gender bias and doubt their capability.
Gender sensitization programmes may be organised for understanding the
credit needs of women entrepreneurs.
7. The garment industry that holds high potential in terms of volume is facing
tremendous challenges of upgrading its quality standards in tune with the
desired demand, because of intense competition both within the state and
outside. Since most of the women are in this sector, they should be
encouraged to go for quality certification, and special incentives may be
provided to them.
8. Bio-informatics had received tremendous hype in A.P with the emergence of
Knowledge Park as bio-cluster with CCMB, ICRISAT and Osmania
University. Contract research has been the service model opted for at the
start up stage. Export of tissue culture has been a remarkable development
by women entrepreneurs. These centres are engaged in molecular and
recombinant bio-technology and are poised for exponential growth. More
and more women should be encouraged to enter this sector. Awareness
programmes need to be organized to make them understand the potential of
this sector.
9. Pharma industry has shown excellent growth and maturity among women
entrepreneurs unparalleled in any other industrial segment. It will have better
acceptability in the export market. More incentives may be provided to attract
women to this sector.
10. Cluster development scheme may be formulated exclusively for women
entrepreneur. ALEAP and ni-msme should jointly implement the scheme in
Andhra Pradesh.
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14. DEVELOPMENT OF TOURISM INDUSTRY

THROUGH CLUSTER APPROACH
*K. Suryaprakash Goud
Abstract
Tourism is the world's largest service industry and one of the fastest growing and as such has
exciting opportunities and faces tough challenges in a fast-changing and increasingly competitive
global market. It provides immense employment opportunities in addition to foreign exchange.
Tourism in India is booming for the last few years. Reasons are many but growing rate of Indian
economy is one of the main issues, which has helped in income levels of middle class people. Also
Indian Information Technology industry has been doing very well and India has become focal point
in the world for Information Technology. Hence many people from middle class families along with
business people prompting to spend money on vacations at home as well abroad. But the
entrepreneurs of the sector feel that India is not grabbing the opportunities and missing for various
reasons. The gap in the physical and social infrastructure is one of the main reasons, which is
upholding the sectoral growth. The present paper discuss on suitability of cluster development
strategy for development of tourism sector in the country.
Introduction:
The charm and uniqueness of India have been attracting travelers since ages.
India has got very good tourism potential and attractions to hold interests of all
types of tourists. Whether it is adventure tour, cultural exploration, pilgrimages
tour, beach combing tour or relaxing amidst the scenic mountains, tourism in India
has everything for the tourists. The tourists are flowing from Europe, Africa,
Southeast Asia and Australia to spend their vacation here. At the same time, the
number of Indians travelling internally also has been increased. Some tourists from
the Middle East countries come just to witness the drenching monsoon rains in
India. India has now become a sought after tourist destination in the world.
______________________________________________________________
* Faculty Member, NRCD, ni-msme.
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As per the World Travel and Tourism Council (WTTC), Tourism in India
could contribute Rs 8,50,500 crore to the GDP by 2020. In other words, every man,
woman and child could become richer by Rs 7000. India has yet to realize its full
potential of tourism.
India's travel and tourism industry is one of the most profitable industries in
the country, and also accounts for a substantial share of foreign exchange. There are
several reasons for the growth and prosperity of Indian tourism industry.
The Indian tourism industry has been creating jobs directly and indirectly in
other related sectors also. It has been helping growth on other sectors like
horticulture, handicrafts, agriculture, construction and even poultry. At present
above 20 million people are now working in the country's tourism industry.
The raise in income levels of the middle class families is driving the domestic
tourism growth. Disposable income in India had grown by 10.11% annually
between 2001-2006, and much of it has been spent on travel. The same trend is
expected to continue.
The growth of the tourism industry is due to the rise in the arrival of more
and more foreign tourists as well as an increase in the number of domestic tourists.
Tourists from Africa, Australia, Lain America, Europe, South-east Asia, etc are
visiting India numbers are growing by the thousands every year. The rate of growth
of tourism sector in India has been way above the world average in the last few years.
In 2006-07 approximately 4.63 million foreign tourists had visited India, thereby
registering a growth of 13 per cent over the previous year.
The booming IT industry is also contributing to tourism industry. As part of

their business many foreigners have been visiting India continuously, and the
number is increasing day by day. Most of them generally add a weekend break or a
longer holiday to their trips. The increase projected in the number of tourist arrivals
is over 22% by 2010.
The tourism ministry is playing an important role in the development of the

industry. Advertising campaigns such as the “Incredible India” campaign have
promoted India's culture and tourist attractions in a fresh and memorable way. The
campaign has helped create a colorful image of India in the minds of travel
enthusiasts all over the world. The state governments have also made a significant
impact on tourism. Each and every state of India has a corporation to administer
support issues related to tourism.
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Indian tourism offers a potpourri of different cultures, traditions, festivals,

and places of interest. There are a number of options for the tourists. India is a
country with rich cultural and traditional diversity. This aspect is even reflected in its
tourism. The different parts of the country offer a wide variety of interesting places
to visit. Ministry of Tourism, and the organizations/ Institutes like Indian Institute
of Tourism and Travel Management, National Council for Hotel Management and
Catering Technology, India Tourism Development Corporation Limited, Indian
Institute of Skiing and Mountaineering and National Institute of Water Sports are
deeply involved in development of Indian tourism industry.
The Ministry of Tourism in India has 20 field offices and 13 offices in other
countries to undertake both developmental and promotional activities. While the
overseas offices are in constant contact with tourists, travel intermediaries and the
media to promote tourism in India, the field offices in India provide facilitation
services to tourists and co-ordinate with the State Governments on tourism
infrastructure development. The main objectives of the overseas tourist offices are
to position India in the tourism generating markets as a preferred tourism
destination, to promote various Indian tourism products vis-à-vis the competition
faced from various destinations and to increase India's share of the global tourism
market. These objectives are met through an integrated marketing strategy and
synergised promotional activities undertaken in association with the travel trade and
state governments.
Present Constraints
India is probably the only country that offers various categories of tourism.
These include history tourism, adventure tourism, medical tourism (Ayurveda and
other forms of Indian medications), spiritual tourism, beach tourism (India has the
longest coastline in the East) etc. Surprisingly, despite the winds of liberalization
blowing across the country, tourism seems to have been the least affected. Even
now, setting up a resort means getting as many as 72 clearances from different
authorities!
One of the most vociferous demands is to declare tourism an infrastructure

industry, which will help it attract low cost funds, so important to keep any industry
globally competitive. Despite being the largest net foreign exchange earner and the
second largest gross foreign exchange earner after the IT industry, tourism is not
supported as per the requirements. Insufficient air seating capacity, pathetic road
and airport conditions, poor rail infrastructure, inadequate economical hotel
accommodation and relatively high level of taxation continue to be the bane of an
average international traveller.
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Procedural hassles in getting visas and poor infrastructure (including roads

which are potholed, dusty and narrow to say the least) are some of the major
problems that need to be attended to. Against the present requirement of about
130,000 hotel rooms, India offers just about 60,000. Our antiquated land laws,
which make land acquisition a very cumbersome process, are doing precious little to
solve this problem. They render the cost of putting up a hotel very high. There is a
big gap between five star and lower categories of hotels. The government needs to
create separate zones and then give liberal floor space index or FSI for setting up
two and three star hotels. This will dramatically and drastically changes the
economics of the hotel industry. The industry is also worried about airline seating
capacity. Against a demand of 10 million seats in the international segment the
supply is just about 5.3 million and in the domestic segment against a demand of 19
million supply is just about 9.79 million.
Visa facilitation is yet another process, which needs to be rationalized

urgently. Stringent eligibility requirements and cumbersome procedure put off
many travelers from visiting India. One of our major policy restrictive to the growth
of tourism is "reciprocity", under which we give visas to citizens of only those
countries which give to Indians. Countries like Bhutan, Nepal, Singapore,
Seychelles, Maldives, Thailand, Turkey, Taiwan and Indonesia give visas on arrival
without reciprocity as a condition. Thailand has a visa-on-arrival policy for over 140
countries and there is no reciprocity in every case.
The advantages of tourism are plenty. It remains confined not just to urban
agglomerations, but spreads its benefits deep and wide into the rural countryside
providing significant gains for the economy. Further, by its very nature tourism is
conducive to protecting the environment.
It is time therefore that the government pulled up its socks and pushed
tourism ahead. Else, it will be one more case of missed opportunities.
Cluster approach for development of tourism industry

The importance and contribution of the MSME sector to the economic
growth and prosperity is well established in most of the developed and developing
countries. The role of MSME sector in terms of employment creation, upholding
the entrepreneurial spirit and innovation has been crucial in fostering
competitiveness in the economy. To support, encourage and strengthen small
enterprise sector, the Government of India has been taking many proactive steps. It
is proved all over the world that MSME sector can boost the competitiveness
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through networking, and this process is easier and more sustainable if they work
very closely with one another in clusters. Also they can build their competitive
strength through cost reduction, up-gradation in the value chain and utilization of
collective economies of scale when they co-operate with each other and build
linkages with private or /and public service providers. The application of cluster
approach has given very good results and sustainable development of MSME
sector in both developed and developing nations.
By observing the success of MSME sector at global level, India has taken up
cluster development methodology a decade ago to support and encourage small
and, medium enterprises. UNIDO had initiated the implementation of cluster
approach in industrial clusters with the support of the then Ministry of Small Scale
Industries. Later this approach was adopted by State Bank Of India, National
Small Industries Corporation, Development commissioner (Handlooms),
Development Commissioner (Handicrafts), Small Industries Development Bank
of India, National Bank for Agriculture and Rural Development, Textile
Committee of India, Department of Science & Technology, Government of
Andhra Pradesh, Government of Madhya Pradesh, Government of Gujarat,
Government of Kerala, Khadi & Village Industries Commission, Coir Board and
other organizations like the Grameen Development Services, Rajastan Chamber of
Commerce and Industry actively supporting and encouraging many industrial,
rural and artisan based clusters. Now, as a marketing strategy or because of huge
business opportunities, many commercial banks are also seriously thinking and
coming forward to support cluster development projects, especially in the creation
of common facility centres and providing funds for bulk purchase of raw materials,
etc.
The cluster concept was applied in different models across the world. In USA
and the European Union nations, the approach was used/is being used to develop
select regions (particular area) whereas in countries like Thailand, Bangladesh and
Srilanka the focus is on the development of a few select sectors (handlooms). The
same concept with different objectives like poverty alleviation and employment
generation is being applied in India.
The cluster development methodology consists of identification and

selection of the cluster, conducting a diagnostic study to identify major issues of the
cluster, scope for social, financial, marketing and technical interventions, preparing
an action plan as per the diagnosis, implementation and then monitoring of the
project.
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The tourism cluster generally consists of stakeholders like hotels, restaurants,

airlines, tour operators, resorts, shopping malls, food grain suppliers, furniture
suppliers, construction industry, local, transporters, media and advertising, training
institutes, hotel management institutes, Ministry of Tourism, State Tourism
Development Corporations and other related organizations/ Institutes/
enterprises.
To develop the tourism industry the Government has to first identify the
potential clusters and then analyze the same for taking up developmental activities.
Methodology:
Phase I:
The phase involves the collection of secondary data from various
government departments, development organizations, technical and management
training and educational institutes, commercial banks, and NGOs in the country.
The information related to world-class tourism clusters of both developed

and developing countries would also be collected. Countries like UK, New Zealand,
Germany, Canada, Scotland, Jamaica, Thailand, Jordan, and Lebanon have
successfully implemented the cluster approach for the development of tourism
clusters. A few clusters from the above nations may be selected as benchmark
clusters for our Indian tourism clusters.
The information related to Indian tourist destinations like Kerala, Agra,

Khajuraho, Goa and a few rural tourism destinations would also be collected to
analyze the status of the industry and its dynamics.
Also supporting activities like training, catering, finance, medical, insurance,

information and advertising will have to be collected to take suggestions for
improvement of the industry. The required information would also be collected
from the tourists dividing them into different segments like individuals, families,
and other organized tour groups. The tour operators and travel agents would also be
covered. This particular exercise would help in the mapping of all the and
identifying a few clusters, which can be taken up for development.
Phase II:
Based on the information from selection of clusters phase I, clusters may be
selected for development. The following factors must be taken into account while
selecting the clusters.
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 Geographical concentration of the enterprises

 Level of present activity in the cluster
 Size of the cluster enterprises
 Scope for growth
 Position in the lifecycle of the “product”
 Status of present networks
 Presence of key players
 Capabilities of the stakeholders in the cluster
 Existence and sophistication of the physical infrastructure
 Degree to which the intervention requires the collaboration of different
government departments
Phase III: preparation of Diagnostic Study & Action Plan

The international tourism clusters experienced that Infrastructure
development, Innovative Product development, government and industry
coordination, public private partnerships, human resource management and
development, privatization and regulatory environment are the main areas one must
concentrate upon for the development of tourism clusters.
A detailed diagnostic study will have to be conducted to design strategies for

the development of the tourism clusters. The objectives of the study would be:
 To take stock of the present status of tourism industry.

 To analyze the socio- economic conditions of rural people who are into rural
tourism
 To identify dynamic groups/ organization/ institutes in the identified tourism
destinations.
 To identify the sectors for strengthening backward and forward linkages
 To analyze the gaps in inputs like man power, equipment and other
infrastructure
 To analyze the current markets and identify new business opportunities
 To identify the aspects that need capacity building for entrepreneurs/ officials/
workers
 To analyze the impact of various schemes being implemented by the Ministry of
tourism
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 To analyze the impact of various schemes being implemented by various

government departments besides the Ministry of tourism
 To find linkages/gaps among different cluster actors
 To identify the scope for joint activities by various ministries such as tourism
development, rural development, industry and commerce.
An implementable action plan is to be prepared for taking up cluster

development activities in the identified cluster. Financial support from the Ministry
of Tourism and also the active involvement of cluster stakeholders are essential to
developing the cluster.
Phase IV: Implementation

The Ministry with the help of national agencies having expertise in cluster
development, Consultancy organizations, NGOs and cluster stakeholders will
undertake to implement the activities suggested in the action plan.
Phase V: Monitoring & Evaluation

Like other concepts, cluster approach is flexible. Regular monitoring of
implementation and supply of cluster demands is to be ensured. If required the
action plan may also be revised in consultation with the Ministry. A suitable
mechanism for monitoring the project may be designed at various levels like policy
level and cluster level.
Outcome
The approach would lead to the development of internationally competitive
tourism clusters in the country. The application of international experiences and
investments helps sustainable development of the sector. Both state and central
government departments will join hands for synergizing various government
schemes designed for development of the tourism sector. A converging model may
evolve suitable for the over all development of Indian tourism sector.
Some of the major expected results may be:
 Improved publicity
 Enhanced image for the tourism destination
 Active participation of various institutions
 Augmented facilities
 Additional employment generation
 Integration of services offered by different service providers
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Banks, BDS Providers
Food Grain Local

Suppliers Transporters
Hotels Restaurants
Furniture Media &
Suppliers Airlines Advertising
Construction Tour operators Gardening

Industry
Shopping malls Entertainment
Souvenir Other service
Suppliers providers
Training institutes,
tourism department
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15. SUSTAINABLE DEVELOPMENT OF INNOVATIVE

TOURISM
RSRC Kumar, Sr. Manager, APSFC
Marketing of Services
The service sector is booming, be it tourism, financial services, hospitality
more so in developing countries. The sector contributes substantially to the process
of socio-economic transformation. The contribution of service industry in the
GDP is considerably on high side in the developed countries. Unlike the goods,
services are intangible and perishable in nature which cannot be carried and stored.
If a seat in the bus is unsold, the service is lost and the seat kilometer will perish
instantaneously.
Another unique nature of services is its inseparability, as the ownership is not

transferred but rests with the service provider. Hence, a marketer creates, promotes
and delivers service to the customers according to their needs and desires. Service is
the marketing of a promise and more of selling yourself. Hence, the service
providers always aim at influencing and satisfying the customer.
Significance of Services Marketing with reference to Tourism Industry

All the developing countries are giving due weightage to tourism services
industry in their national development agenda due to the following advantages:
1) Creation and expansion of job opportunities 2) Contribution to GDP and large
amount of foreign exchange earnings 3) Optimal utilization of local resources 4)
Formation of capital and enticing FDIs 5) Increase in the standard of living and
lifestyle changes. 6) Development of allied industries such as hotels,
communication, banking, transportation, trade and commerce.
Tourism - The concept

It is a well known fact that tourism is the short term movement of people to
outside destinations from their normal habitat. It is basically concerned with leisure
and involves at least overnight stay. The terms travel and tourism are often used
interchangeably. It is a service where intangible experience is being sold in
combination with certain intermediary services like transportation,
accommodation, hospitality and related services. Policy planners as well as
environmentalists are pin-pointing the bad effects of manufacturing industries,
specially on the ecological balance and focusing an environmental friendly
exploration.
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Backdrop of tourism in India

Growing levels of middle class income are prompting them to spend their
disposable income on relaxation and recreational activities. When we earn more, we
evince interest in utilizing our leisure time and avail modern amenities and facilities
to get relief from day-to-day routine and occupational burdens. Tourism activity,
intended to provide the fun and excitement, no doubt, gained momentum with the
holistic approach. Aggressive advertising campaign by the Government of India
with the theme Incredible India has contributed to boosting India's image in the
eyes of domestic and foreign tourists.
Types of tourism
a) Nature based tourism:
Nature based tourism is more concerned with viewing of nature where the
focus is on observation of natural surroundings, i.e., rocks, land forms and
life around us.
b) Adventure tourism:
It is a type of tourism involving exploration or travel to remote, exotic areas,
where the traveller should “expect the unexpected”. Adventure tourism
includes activities such as mountaineering, trekking, bungee jumping,
mountain biking, rafting, zip lining and rock climbing. Other rising forms of
adventure travel include social and jungle tourism.
c) Eco tourism:
Eco tourism is a form of leisure tourism. It involves travel to destinations
where flora, fauna and cultural heritage are the primary attractions.
d) Wildlife tourism:
Wildlife tourism can be an animal friendly tourism in wild environments.
e) Medical tourism (Health tourism):
It is a term initially coined by travel agencies and the mass media to describe
the rapidly growing practice of travel across international borders to obtain
health care coupled with any kind of tourism.
f) Rural Tourism:
Exposure to heritage sites, lush green mountains, river streams could be the
main attractions. Ethnic food, local crafts and cottage industry can provide
unique shopping experience in rural tourism.
g) Highway Tourism:
Highway tourism provides general recreation for the users of highway to
drive to the resorts to relax and enjoy good food and drinks.
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Market Information for tourism

In an age of information explosion, it is pertinent that an organisation
develops and institutes MIS to have an easy access to information needed for
planning, problem-solving and decision-making. The key problem in the
management of information is to establish a tourist information network. The
diagram below helps the tourism professionals in studying and identifying the level
of various segments.
Domestic, Foreign Kids, Teens
General Youths, Grey Students Executives
Artists, Politicians, Cine artists.
Category Kids, Men, Women
Prospective Region Rural, Semi Urban, Urban Tourism

users Service
Education Literate, Illiterate
Status Rick, Middle Class Poor
Executives, Academics, Artists,
Profession Sportsmen, Professionals
Occupation Public Sector, Private Sector,

Self-employed, Forming Sector
Users of tourism services and purchase decisions
Non-users:
Persons not interested in using the services are known as non-users. They lack
willingness, desire and ability and therefore, the level of income or even the
availability of leisure hours will not influence them.
Potential users:
They are also called the prospects or prospective users. They have willingness
but the marketing resources have not been used optimally for influencing their
impulse. The marketing professionals are expected to capitalise on their potential by
using creative promotional measures.
Actual users:
Persons already using the services generated by the tourist organisations are
known as actual users.
Occasional users:
Users availing the services occasionally but not forming a habit of travelling
are known as occasional users.
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Habitual users:
Users forming a habit and availing the services regularly are known as the
habitual users.
Data collection and analysis

In order to achieve a suitable tourism marketing plan, answering to the
following questions and analyzing them are necessary.
Who are the potential users and where do they live? What are their likes and
dislikes? What are their travel preferences and interests? What do they prefer to buy
while travelling? Where do they prefer to stay? Where do they prefer to take their
food and drinks? What are their transportation preferences? What are their
entertainment preferences? What are the strategies of leading competitors? What
type of marketing strategy would be suitable in the existing market?
Family Influences
M
ot
ds
iv
ee
at
N
io
n
Social Purchase Cultural

Influences Strategy Influences
Pe
e
rc
ud
ep
tit
tio
At
n
Professional Economic
Influences Influences
Who Prefers What

The economic theory describes man as a rational buyer who has complete
information about the market and uses it to obtain optimum value for his effort and
money. In this light, the general preferences in tourism are as follows:
Kids-theme parks, youth-picnics, exotic and remote areas, students-

excursions, study-tours, newly married couple-honeymoon packages; middle-aged-
eco/nature/rural tourism; old aged-spiritual tourism and pilgrimage.
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Marketing of Tourism Products

The general confusion about marketing is on selling and advertising. They are
only a component of marketing. Marketing requires thorough information about
the consumers that are targeted for marketing such as what they like, where they buy
and how much they spend. Today's customer is more educated and he / she has
many choices than ever before. Hence, marketing should create and promote a
product (ideas, goods or services) that satisfy the customer's needs or desires and is
made available at a desirable price and place. The measurement of quality in
intangible service is difficult and crucial. The effectiveness of quality is experienced
and judged by the consumer themself. We are living in the age of specialization in
which perfection is rewarded suitably.
Need for innovative tourism marketing

There can be no control in the cyclic movement of fashion, needs and lifestyle
changes. The process of change is influenced by the law of nature which forces us
to welcome the change. If we delay and postpone, we land up in dissatisfaction and
monotony. Thus, travel and tourism which enhance the quality of life are the
activities that are being transformed into a creative business and industry.
Due to growing specialization, the tourism service providers would need a

new culture influenced by competitive corporate outlook by way of launching
innovative marketing programmes. World-class services with innovative marketing
would help the service generating organizations in proving their excellence
nationally and internationally their competitive spirit which requires a fair blend of
performance orientation and employee orientation. Innovative tourism expands
the tourism services with the best use of effective communication and instant
information. Tourism service providers must develop unique marketing
programmes clubbed with the whole tourism value chain keeping in view increasing
complexity and diversity of customer requirements at affordable prices. Upgrading
the tourism infrastructure with focused attention on art, culture, leisure, heritage,
rural crafts, natural resources and joy of travel will ensure sustainable development
of tourism.
Case study of Haryana tourism

Haryana State suffers the lack of natural resources and low potential for
tourism. There are no lush green mountains, no rivers and streams. Still they have
pioneered the concept of Highway Tourism. They planned to take full advantage of
Haryana's proximity to Delhi and had built tourist complexes along the highway
passing through the State. The idea clicked exactly as it was conceived and it has
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became a general recreation for Delhites to drive to these resorts to relax and enjoy
good food and drinks. Now highway tourism in Haryana is fuelling the state's
economic growth.
Conclusion and findings

Tourism marketing is a managerial process to promote business. The purpose
of innovation in tourism is that the tourist should be able to enjoy the refreshing
change and feel the overall tourism pleasure. Tourism investments with product
differentiation under public-private partnership would bring higher returns with
competitive edge.
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16. LIFE INSURANCE INDUSTRY IN INDIA:

A STUDY
Mushtaq Ahmed*
INTRODUCTION
The proposed study aims at the Marketing aspects of Insurance products in
India. Insurance marketing is concerned with the realization of not only the present
markets, but also the emerging and future market.
NEED FOR THE STUDY

In the Indian context insurance activities are closely related with its
development, for the following reasons.
1. Income of the people is increasing at a faster rate.
2. Literacy level of the people is also raising because of the special efforts of
government like Akshara Jyothi.
3. Cultural transformation between rural and urban areas is taking place at much
greater pace than in the past.
4. Development consciousness of the people is also growing because of the
investments by the government in the development schemes and
programmes like Janmabhoomi.
5. Expansion of the markets and the economic infrastructure like roads,
telecommunications, electricity, information technology is transporting
development more easily.
IMPORTANCE OF THE STUDY

There is a need to spread insurance activities more widely and in particular to
the potential areas with a view to reaching all the potential users of the Insurance
services.
______________________________________________________________
* Director, GEC ( Madina Group of Institutions)
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The management field appears to be interested in meeting various insurance

needs of the society against the background of emerging trends in socioeconomic
environment.
The over ambitious objectives of the insurance companies both in public and
private sector have necessitated a change in their managerial and marketing
practices, so that they are successful in promoting insurance business in India.
Naturally, it requires emphasis on the marketing practices – for changing the
product-mix, the customized insurance services and framing the pricing policies
and making the promotional decisions etc., more effective
.
A number of new policies has to be designed in the product-mix of insurance
business. While offering new products the specific needs of the rural customers
must be prioritized. While fixing the premium rates, the interest of the rural
communities must receive due weightage. And for promoting the insurance
business the nature and characteristics of the community must be considered. And
while distributing the insurance services , it must be ensured that the personal selling
abilities of agents operating in the rural areas must be suitable for motivating the
potential policy holders in the rural markets.
This naturally necessitates realignment of the insurance services with

innovative marketing principles and practices. The marketing concept of insurance
business is concerned with expansion of insurance services in the best interest of
the society, particularly, in the Indian setting where rural orientation needs prime
attention. All the outstanding principles of marketing practices must make it clear
that Insurance business cannot flourish unless overall marketing decisions are
innovated, more so when the multinational companies, which have successful track
record in the international markets have already entered the field.
Role of life insurance

Risks and uncertainties are part of life's great adventure -- accident, illness,
theft, natural disaster – they are all built into the working of the Universe, waiting to
happen
Role 1: Life insurance as "investment"

Insurance is an attractive option for investment. While most people recognize
the risk hedging and tax saving potential of insurance, many are not aware of its
advantages as an investment option as well. Insurance products yield more
compared to regular investment options, and this is besides the added incentives
(read bonuses) offered by the insurers.
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You cannot compare an insurance product with other investment schemes

for the simple reason that it offers financial protection from risks, something that is
missing in non-insurance products.
In fact, the premium you pay for an insurance policy is an investment against
risk. Thus, before comparing with other schemes, you must accept that a part of the
total amount invested in life insurance goes towards providing for the risk cover,
while the rest is used for savings.
In life insurance, unlike non-life products, you get maturity benefits on

survival at the end of the term. In other words, if you take a life insurance policy for
20 years and survive the term, the amount invested as premium in the policy will
come back to you with added returns. In the unfortunate event of death within the
tenure of the policy, the family of the deceased will receive the sum assured.
Now, after comparing insurance as same amount of Rs 10,000 can give an

insurance coverage of up to approximately Rs 5-12 lakh (depending upon the plan,
age and medical condition of the life insured, etc) and this amount can become
immediately available to the nominee of the policyholder on death.
Thus insurance is a unique investment avenue that delivers sound returns in

addition to protection. If you invest Rs 10,000 in PPF, your money grows to Rs
10,950 at 9.5 per cent interest over a year. But in this case, the access to your funds
will be limited. One can withdraw 50 per cent of the initial deposit only after 4 years.
Role 2: Life insurance as ”security”

Insurance offers that unique sense of security that no other form of
investment provides. By buying life insurance, you buy peace of mind and are
prepared to face any financial demand that would hit the family in case of an
untimely demise.
To provide such protection, insurance firms collect contributions from many

people who face the same risk. A loss claim is paid out of the total premium
collected by the insurance companies, who act as trustees to the monies.
Insurance also provides a safeguard in the case of accidents or a
 Term Insurance Policy
 Whole Life Policy
 Endowment Policy
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 Money Back Policy

 Annuities And Pension
Most of the products offered by Indian life insurers are developed and
structured around these "basic" policies and are usually an extension or a
combination of these policies. So, what are these policies and how do they differ
from each other?
Term Insurance Policy

 A term insurance policy is a pure risk cover for a specified period of time.
What this means is that the sum assured is payable only if the policyholder
dies within the policy term. For instance, if a person buys Rs 2 lakh policy for
15-years, his family is entitled to the money if he dies within that 15-year
period.
 What if he survives the 15-year period? Well, then he is not entitled to any
payment; the insurance company keeps the entire premium paid during the
15-year period.
So, there is no element of savings or investment in such a policy. It is a 100 per

cent risk cover. It simply means that a person pays a certain premium to protect his
family against his sudden death. He forfeits the amount if he outlives the period of
the policy. This explains why the Term Insurance Policy comes at the lowest cost.
Whole Life Policy

 As the name suggests, a Whole Life Policy is an insurance cover against death,
irrespective of when it happens.
 Under this plan, the policy holder pays regular premiums until his death,
following which the money is handed over to his family.
This policy, however, fails to address the additional needs of the insured
during his post-retirement years. It does not take into account a person's increasing
needs either. While the insured buys the policy at a young age, his requirements
increase over time. By the time he dies, the value of the sum assured is too low to
meet his family's needs. As a result of these drawbacks, insurance firms now offer
either a modified Whole Life Policy or combine it with another type of policy.
Endowment Policy
Combining risk cover with financial savings, endowment policy is the most
popular of policies in the world of life insurance.
204
 In an Endowment Policy, the sum assured is payable even if the insured

survives the policy term.
 If the insured dies during the tenure of the policy, the insurance firm has to
pay the sum assured just as any other pure risk cover.
 A pure endowment policy is also a form of financial saving, where if the
person covered remains alive beyond the tenure of the policy, he gets back the
sum assured with some other investment benefits.
In addition to the basic policy, insurers offer various benefits such as double
endowment and marriage/ education endowment plans. The cost of such a policy is
slightly higher but worth its value.
Money Back Policy

 These policies are structured to provide sums required as anticipated
expenses (marriage, education, etc) over a stipulated period of time. With
inflation becoming a big issue, companies have realized that sometimes the
money value of the policy is eroded. That is why with-profit policies are also
being introduced to offset some of the losses incurred on account of
inflation.
 A portion of the sum assured is payable at regular intervals. On survival the
remainder of the sum assured is payable.
 In case of death, the full sum assured is payable to the family of the insured.
 The premium is payable for a particular period of time.
Annuities and pension

In an annuity, the insurer agrees to pay the insured a stipulated sum of money
periodically. The purpose of an annuity is to protect against risk as well as to provide
money in the form of pension at regular intervals.
Over the years, insurers have added various features to basic insurance policies
in order to address specific needs of a cross section of people.
Insurance companies operating in India

 Birla Sun Life
 HDFC Standard Life
 ICICI Pru
 Life Insurance Corporation
 Om Kotak Mahindra
 New India Assurance Company
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 National Insurance Company

 Oriental Insurance Company
 Royal Sundaram Alliance Insurance Co. Ltd.
 Tata AIG
 United India Insurance Company
 Max New York Life
Policies from Life Insurance Corporation of India

 Poilcies for pension children's insurance
 Endowment policies
 Group insurance policies
 Joint life policies
 Money back policies
 Annuity
 Special policies
 Term policies
 Whole life policies
 Policies for women
Policies from other Insurance Companies

 Endowment policies
 Moneyback policies
 Retirement policies
 Term policies
 Whole life policies
 Health policies
OBJECTIVES OF RESEARCH
Primary objective
“To study on life insurance industry in India”
Secondary objectives
1. To study different life insurance service providers
2. To study the various kinds of life insurance products that are being offered by
the public sector and private sector insurance companies of India.
3. To know the perception of consumers towards insurance products
4. To study in detail the ICICI prudential operations
206
5. To study consumer behaviour towards ICICI prudential

6. To suggest strategies for improvement
HYPOTHESIS
Ho = Private Sector And Public Sector Insurance Companies Are Similar In
Operation And Performance.
H1 = Private Sector And Public Sector Insurance Companies Are not Similar
In Operation And Performance
Limitations
In the research carried on one cannot be cent per cent accurate and authentic.
However every possible effort has been made to make it accurate and authentic.
There is every possibility that some errors had crept in to certain activities and
steps of research. Some of the possible errors are as follows.
 The survey was limited due to inadequate time and money.
 There was a lack of professional experience of research on the part of the
researcher.
 Sampling and non sampling errors, might have occurred.
 Pit falls in tabulation and analysis may have weakened the exactitude.
 Apart from the above there are many constrains and possibilities biased
information.
FINDINGS FOR COMPARITIVE RESEARCH

1. The multi-channel approach adopted by the private insurance companies has
proved to be a boon in terms of costing and their ability to capture business.
Earlier, most of the private insurance companies focused their energies on the
top 20 cities. Today they are moving to smaller cities.
2. The potential in smaller cities is increasing and companies are moving to
smaller cities and towns because these are increasingly becoming more
prosperous with a rise in agricultural income. With the increase in buying
power, this has fuelled the growth opportunities for insurance companies .
3. Private players in the life insurance business are growing at a scorching pace.
Within three years of their inception, they have seized about 14 per cent of the
market.
4. Compare this with new generation private-sector banks, which took nine years
for 20 per cent share in the Indian banking industry. After seven years in the
industry, in 2000, the private mutual funds accounted for just 9 per cent of a
market that had been dominated by the Unit Trust of India.
207
5. The products dealt by all public sector and private sector companies are mostly
similar, except that separate strategies and names were given .
6. There is another dimension to the insurance numbers game. While the private
insurance companies have attained 13 to 14 per cent share of the overall
insurance market, their share in the key metros (Mumbai and Delhi) is as high as
30 to 40 per cent.
7. Private insurance companies are essentially joint ventures with global insurance
companies holding a maximum of 26 per cent stake. The foreign partners are
investing heavily in the Indian market and, thereby, driving the sales because
they see India emerging as one of the biggest markets in the Asian region.
8. Private players have certainly done their bit to increase the penetration levels of
insurance, mainly by creating alternative distribution channels--such as
associations with banks, brokers and corporate agents for example, Aviva
which has 70% of total sales by tie ups with four banks.
9. OM Kotak Mahindra Life, which is ranked eighth among private players, is also
leaning towards alternative distribution channels that will contribute to 45 per
cent of total sales, in line with the contribution from its tied agency force.
10. In sharp contrast, most of the LIC policies continue to be sold through its tied-
agency network. The state life corporation acknowledges that it is unable to
maintain its lead in some metros: penetration by the private-sector insurers has
come of age and they are giving the LIC a run for its money.
11. AMP Sanmar, another private player, has tied up with various chit funds and
transport finance companies in the country, where it is selling life policies on
the back of fixed deposits and bonds. A senior company official cites the
example of Vijaywada where a significant portion of the income is derived
from farming activities.
12. "The rural people are managing their money well and no longer keeping it
under their beds. They have mobile phones and have opened bank accounts.
They are not very different from their urban counterparts when it comes to
purchasing life insurance covers," he points out.
13. All that is making the private sector optimistic about its future in the Indian
insurance market. Private insurers are becoming an alternative to LIC. If a
customer has already bought an LIC plan, his second policy is likely to be
bought by the private insurance sector on account of various reasons--more
specifically flexibility and transparency,"
14. Perhaps this partly explains why the LIC has increased its advertising spend
multi-fold since the insurance sector was privatised. Its ad spend more than
doubled to Rs 81 crore (Rs 810 million) in fiscal 2003, against Rs 37 crore (Rs
370 million) in 1999-2000, prior to the industry being privatised.
208
15. Of course, the private insurance sector has also been steadily increasing its ad
spend, from Rs 29 crore (Rs 290 million) in fiscal 2001 when the industry
opened up, to Rs 92 crore (Rs 920 million) the following year. In fiscal 2003, the
private insurers had spent Rs 143 crore (Rs 1.43 billion) on advertising.
16. But it is not the increased spend on advertising alone that has helped the private
players in grabbing the market share. One of the key differential factors
responsible for their growing market is the 150,000-odd life insurance advisors
of the private insurance companies.
17. "The private insurance agents sell better than their counterparts at the LIC. Life
insurance advisors of private sector insurance companies adopt the need-
based selling approach, unlike the LIC's agency force that pushes the number
of policies.
18. This also gets reflected in the average sum assured by private insurance
companies being higher than that of the LIC. Policies sold by the private
players tend to be of a higher value.
19. For instance, Birla Sun Life's average premium stands at Rs 24,500, while that
of OM Kotak Mahindra Life is equally high at Rs 20,400. Against this is the
LIC's average premium of Rs 3,200.
20. Of course, there's also a difference in the target client of the private and the
state-run insurance companies. While the private players are targeting the
upper middle-class and high net-worth individuals, the LIC aims for the masses
through its 2,048 branches spread across the semi-rural and rural towns.
21. OM Kotak has gone a step further and tied up with Swiss Life International so
that it can capitalise on the latter's relationship with 300 multinational
subsidiaries and affiliates.
22. But it is not as if LIC has lost out on group insurance. The insurance major's
group business reached new heights in fiscal 2004, recording a 119 per cent
growth in new premium income and 50 per cent increase in the number of lives
covered.
23. Still, new business income for private companies has grown at 146 per cent in
fiscal 2004, compared to the 18 per cent average industry growth in new
premium income for the same period.
24. The biggest draw in insurance in fiscal 2004 was unit-linked plans. Ninety-five
per cent of the policies sold by Birla Sun Life and over 80 per cent of the
4,36,000 policies sold by ICICI Prudential were unit-linked plans.
25. Even though the LIC was late (January 2004) in pushing its unit-linked product
Bima Plus, it managed to mop up a premium income of Rs 373 crore (Rs
209
billion) with the sale of just under 1.7-lakh unit-linked policies, the highest sales
figure in the industry.
26. The advantage with unit-linked plans is that they offer the policy holders
transparency in terms of costs, annual returns and bonus calculations. With
many companies guaranteeing the capital investment (some like Birla Sun Life
even guarantee 3 per cent assured returns on its unit-linked plans), the interest
in unit-linked plans only increased.
27. The switch from traditional products to unit-linked plans gained momentum as
the Sensex climbed higher: the returns on such policies are linked to the equity
market.
28. "The stock market has helped to a certain extent and has contributed to our
growth and performance," agrees Birla Sun Life CEO Nani Javeri.
29. Aviva has shown a compounded aggregate growth rate of 36 per cent since the
inception of its fund. Returns on OM Kotak's balanced and growth funds
stand at 31.79 to 43.25 per cent respectively.
30. Dam claims that OM Kotak has sold several policies of Rs 25-50 lakh (Rs 2.5-5
million) since the "savvy investor thinks it best to invest in unit-linked
products." He adds: "Growth is coming faster in insurance companies with
unit-linked plans."
31. Life insurance industry growth pegged at 51 per cent.
32. While the life insurance industry took a hit in 2003 due to the slack in sales of
single premium plans, this year the growth has been 51 per cent. Premiums
have gone up to Rs 18,710 crore from Rs 12,300 crore in 2002-03 mainly due to
the increased sales of unit-linked plans, group policies and pension plans.
33. The Life Insurance Corporation has been able to garner Rs 2,332.85 crore from
insuring more than 30 lakh individuals. Its group business touched a high of
119 per cent and registered a 50 per cent increase in lives underwritten. The
non-life business premium is know to have gone up by 16 percent touching Rs
16,118 crore. Apart from insuring the individual lives, alternate channels such
as bancassurance also contributed in a big way.
FINDINGS OF PRIMARY DATA

 According to the survey it as been inferred that maximum number of
respondent had wanted to buy an insurance product in the near future, but
40% of the respondents had not intended to buy any.
 Study in regard to perception with reference to after sales service is satisfactory,
as 50% of the respondents said it was good and 35% said its good so overall the
customer service and response are given consideration.
210
 The most important factor in convert the potential customer to a buyer is the
influence of the brand image which plays dominant role as stated by 55% of the
respondents. 25% perceive after sales service and 15% effective network as
important factors.
 From the above finding it is inferred that brand image carries a dominant role in
the client's choice 44%prefer LIC ,23%prefer ICICI ,followed by birla sun life
and other companies.After choosing the company the next step is the insurance
product choice in which most of the respondents had opted for retirement plan
(31%)and 22% wants to go for saving plan, followed by investment plan.
 Selection of promotional tools was a critical decision as it has direct relation
with sales, and as insurance is some thing an unsought good detailed
information and product based executives is appropriate which has been the
reason for purchase for 50 % of respondents and other sources are friends and
relatives, etc.
 There will be a need reason and reason behind purchase of any products so
most of the respondents were buying insurance as a solution to tax exemption
(60%).
SUGGESTIONS AND RECOMMENDATIONS

According to Maslow's need hierarchy, security needs are second only to basic
needs. Man's desire to feel safe and protected from future disasters or undesirable
events led to the concept of Insurance.
Some of the important strategies identified are as follows.

Insurance now-a-days is a want and need of all segment of people and due to
rapid changes in market conditions even consumer behaviour, standard of living
and security for life are increasing and customers are ready to pay the price if they
are able to get value for it. The analysis had revealed that the customer has
difficulty in influencing, initiating buying and using due to lack of attention, interest,
desire which is stopping for action. Hence, the strategies given below are connected
with this.
Organisational strategies
 What are the unique products of the company?
 How quickly can one introduce newer channels in response to changing market
conditions
 Tab channel partners by a preferred life insurance service provider
 Motivate channel partners to perform better.
 Make sure that channel partner performs effectively and efficiently.
211
 Design different compensation mechanisms for individual channels or for

segments within a channel.
 Practice new promotional tools then launch and effectively monitor campaigns.
Product Related Strategies

 Introduce new insurance product to tab rural customers by offering insurance
on agriculture pump sets and cattle among the owners.
 The next potential area is health care which is booming today so need to
promote health and personal accident policies, which have low awareness but
high concerns.
 Introduce travel-related health Insurance which is not available.
 Recognize health-care as a separate line of business.
 Gove importance to claims processing by.
 Making the response time between the claim and the actual payment should be
fast and low.
 In case of delayed payments, fine should be paid by the Insurance company to
the customer.
 In case of conflict the case should be referred to the ombudsman or courts as
the case may be.
Price Related Strategies

 The premium is to be lowered as it will be preferred, even by the richer
customers.
 Steady growth of the insurance business with the tariffs providing benchmark
rates with competitors both Indian and global to be followed.
 Tariffs followed do not respond in a timely manner to changes in rates in
international markets which should be concentrated.
 High margin to agents/brokers. Which f possible to be lowered.
 While the law pertaining to the remuneration is still a bit unclear, it is said that
the commission to agents could be high to induce them to sell more and better
products.
Place related strategies

 Marketing alliances with people/companies having a physical presence is a
good distribution strategy too.
 Preferred channels are banks, co-operatives and the sarpanch
 The online world is not going to be left behind. A number of sites have started
offering policies online. What needs to be borne in mind is that no matter what
212
channel one may use, the following factors will be critical in deciding the
success or failure of the venture:
Promotion related strategies

 The concentration on positioning as insurance is a product which does not have
clear positioning though there may be a need for a product but due to confusion
purchase is not made.
 Participative information dissemination may be effective by small cohesive
groups at farmer meets, melas, co-operative society meets.
 Insurance tie-up with some hospitals and health care centers will help.
 Tie with banks and co-operative societies to sell general insurance policies. The
concentration on promoting products which as has major back lash due to ill
awareness. which can be overcome by following
 Holding seminars and informal corner meetings
 Distributing brochures / handouts giving complete information of their
products
 Laying emphasis on the value of the product rather than on its price
Conclusions
Insurance industry is a growing industry booming at a very fast pace. Both
private and public sector companies are doing well ,but still LIC is the dominant
provider of insurance Most of the products dealt by all insurance provides are
similar in most capacities. The best ways are to concentrate at rural areas
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214
17. BIO-TECHNOLOGY: THE SUNRISE SERVICE

SECTOR
1. Each industry has a life cycle. Industries flourish and boom and at the end of
their life cycle, die naturally as saturation takes place or substitutes emerge.
Black and white television sets and manual typewriters are good examples.
Who knows the present Land Line Telephones and Desk Top Computers will
meet the same situation. In some industry sectors, innovation helps to extend
the life cycle as new products replace earlier offerings. It therefore, becomes
necessary to identify sunrise industries within the overall industrial scenario
so that an appropriate policy regime can be put in place which enables them to
grow and expand. In the Indian context information technology (IT),
Biotechnology (BT), pharmaceuticals and Nanotechnologies along with IT
enabled services are often cited as sunrise industries. India is seen as
competitive in these industries which are in line with the fast changing
economic, technological and global context. Call Centres, Business Process
Outsourcing etc. may be added as they are also called as Sunrise Sectors.
2. Sunrise Sectors are very useful in the Indian scenario as they are the growth
centers for revenue generation and employment.
3. In light of the above, a brief description on Bio-Technology and

Pharmaceuticals industries will be dealt in the following paragraphs.
4. Bio-technology
“If Bangalore is the Silicon Valley, Hyderabad is the Genome Valley,
Indias's future is in Bio-Technology.” Dr.Y.S.Rajasekhara Reddy, ex-
Chief Minister, AP.
“Genome Valley is our answer to the Silicon Valley of Bangalore. It is
making waves not just in India but across the world”
Dr. Reddy's Laboratores, Hyderabad.
What is bio-technology
Bio-technology is the art of utilizing the living organisms and their products
for the production of food, drink, medicine or for other benefits to the human race,
or other animal species. Technically speaking, humans have been making use of bio-
technology since they discovered farming, with the planting of seeds to control
plant growth and crop production.
215
About Genome Valley, Hyderabad

Genome Valley, Turkapally, near Hyderabad is India's bio-tech park that
provides research, training, collaboration and manufacturing activities for bio-tech
companies. More than 100 bio-tech companies are operating from the Genome
Valley.
The Genome Valley offers plots of land -- of varying sizes -- to build research
centres and pilot plants as per specific requirements of the resident companies.
Growth of bio-technology
From a small beginning 25 years ago, the sector has emerged as a dominant
one providing employment to hundreds of thousands of skilled and qualified
people.
An Ernst and Young survey identifies India as one of the five emerging bio-
tech leaders in the Asia-Pacific region, the others being Singapore, Taiwan, Japan,
and Korea. The firm ranked India third in the region based on the number of bio-
tech companies in the country. India is already the world 's largest vaccine producer
as well as the largest cultivator of Bt cotton.
Trends
 With the Genome Valley project in Hyderabad, the city is now emerging as a hub
of discovery research in bio-tech and pharma industries. The bio-tech industry,
which has been anchored firmly by the Genome Valley project, has already been
a major earner of foreign exchange (US$ 1.24 billion from pharmaceuticals,
biotech, chemicals and allied chemicals) for the state. Similarly Gujarat is also
turning into a biotech hub with the number of bio-tech companies in the state
shooting up 50 per cent.
 A large chunk of the sector's revenues are expected to come from opportunities
in the US$ 4.5 billion Indian pharmaceutical industry which is growing at the rate
of over 8 to 9 per cent per year. An increasing number of Contract Research
Organisations (CROs) in the country bears evidence to this. The CRO market in
India is worth US$ 250 million and is growing at 30-40 per cent year on year.
Ranked fourth globally in terms of volume and 13th in terms of value, the
country has the highest number of manufacturing plants approved by the
United States Food and Drug Administration (USFDA)
 The biotech industry has been growing by about 35 to 40 per cent for the past
three years. According to the 5th Bio-Spectrum-ABLE Biotech Industry Survey
216
conducted in April-May 2007, the industry grew by 30.9 per cent in 2006-07,
with bio-agri scoring the highest growth rate at 50 per cent and largest acreage of
9 million. Exports in the sector had increased by a massive 47 per cent.
Investments in the Indian bio-technology sector had crossed US$ 580 million
in 2006-2007 with Bangalore alone witnessing more than US$ 243.9 million outlay
from companies like Jubilant, AstraZeneca, GE Healthcare and Biocon. The bio-
technology companies expenditure on research and development (R&D) had
amounted to an average 3% of their sales.
LEADING BIO-TECH COMPANIES

 Avra Laboratories Pvt. Ltd.
 Bharat Biotech International Ltd.
 Bijam Biosciences Ltd.
 Biological E. Ltd.
 Bioserve Biotechnologies Ltd.
 Dr. Reddy's Laboratories Ltd.
 Genotex International (India) Pvt. Ltd.
 GVK Bio Pvt. Ltd.
 Indian Immunologicals Ltd.
 Indigene Pharmaceuticals Ltd.
 Jupiter Biosciences Ltd.
 Krebs Biochemicals Ltd.
 Microbiomed Products Ltd.
 Nuziveedu Seeds Ltd.
 Prabhat Agri Biotech Pvt. Ltd.
5. Pharmaceuticals and bulk drugs Hyderabad, which accounts for around

one third of India's total bulk drug production, is considered as the bulk drug
capital of the country. A large number of bulk drug units are located in and
around Hyderabad with good infrastructure. The pharmaceutical industry in
India is expected to grow from 5.5 Billion US dollars to 25 billion US dollars
by 2010, and 75 billion US dollars by 2020.
6. A.P. Advantage
AP has a dominant position in this sector with a market size of 1.6 billion US
dollars presently growing up to 8 billion to 10 billion US dollars by 2010 and is
well known internationally for its skills in chemical synthesis and process
217
engineering and its speed in market. Jawaharlal Nehru Pharma City at

Parwada, Visakhapatnam is located in 2200 acres of land with world class
infrastructure to support efficient and environment friendly pharma
manufacturing.
Source: internet and a book “doing business with AP: published by the
Commissioner of Industries, Govt.of A.P.
218
18. PROMOTION OF ENTREPRENEURSHIP IN

SERVICES SECTOR
R.S.R.C. Kumar*
Entrepreneurship has become an important topic of deliberation among

banks, financial institutions, industry and academicians because the entrepreneurs
play an important role in promoting business and industries and contributing to the
economy of the nation. Potential entrepreneurs contribute to wealth generation
and take part in utilization of national resources.
In fact “entrepreneur” and “entrepreneurship” are popular and respectable

words today. Where people see problems, entrepreneurs see possibilities. Their
investments in knowledge and industry give them returns. To become an
entrepreneur, all that is required is enterprising spirit, ideas, dreams, and a strong will
to succeed.
In today's world of integrated economies it is not enough to just exist and

survive. But it is time to innovate. Thanks to the globalization, advancement of
science and technology, advent of internet and rising purchasing power, today, the
customer has greater choices than ever before. Thus in a globally competitive world,
individuals and enterprises are constantly challenged.
Opportunities come with risk. Entrepreneur will take prudent risk. They
promote vision with enthusiastic passion and completes the mission. The six-P
acronym, i.e., “Proper Prior Planning Prevents Poor Performance” aptly suits the
entrepreneur.
Factors responsible for emergence of entrepreneurship

• Background factors: Education, training, experience, family, role models,
and financial conditions
• Motivational factors: Zeal for achievement, ideas & ideals, and business
environment.
• Economic factors: Supportive government policies, free flow of financial
assistance from banks and FIs, and availability of technical support.
• Reward: Recognition, social status
______________________________________________________________
*Sr. Manager, APSFC
219
Entrepreneurs are classified based on the type of activity i.e., business

entrepreneurs, trading entrepreneur, industrial entrepreneur, corporate
entrepreneur, farm entrepreneur.
The business and industrial entrepreneurs have become a focus in developing

countries and they are recognized as an instrument of socio-economic change.
That's the reason why the constant efforts are being made by all concerned to find
out better ways of creating enterprising ability.
Entrepreneurship education
Rising awareness of enterprise and entrepreneurship is a significant
improvement in the present economic scenario. Entrepreneurship education
develops attitudes and motivation for acquiring business skills and competencies to
perform better. Entrepreneurship is a creative art which tries to find opportunities
and derive benefits from them.
Creativity and innovation consist of a) Seeing what everyone else has not seen
b) Thinking what no one else has thought c) Doing what no one else has dared. This
is how small ideas some times make great stories.
Entrepreneurship education should aim at promoting independent thinking,

creativity and enable them to face challenges. EDPs shall be designed to connect
students and youth to the colleges, the community and the work place.
Networking and sharing

The existing entrepreneurs learn from their own experience and the first
generation entrepreneurs learn from other's experiences. Sharing of experiences
through proper networking is possible in the common forums and SME clusters.
Clusters can be benefited by creating a strong network of entrepreneurs, from
which the managers could draw on for advice and support. Technology incubation
system can create better conditions for the emergence of new entrepreneurship,
especially for technology based enterprises. India could create a pool of
entrepreneurs and establish essential business contacts through proper planning
and focus.
Success of entrepreneur
Entrepreneurship in India is an economic necessity. Hence, the emergence
220
of entrepreneurial process has not become adequately innovative. To know how to

succeed, the entrepreneur needs to understand why people fail. The business started
by him should be able to survive and succeed. It would be possible only if he tries to
acquire basic business skills and management skills before entering into or opting
for business opportunities.
Entrepreneurs should get organized before getting started and develop a

strong determination to win. They should be made aware of circumstances leading
to the onset of entrepreneurial seizure. Enthusiastic skilled entrepreneurs will
become world leaders of tomorrow.
Following basic tips should be taken into account before setting up an

Industry
 Understand the project / product and work on it.
 Research the various business models within that industry.
 Analyse the competition.
 Do market research to assess the realistic market potential for the business.
 Develop a preliminary business plan and funding requirements.
 Plan the project within the means of your investment ability.
 Start the business, keeping in view the customer requirements.
 APSFC initiatives
APSFC is aiming at imparting entrepreneurship education to the students of

professional colleges and creating awareness on the development of SMEs and
their contribution to the economy.
“Entrepreneur meets” are also being organized through interaction with

successful entrepreneurs, for better understanding of the process and the
principles. Promotion of entrepreneurship among new and existing entrepreneurs
has become one of the priority areas in the activities of APSFC.
Promotions of financial literacy and industry-academician interaction are the

key goals of APSFC.
221
19. SERVICE ENTERPRISES-A FINANCIAL

PERSPECTIVE
Gopala K Murthy*
Economic reforms and liberalization

Independent India's economic development programme is built on the key
objectives of self-reliance and social equity. Despite the debate whether there had
already been some liberalization earlier, 1991 marks the big liberalization of the
Indian economy. The liberalization has been characterized by the abolition of
licence raj and reduction of tariffs. A serious effort was on to rationalize the tax
system. During this period the divesting of public sector has been initiated. These
developments have encouraged the private enterprises to compete with state owned
enterprises.
Finally, it was the turn of the financial sector to undergo the reforms. India
has a respectable place among the developing nations due to its impressive financial
system. There have been serious attempts at privatizing the power sector and at
imposing a regulatory system. The rise of the Indian economy is one of the most
important economic developments of contemporary times.
Strengths of Indian economy

 An impressive DPgrowth rate which touched 9.4% during 2006-07.
 The 4th largest economy in terms of Purchasing Power Parity (PP
 Sixth fastest growing economy, projected to be 7to 5% larger than apan' by 2010
 A strong agriculture sector accounting for nearly 25% of national output and
15% of exports, with selfufficiency in all important crops except oilseeds
 A diverse industrial base with self reliance in all core industries and a wide range
of engineering products, but domestically weak in electronic hardware
technology
 A Mature financial sector and capital market with over 9000 listed companies
and market capitalization close to US $ 3 trillion, with the Banking and finace
sector growing by around 9%
 A robust services sector accounting for more then 50% of national product, and
growing by 7% annually
______________________________________________________________
* Consultant, Advisor and Banking Resource, HYDERABAD ,
E-mail: gopalkmurthy@rediffmail.com 040-23737335 and 9347528867
223
It is a fact that the Indian economy is growing faster than ever before. It had
recorded robust growth for the fourth successive year during 2006-07. The real
GDP growth accelerated from 9 per cent during 2005-06 to 9.4 per cent during
2006-07. The growth, thus, had averaged 8.6 per cent per annum during the four-
year period ended 2006-07. Real GDP growth during the Tenth Five Year Plan
period averaged 7.6 per cent per annum, the highest in any Plan period. The
acceleration in the growth rate during 2006-07 was attributable to buoyancy in the
industrial and services sectors, which had exhibited double-digit growth (11.0 per
cent each). Higher growth in the industry and services sectors had more than offset
the deceleration in the agricultural sector. Encouraged by economic developments
over the past decade, the government is committed to scoring a GDP growth rate
of higher than 9% by the year 2008-09.
Services Sector and Trends

The services sector is comprised of the services meant for both final and
intermediate consumption. Of these two categories, intermediate services such as
transport and communications, which are also intermediate inputs for the
production of other goods and services, account for a major share in the total
services output. The share of services meant for final consumption is relatively
small. Technological advancements in the field of information and communication
technology (ICT) have steadily transformed the services sector. The latest available
information on Gross Domestic Product and the Services sector contributions to
it are related to the last quarter of 2006-07.
Shift towards service sector

India was primarily known as an agricultural economy, but the face of its
economy has been changing rapidly over the past decade. The share of the
secondary and tertiary sector in increasing rapidly. The services sector had grown
at double-digit rates in the last three years and emerged as the key driver of
economic activity in the country. This sector had accounted for 61.8 per cent of
GDP in 2006-07 and contributed nearly three-fourths to the overall real GDP
growth during the year. The services sector had benefited from the robust growth in
domestic tourism, foreign tourist arrivals, telecom sector, railway traffic, civil
aviation, cargo handled, construction, business process outsourcing (BPO),
information technology enabled services (ITES), and banking and insurance
activity as revealed in the following table and graph:
224
Table-1: Growth in Services

Rs. in crores
Year Trade, hotels, Financing, Community, Total
transport & insurance, real social and Amount
communication estate & business personal Services
services
2000-01 428855 254772 287905 971532
2001-02 477836 293035 310721 1081592
2002-03 527569 332115 334466 1194150
2003-04 610239 375606 364019 1349864
2004-05 714547 413129 407285 1534961
2005-06 824936 464493 468128 1757557
2006-07 968677 540160 534479 2043316
Great booster for economy

A direct relationship exists between the socio-economic development and the
services sector in India. This sector accounts for approximately 45% of India's total
GDP and has great potential for growth. The role of trade in services sector in
India's balance of payments is invaluable. It has been estimated that of India's
exports (both merchandise as well as invisibles) 40% is made up by trade in services.
As a result of the net positive on services trade, net invisibles financed a substantial
portion of India's total deficit on trade account. The high potential of the services
sector to earn foreign exchange has been thus widely recognized.
Potential source of employment generation

Being labour intensive, the services sector is of crucial importance to the
Indian economy.
225
Studies have shown that the employment elasticity to GDP growth in the
services sector is higher than in the case of both agricultural and manufacturing
sectors. Hence growth of the services sector is being looked upon as a great
potential source of generating employment opportunities in the country.
It is also important in accelerating the growth process in the economy as it

provides services which are complementary to agriculture and industry. For
instance, an agriculturist or industrialist requires financial services to provide capital
for his production facilities, communication and transport services to reach the
market and distribution and retail networks to reach the consumers.
Role of services sector

Services has been at the forefront of the rapid growth of the Indian economy,
contributing nearly 55 per cent of the GDP in 2006-07. The sector has come to play
an increasingly dominant role in the economy accounting for 68.6 per cent of the
overall average growth in GDP during 2002-03 and 2006-07.
While the Indian economy grew at the rate of 9.4 per cent in 2006-07 against 9
per cent the previous year, services grew at an impressive rate of 11 per cent in 2006-
07 against 10.3 per cent in 2005-06. The sector has continued to record double-digit
growth in the last fiscal with a growth rate of 10.4 per cent during April-December
2007-08.
 Trade, hotels, transport and communication grew by a robust growth rate of
11.6 per cent.
 Financial services (comprising banking, insurance, real estate and business
services) grew by 10.8 per cent as against 11.1 per cent.
 Community, social and personal services grew at the rate of 7.7 per cent.
 Construction activity grew by 10 per cent.
Indicators
 The lead indicators suggest that the pace of expansion in the services sector
activity is likely to be sustained for the rest of the financial year.
 The communication sector had recorded a robust growth with 946.5 million
telephone connections (fixed plus cellular) in 2007-08 which is 44.41 per cent
higher than the corresponding period last year. Consequently, India has now
become the second largest wireless network in the world.
 The cargo handled at major ports had increased by 12 per cent during 2007-08
over the same period in 2006-07.
226
 The total freight handled by the civil aviation sector had increased by 11 per cent
during April-December 2007 over the corresponding period in 2006.
 The freight traffic of the Railways had increased by 9.06 per cent during 2207-08
over the same period in 2006-07, recording its highest ever incremental freight
loadings of 66 million tonne.
 Passengers handled at domestic and international airport terminals during April-
December, 2007 had increased by 27.9 per cent and 17 per cent, respectively
compared to the same period in 2006.
 Aggregate bank deposits and non-food credits by scheduled commercial banks
year-on-year had shown growth rates of 21.2 per cent and 22.3 per cent,
respectively as on March 28, 2008.
Service sector in India

Services or the "tertiary sector" of the economy covers a wide gamut of
activities like trading, banking and finance, infotainment, real estate, transportation,
security, management and technical consultancy among several others. The various
sectors that combine together to constitute service Enterprises in India are:
 Trade
 Hotels and restaurants
 Railways
 Other transport & storage
 Communication (Post, Telecom)
 Banking
 Insurance
 Dwellings, real estate
 Business services
 Public administration; defence
 Personal services
 Community services
 Other services
There was marked acceleration in services sector growth in recent times.

While almost all the services had participated in this boom, growth was fastest in
communications, banking, hotels and restaurants, community services, trade and
business services. One of the reasons for the sudden growth in the services sector in
India in the nineteen nineties was the liberalization in the regulatory framework that
gave rise to innovation and higher exports from this sector. The sub-sector wise
break-up is as follows:
227
While the Indian economy grew at the rate of 9.4 per cent in 2006-07 against 9
per cent the previous year, services grew at an impressive rate of 11 per cent in 2006-
07 against 10.3 per cent in 2005-06. The sector has continued to record double-digit
growth in the last fiscal with a growth rate of 10.4 per cent during April-December
2007-08.
 Trade, hotels, transport and communication grew by a robust growth rate of
11.6 per cent.
 Financial services (comprising banking, insurance, real estate and business
services) grew by 10.8 per cent as against 11.1 per cent.
 Community, social and personal services grew at the rate of 7.7 per cent.
 Construction activity grew by 10 per cent.
SECTORAL OVRVIEW
Infrastructure
Infrastructure is the foundation of economic, industrial and social
development. The multiplier effect of infrastructure development on the economy
is significant and its role as stimulator of economic growth is indisputable.
There is wide recognition of the critical importance of infrastructure

development to sustaining India's growth objectives. The goverent has recognized
its limitations in being a provider of infrastructure services, which entail huge
investment outlays, long gestation periods, project risk and long pay -back periods,
besides red-herrings such as differential and subsidized pricing, unmanageable cost
structures, surplus manpower and operational inefficiencies that made several
government projects nonviable. On the other hand, infrastructure projects are
quasi-commercial in character and cannot lend themselves completely to free
market mechanisms.
India's infrastructure has been expanding at a rapid pace to support the

economic growth rate of over 9 per cent. The six core infrastructure industries had
registered a robust increase of 9.6 per cent during March 2008 owing to accelerated
production in the steel and coal sectors.
During 2007-08, the six core sectors – crude oil, cement, electricity, coal,
petroleum refinery products and finished steel had registered 21.8% growth
compared to 16.6% in March 2007. Significantly, electricity generation had
registered 3.6% while coal production grew by 8.1% during April-March 2007-08.
228
Infrastructure growth potential

According to the consultation paper circulated by the planning commission, a
massive US$ 494 billion of investment is proposed for the eleventh plan period
(2007-12), which would increase the share of infrastructure investment to 9 per cent
of GDP from 5 per cent in 2006-07. This translates roughly into US$ 40 billion
annual additional investment.
The projected sector-wise shares are: 30.4 per cent in electricity, 15.4 per cent
in roads and bridges, 13.7 percent in telecommunications and 12.4 per cent in
railways among others. Significantly, 30 per cent of the total investment is expected
to come from the private sector (including public-private partnership). Indian
officials have invited foreign entrepreneurs to invest in the sector which would
require investments worth US$ 500 billion to sustain India's fast-growing economy.
New projects
For this, the government has already enacted many proactive measures like
opening up a number of infrastructure sectors to private players, permitting FDI
into various sectors, introducing model concession agreements, taking up new
projects like the National Highway Development Project, National Maritime
Development Programme among others. Some of the projects planned for the
next five years include the following:
 A 40,000-MW hydro power generation capacity planned for the 12th (2012-17)
and 13th (2017-22) Plans
 Additional power generation capacity of about 70,000 MW
 Dedicated Freight Corridors between Mumbai-Delhi and Ludhiana-Kolkata
 Capacity addition of 485 million MT in Major Ports, 345 million MT in Minor
Ports
 Modernisation and redevelopment of 21 railway stations
 Developing 16 million hectares through major, medium and minor irrigation
works
 Modernisation and redevelopment of 4 metro and 35 non-metro airports
 Six-laning 6,500 km of the Golden quadrilateral and selected national highways
 Construction 1,65,244 km of new rural roads, and renewing and upgrading of
existing 1,92,464 km covering 78,304 rural habitations.
FINANCIAL SERVICES
The banking sector had witnessed accelerated growth during 2006-07. The
faster growth of the banking sector in relation to the real economy had pushed up
229
the ratio of assets of scheduled commercial banks to GDP to 92.5 per cent at end-
March 2007. Broad based credit growth with some rebalancing in sectoral credit
allocation away from housing and commercial real estate sectors was observed
during the year. The accelerated growth of deposits mainly contributed by sharp
increase in term deposits, however, had obviated the need for unwinding the
investment portfolio to finance credit growth by banks, as was witnessed in the
previous year. However, as a percentage of both total assets and net demand and
time liabilities (NDTL), investment by banks in Government securities had
continued to decline. The consolidation of the banking sector continued with the
merger of three old private sector banks, bringing down the total number of SCBs
to 82 from 85 at end-March 2006.
Recent measures also include encouraging private sector investment in the

banking sector and permitting public sector banks to sell shares to the public.
Customer orientation is the most important focus area of banks, with retail
operations getting the maximum attention at the leading banks. Cash collection
facilities, e-banking, phone-banking, ATMs, and remote access centres in several
lesser developed locations in India are the new customer-friendly services being
offered by leading private banks to customers.
The insurance sector, previously a state monopoly has been thrown open for
private sector participation. This has led to a high degree of corporate activity in the
sector.
Over 9,000 companies have listed and traded on Indian stock exchanges,
estimated to be the highest in the world. There are two major exchanges, the
Bombay Stock Exchange, founded in 1875, and the National Stock Exchange set up
in 1992. Mumbai, being the financial capital of India, seats the major financial
institutions, stock exchanges, India's Central Bank, market watchdog – Securities
and Exchange Board of India (SEBI) - among others. This is in addition to having
branches in other business centres of the country like Delhi, Chennai, Ahmedabad,
Bangalore and Kolkata.
Service enterprises as defined by RBI

(a) Micro (Service) Enterprises: Enterprises engaged in providing/rendering of
services; whose investment in equipment does not exceed Rs. 10 lakh.
(b) Small (Service) Enterprises: Enterprises engaged in providing/rendering of
services; whose investment in equipment is more than Rs. 10 lakh but does
not exceed Rs. 2 crore.
230
(c) Medium (Service Enterprises: Enterprises engaged in providing/rendering

of services; whose investment in equipment is more than Rs. 2 crore but does
not exceed Rs. 5 crore.
(iii) The small and micro (service) enterprises include small road and water
transport operators, small business, professional and self-employed units ,
and all other service enterprises. Although medium enterprises are included
in the SME sector, credit to medium enterprises is not included under the
priority sector.
Credit flow to services sector:

The following table furnishes a glance at the credit dispensed by the
Commercial banks to the service sector.
Table-2
Finance to Services Sector by Banks at a glance

(Amount in Rs. Crores)
Outstanding as on Variation
S.No. Sector March 31 March 31 March 30 2005-2006 2006-2007
2005 2006 2007
1 2 3 4 5 6
Gross Bank Credit 10,45,954 14,43,920 18,41,878 3,97,966 3,97,958
(42.1) (39.2) (38.5) (31.8) (36.1)
Credit Exposure to 2,01,080 3,19,334 4,18,191 1,18,254 98857.0
Services ((36.28)) (22.8) (23.3) (29.7) (25.2)
Credit to Transport 8396.0 17341.0 26416.0 8945.0 9075.0
Operators (0.8) (1.2) (1.5) (2.2) (2.3)
Credit to Computer 2760.0 3625.0 5093.0 865.0 1468.0
Software (0.3) (0.3) (0.3) (0.2) (0.4)
Credit to Tourism 4199.0 7732.0 9704.0 3533.0 1972.0
and Hotels (0.4) (0.6) (0.5) (0.9) (0.5)
Credit to Professionals 9656.0 15283.0 23782.0 5627.0 8499.0
and others (1.0) (1.1) (1.3) (1.4) (2.2)
SUGGESTIONS
As per the RBI Guidelines in force, credit to SMEs comes under priority
sector lendings. Again, Service Enterprises are part of the micro, small and
medium enterprises as per the above definition. The service enterprises, by virtue of
231
their definition and obviously of small stature, the investment criterion being very
low. With the upper cap for investment criterion for small and medium enterprises
set at Rs.5 crores and Rs.10 crores respectively, and with no sub-targets having been
fixed for micro enterprises and service enterprises for compliance by banks, the
share of credit inflow enjoyed by the service enterprises, in the overall credit to the
priority sectors and the SME segment as a whole is likely to be very low.
As of now, the information and statistics relating to lendings to the micro

and small enterprises is not available in the data base of respective commercial
banks. Hence RBI must undertake to clearly publish in their various publications
the statistics of credit dispensed to these enterprises. This will serve as information
for the public in general as also for the aspiring micro and small entrepreneurs in
particular. Commercial banks shall also be advised to make available this
information in their annual reports. This step will go a long way in creating public
awareness about the credit inflow to the highly deserving and less privileged
enterprises in the micro and services sub-segment. It is not out of place to mention
that banks in general are content with fulfilling the RBI targets on priority sector
lending by focusing on big-ticket loans in the SME category. It will only be fair that
the Central Bank and the government would cause the necessary instructions to
render social justice expected of banks in encouraging the micro and service
enterprises as well. The objective of financial inclusion would well be served by this
measure.
Another pertinent issue is that the micro and service entrepreneurs, belonging
to the unorganized sector are less informed about the lending procedures of the
Banks in regard to compliance of conditions like submission of tax returns,
registration certificates, compilation of complex financial statements certified by
the auditors. It is high time that the lending procedures in respect of micro and
service enterprises are rationalized and simplified. RBI may examine whether the
micro and service enterprises are required to just comply with the KYC norms alone
meticulously and other information/ financial data be furnished by means of a
declaration with the loan application forms and the submission of documents in
this regard can be dispensed with.
Investment Scenario
With such huge opportunities opening up in this segment, private investment
has been growing at a scorching pace. Already telecommunications, construction
and power together had attracted a combined cumulative foreign direct investment
of US$ 7.553 billion over the period April 2000 to December 2007. In fact, these
232
three had accounted for about 16.68 per cent of the total FDI in the country during
this period.
Significantly, India Inc. had invested an overwhelming 81 per cent of their

planned total investment of US$ 104 billion during April-December 2007-08 in
developing core physical and service infrastructure. While steel (US$ 31 billion)
accounted for the largest share of total investment, other industries that attract
substantial capital expenditure include oil (US$16 billion), power (US$ 13 billion),
telecom (US$ 8.2 billion), real estate (US$ 6.2 billion) and cement (US$ 4.8 billion),
among others.
The central public sector enterprises in infrastructure sectors had also

recorded a 32.69 per cent rise in their planned investments to reach US$ 37.04
billion in 2008-09 over 2007-08.
Simultaneously, many dedicated infrastructure funds are coming up. In fact,

infrastructure has been instrumental in India emerging as the leading destination for
private equity in Asia (excluding Japan). Some of the major players in this segment
include 3i, Citigroup, Blackstone Atherstone India Invest, PFC, AMP Capital,
Macquarie Infrastructure Group, DLF-Laing O'Rourke among others. Funds
raised through infrastructure schemes by mutual funds are likely to exceed US$ 5.07
billion in 2007 against US$ 634.69 million in 2006. In fact, eight of the Lipper's
world's top ten infrastructure funds in 2007 were Indian equity funds.
Analysis
The boom in the services sector has been relatively "jobless". The rise in
services share in GDP has not been accompanied by a proportionate increase in the
sector's share of national employment. Some economists have also cautioned that
the service sector growth must be supported by proportionate growth of the
industry sector. Otherwise the service sector growth will not be sustainable. In the
current economic scenario it looks that the boom in the services sector is here to
stay as India is fast emerging as global services hub.
Service sector and significance

The importance of services sector enterprises has been magnified ever since
trade in services was included in the last concluded GATT Agreement. With the
new economic policies initiated in the country since 1991 and the conclusion of the
Uruguay round of GATT talks, liberalization and globalization of the services
sector in India has assumed greater significance. The sector has therefore emerged
233
as the fastest growing sectors of economy world over by virtue of its ability to
contribute higher employment generation and output. Over a period services
sector has overtaken the dominant segments like agriculture and manufacturing
activities. As per the analysts, the services sector has been growing at an annual rate
of above 25%. Services exports have grown considerably over the past 15 years
touching magic level of nearly $75 billion in 2007. The contribution of service
sector to Indian economy also stands very significant at 55%.
 In this context there is an urgent need to strengthen this sector to fully exploit
its potential in order to boost the economy in terms of raising the share of
India's service exports to 10% by 2015.
 In its last release of "State of the Economy Report", The CII had expected
the growth to continue at a rate of 11.2 per cent in 2007-08.
 Reflecting the confidence of the service industry, the provisional information
available from select scheduled commercial banks as on November 23, 2007
indicates that bank credit to services had expanded by 20.8 per cent on a year-
on-year basis, according to the RBI's third quarter review of the economy.
Important constituents in this growth have been transport operators, real
estate and non-banking financial companies. This is a redeeming feature.
 In fact, the prospect for India's services sector growth over the next year
continues to be robust, according to a survey by KPMG conducted across the
BRIC (Brazil, Russia, India and China) countries. Indian companies had the
highest positive outlook on profits among the BRIC countries. Also, Indian
companies were the second most optimistic lot in terms of increase in new
business over the next year.
Final Note
The impressive performance of the services sector was attributable largely to
the availability of skilled and cheap labour. However, the sustained acceleration in
services and the manufacturing activities is leading to incipient pressures on the
supply of good quality skilled lab our. While its demographic profile places the
country favourably in terms of manpower availability, there are reports of emerging
talent supply shortages. Only 10 per cent of the relevant age group is getting
enrolled into institutions of higher learning in the country as compared with 40 to
50 per cent in the most developed countries. Less than half of the secondary school
students opt for college education. Moreover, the quality of education imparted in
several colleges and universities in the country remains less than adequate to meet
the emerging demands for skilled professionals.
234
Concerted efforts in the direction of improving the physical, urban and social
infrastructure in the country would further entrench the growth of the services
sector.
References:
Reserve Bank of India (RBI)
Central Statistical Organization (CSO)
Secretariat for Industrial Assistance
Confederation of Indian Industry (CII)
State Bank of India (SBI)
235
20. FINANCING HIGH TECH FARMINING

ACTIVITIES - A VIABLE OPTION FOR
SUSTAINABILITY OF AGRICULTURE
G.G.K. Murthy*
Role of agriculture in Indian Economy

The role of agriculture in Indian economy cannot be under estimated, for the
reason that it is the mother of the economy and gives food and bread in physical
form for the country's people. Agriculture continues to be vital for our economy,
even today, as about 70% of our population depends on agriculture either directly
or indirectly for their livelihood and agriculture contributes about 25% to the GDP.
But, it is disturbing to note that while the economy has taken a giant leap to about
10% over the recent decade, on the back of industry and services, agriculture trails
back growing at a snail pace. While the GDP touched a growth of 9.4% last year,
the agriculture sector grew only at about 5% (with signs of further dip) during the
same period. This is not a healthy symptom for our economy aspiring to grow in
double digits. Such an achievement is doubtful, without a still more better
contribution from the agriculture sector. The agriculture and allied sector directly
impacts the output, wages, employment and consumption patterns of a vast
multitude of the population. Though the share of agriculture in the GDP has
declined from a little over 36 per cent in the 1980s to 18.5 per cent in 2006-07, the
number of people dependent on agriculture for their food and livelihood have
remained largely unchanged.
Since the independence, the government has brought many reforms and
rationalized the policies towards easing the flow of credit and investments into the
farming sector. Crores of rupees have been pumped into the system to keep the
farmers engaged on the agriculture and allied activities.
Commercial banks, particularly the public sector banks, have been the major
stake holders who purveyed credit to the sector under numerous schemes.
Following are vital measures initiated by government and regulator of the economy
for giving a boost to the agriculture sector.
______________________________________________________________
* Consultant, Advisor and Banking Resource, HYDERABAD,
e-MAIL: gopalkmurthy@rediffmail.com, Tel.No.23737335 and 9347528867
237
Credit inflow to agriculture and allied activities

In the above context, a number of steps have, been taken by the Reserve Bank
and the Government of India to facilitate credit flow to the agriculture sector.
Towards this end, the Union Finance Minister had announced some measures on
June 18, 2004 for doubling the flow of credit to the agriculture sector within a
period of three years. The actual disbursement of credit by banks had exceeded the
targets during all the three years up to 2006-07. Carrying forward this measure, the
Union Finance Minister has fixed a target of Rs.2,25,000 crore for disbursements by
banks for 2007-08. NABARD, the apex bank for agriculture and rural development,
has also come with strategies, inter alia, covering the formulation and circulation
of model bankable schemes and location specific bankable schemes to the
financing banks. NABARD also proposes to identify highly potential zones for
undertaking investment activities in various states and organise interactive
workshops in these potential zones
Role of RBI
Based on the draft Technical Paper submitted by the internal Working Group
(Chairman: Shri C. S. Murthy) and the feedback received thereon from the
governments, banks, financial institutions, non-banking financial companies,
associations of industries, media, public and the Indian Banks' Association, RBI has
issued revised guidelines on lending to the priority sector, revised on April 30, 2007.
The guiding principle of the revised guidelines on lending to the priority sector has
been to ensure adequate flow of bank credit to those sectors of society/economy
that impact large segments of the population, the weaker sections and to the sectors
which are employment-intensive, such as agriculture and tiny and small enterprises.
The broad categories of advances under the priority sector now include agriculture,
small enterprises sector, retail trade, micro credit, education and housing, subject to
certain limits.
i) In order to overcome the crowding out effect against small loans, particularly
to agriculture, big-ticket loans/ advances have been kept out of the direct
agriculture segment (loans/advances in excess of Rs. 1 crore granted to
corporates, will get only one-third weightage for being counted under direct
agriculture).
(ii) With a view to encouraging direct and retail lending by banks, intermediation
has been generally discouraged by keeping loans for on-lending, barring a few
categories, out of the priority sector fold and by phasing out investment in
bonds of financial institutions from the priority sector.
(iii) Some of the banks had a 'nil' or negligible net bank credit (NBC) and were
engaging mostly in non-funded business (derivatives). This distortion has
238
been sought to be corrected by linking their targets to the credit equivalent of

their off balance-sheet business.
Role of NABARD
NABARD as an apex development bank with a mandate for facilitating the
credit flow for promotion and development of agriculture and other priority
sectors has been working in the direction of sustainable rural development and
secure prosperity of rural areas. In discharging its role as a facilitator for rural
prosperity NABARD is entrusted with providing refinance to lending institutions
in rural areas, apart from helping the state governments in reaching their targets of
providing assistance to eligible institutions in agriculture and rural development.
With its effective overseeing and monitoring of the implementation of the
Government of India's programme to double the flow of credit to agriculture over
a three-year period from 2004-2005, the total disbursement of credit had reached
Rs 1,25,309 during 2004-2005. Ground level credit flow to agriculture and allied
activities had reached Rs 1,57,480 crore in 2005-2006. Refinance disbursement to
commercial banks, state cooperative banks, state cooperative agriculture and rural
development banks, RRBs and other eligible financial institutions aggregated Rs
8,622.37 crore. As on 31 January 2007 through the Rural Infrastructure
Development Fund (RIDF), Rs,59,795.35 crore have been sanctioned for 2,31,702
projects covering irrigation, rural roads and bridges, health and education. The
Bank will also provide direct lending to any institution as may be approved by the
Central Government.
Recently announced National Strategies for accelerating the flow of credit to

farm sector include doubling the flow of agricultural credit in 3 years, increase in
disbursement from Rs.80,000 crore in 2003-04 to Rs.1,05,000 crore in 2004-05,
financing of at least 100 new farmers and 2-3 new investment projects in various
sub-sectors of agriculture by each of the rural and semi-urban branches of the
Commercial Banks.
In view of the growing volume of farm credit, the demand for refinance from
NABARD is expected to increase. In order to augment the resources of NABARD,
the Union Budget 2007-08 proposed to allow it to issue rural bonds to the extent of
Rs.5,000 crore, guaranteed by the Government and eligible for suitable tax
exemption.
In view of the renewed focus on faster, more broad-based and inclusive

growth, reversal of the deceleration and containment in volatility in agricultural
growth remained the highest priority of the Government. A number of steps were
239
taken to improve the availability of irrigation facilities, crop yields, flow of

institutional credit and rural infrastructure while also providing some relief to debt
stressed farmers.
The credit flow to the agricultural sector had exceeded the target for the third
consecutive year during 2006-07. As against the target of Rs.1,75,000 crore, the
actual disbursements of farm credit by the banking system in 2006-07 were
Rs.2,03,296 crore. For 2007-08, the Union Budget has fixed a target of Rs.2,25,000
crore as farm credit with an addition of five million new farmers to the banking
system. The Union Budget, 2006-07 had provided for the continuance of the two
per cent interest subvention scheme for short-term crop loans up to Rs.1 lakh
granted by banks in kharif and rabi of 2005-06. Furthermore, in accordance with
the Union Budget announcement, crop loans up to a principal amount of Rs.3 lakh
were provided at seven per cent rate of interest beginning kharif 2006-07 for which
the Government had provided interest rate subvention of two per cent. The Union
Budget, 2007-08 announced the continuance of this scheme for 2007-08 also. A
National Agricultural Innovation Project, launched in July 2006, was aimed at
enhancing livelihood security by involving the farmer groups, Panchayati Raj
institutions and the private sector. In order to improve the flow of credit from the
cooperatives, a package for revival of the short-term rural cooperative credit
structure was announced in January 2006. The Union Budget 2007-08 asked the
regional rural banks to undertake an aggressive branch expansion programme and
open at least one branch in the 80 uncovered districts of the country in 2007-08.
The darker side of the picture

The general view of analysts and economists is that the financial sector
reforms have pushed the farming to the back seat of the economy. This is the sad
part of the impact of 'globalisation' on Indian economy. No doubt, reforms should
be welcomed. Yet the campaigners of economic liberalization seem to have
overlooked or ignored the significance of agriculture in the Indian economy and
have done the least for this segment. Despite the so called urbanization and rise of
the urbanized services, in the rural pockets too, there is no substitute to agriculture
and related activities, for the simple reason that majority of Indian population live
in villages. Things have not changed drastically towards better in the villages,
whatever be the reason. Globalization, though has created some employment
opportunities over the last decade, the pleasure is off set by the pain caused by the
trend of rationalization and down sizing of work force in many organizations.
Growing inflation and dwindling employment opportunities in urban towns and
240
metros cities, should prompt one to realize the importance of the 'real sector' as the
back bone of our economy and strengthen it to make farming activities sustainable
services.
There are several constraints that cripple the sector in unleashing its full
potential and reap the optimum yield. To illustrate a few, the cultivation activities
are subject to the vagaries of nature and unfortunately the irrigation facilities
created through different projects and plans in the country have not come handy in
this regard. And the farmers even today are dependent on monsoon. There are
variations in different agro climatic zones resulting in crop failures or low quality of
yield which again has a bearing on the price of the produce. Lack of equitable price
for the grains produced by the farmers and exploitation of farmers by numerous
intermediaries is another discouraging factor. Grain fields have been slowly
disappearing over a period due to conversion of agriculture lands for industrial and
dwelling purposes due to increasing culture of urbanization. The third generation
citizens in villages are shifting from agriculture operation, preferring jobs and
business in urban towns and metros. Spiraling costs of cultivation and scarcity of
fertilizers are deterring the farmers to go in for cultivation activity.
These issues are hampering the sustainability of agriculture as a viable

economic activity to a large extent. Consistency and cohesiveness in policies
formulated and implemented are the missing link in the whole system and do not
appear to be creating congenial environment for the flourishing of agriculture. A
great deal of confusion prevails all over, particularly among the commercial banks
who are the real well wishers of the farmers. As a result of these factors agriculture
in our economy has lost its glory.
The Imperative
It is imperative that the growth of the agriculture sector is made as important
for the economic growth of the country as that of manufacturing activities and
services. To fall in line with the expectations and aspiration to step up the
effectiveness of agriculture and its contribution to economy, it is worth while to
explore the high tech farming activities and reap optimum benefits, instead of
hanging on to conventional activities that fail to yield desired fruit. To this end it is
expedient that the whole gamut of agriculture management is revamped with a view
to restoring the capacity of agriculture as a viable segment of the Indian economy.
Following are some of the high tech farming activities, which are gaining
popularity in the recent times and yield good and assured returns to farmers. Banks
241
are also willing to encourage these activities which are different from the
conventional agricultural activities like crop loans, poultry, dairy activities which
have reached near saturation points. These 'high-tech agricultural projects are
broadly classified into three categories:
I. Bio-tech projects like

a. Tissue culture
b. Floriculture
c. Hybrid seeds
d. Apiculture
e. Food processing
f. Animal vaccines
g. Aquaculture
h. Bio-mass utilization
i. New bio-products
j. Industrial Enzymes
II. Hi-tech agricultural production projects like

i. Drip and sprinkler irrigation
ii. Controlled environment agri. Production
iii. Hydroponics
iv. Unconventional agricultural products
III. Post harvest and processing projects like :

A. Cold storages
B. Marine food processing
C. Meat / poultry processing
D. Manufacture of malted food
E. Manufacture of resins
F. Improved packaging.
The above activities in agricultural are new and are being given a good try in
many of the states of India. These activities deploy the technologies developed for
agriculture. Therefore they are regarded as high tech projects. These are considered
to be on par with sophisticated industrial activities and can be regarded as Industrial
agriculture.
242
Another promising sector is biotechnology, which enjoys excellent potential

in India and abroad. Exploration of bio-technology in agriculture is a new concept
and is gaining big acceptance world over.
WINGS OF BIO-TECHNOLOGY
Genetic engineering / recombinant DNA
It is the technique of introducing hybrid DNA containing genes of interest
into organisms (Escherichia coli, Bacillus subtilis or yeast) in order to make the
organisms produce enzymes, amino acids, hormones and proteins.
Bio-processing
It involves conversion of raw material substrate into a product using
microbial fermentation or enzymes. The antibiotics, enzymes, amino acids and
other specialty chemicals can be produced on an industrial scale with the
introduction of recombinant DNA. Continuous sensor devices and the interfacing
of process control with computer is being attempted to ensure automation and
continuous processing.
Hybridoma technology
Under this, antibodies are proteins produced in vertebrates in response to
foreign proteins or substances. Conventional antisera consist of a number of
antibodies. Hybridoma technology allows the production of highly specific
antibodies from single clones of cells termed monoclonal antibodies (MAB).
MABs, being very specific are utilised in diagnostic system; in vivo diagnostic
imaging for detection of tumor cells in therapeutic including immunization and
immunotox; in targetable drugs for tumor cells; in tissue typing; in purification and
separation of biological molecules, etc.
Protein Engineering
It involves of the modification of protein structures to improve the functions
of proteins or to design entirely new proteins. It could modify enzymes to
improve their tolerance of temperature or alter pH optimum or other
characteristics and even produce therapeutic proteins. Progress in protein
engineering is dependent on development in other areas such as X-ray, diffraction
methods, computer molecular modeling and chemical synthesis of DNA.
243
Bio-informatics
It covers fields such as use of computers in protein engineering, Software for
DNA sequence analysis, automated DNA Synthesisers, Automated Process
Control, etc. The GOI has set up the National Biotechnology Board which has
chosen genetic Engineering, photo-synthesis, tissue culture, enzyme engineering,
alcohol fermentation And immuno-technology as areas of immediate interest.
Agricultural Industrialisation
Unlike the other sectors of industrial activity, agriculture can not be
transformed directly into a branch of industrial production. There is no industrial
alternative to the biological transformation of solar energy into food. The
industrialization of agriculture has therefore taken a decisively different path.
Different aspects of agricultural production therefore became transformed into
specific sectors of industrial activity. The discontinuous but persistent undermining
of discrete elements of agricultural production process, their transformation into
industrial activities and their re-incorporation into agriculture as inputs can be
termed as 'appropriationism'.
The emergence of food industry represents similarly discontinuous but a

permanent process to achieve the industrial production of food which can be
termed as 'substitutionism'. The rhythms of 'appropriation' and 'substitution' are,
however, determined by the levels of science and technology, mechanical, chemical
and biological with successive innovations redefining the relative weight of natural
and industrial processes with the overall food system.
Modern 'bi-technology' represents a revolutionary new phase in the

industrialization of this food system which can best be understood within the larger
history of 'appropriationism' and 'substitutionism'.
Semi-conventional activities in farm sector

MARKETING AND STORAGE
"A grain not properly saved is a grain not produced" is the slogan for the save
grain campaign which clarifies the need for proper storage. The grain is to be
protected from pests and diseases and rodents etc. Further, proper climatic
conditions like humidity, temperature are to be maintained to store the produce.
Keeping in view the importance, the government of India is encouraging the

construction of rural godowns and cold storages in private structure by providing
subsidy. Banks may consider loans either for storing the farmer's own produce or
for private warehouses.
244
MISCELLANEOUS ACTIVITIES
The following activities are included :
Bio-Gas plants:
In the digester (a component of bio-gas plant) organic matter like cow- dung,
agro wastes, etc., will be subjected to bacterial action and in the process methane gas
is produced. Methane gas may be used as fuel for burners in the kitchen , lighting
the gas lights, fuel to run the (diesel) engines, etc. Non-conventional energy
Development Corporation looks after the development of bio-gas plants.
Role of IT
Lack of proper information regarding the market prices of such produce
makes it difficult for the farmer to sell his produce profitably. A possible solution
could be the private and public partnership in the integration of IT in agriculture,
which could deliver relevant information to farmers, thereby enabling them to seek
better prices for their produce.
Though India does not have paucity of agricultural scientists or agricultural

research labs where high yielding seeds and scientific methods of cultivation are
evolved, the real problem is the information and communication gap ( between
farmers and those involved in research).
The e-choupal experience

It is a very valuable information and a noteworthy example. The e-choupal
experience inspires similar innovations to follow. In June 2000, ITC-IBD (ITC's
International Business Division) introduced the concept of e-Choupal, which
became the first of its kind of initiative taken by any corporate in India, aimed at
improving and uplifting the farmers' lives. Importantly, it became the first-ever
attempt to connect IT with agriculture. Six years down the line, as the talks of a
second Green Revolution gather pace, amidst the grim agriculture scenario in the
country, it is increasingly becoming clear that the country needs more e-choupal-
like initiatives. In other words, India needs to effectively harness the potential of
ICT (Information and Communication Technology) in order to revive the
agriculture sector and usher in the era of e-agriculture.
The project e-Choupal has made waves covering nine states and around
36,000 villages. Six thousand e-Choupal centres have been installed, empowering
around 3.5 million people. These centres deliver real-time information and
customized knowledge to improve the farmers' decision-making ability, thereby
aligning the farm output to market demands in a better way, securing better quality,
245
productivity and improved price discovery. This also helps the farmers to access
higher quality farm inputs at lower cost. The model reduces transaction costs by
providing a direct marketing channel. The e-Choupal website is now helping
farmers discover the best price for their produce at the village itself . At present, the
network offers information regarding commodities like soya and wheat. It aims to
cover over 1,00,000 villages and reach out to more than 10 million e-farmers by the
next decade.
The AIC experience

Another interesting project is the one initiated by the Agriculture Insurance
Company of India (AIC). Presently, the satellite is being used by agriculture
insurance companies to locate crops which are damaged and other valuable insights
related to the agriculture field in quick time. This insight helps in assessing the crop
status through out the study area. We should invite many similar inventions and
innovations in agriculture in the coming times.
Constraints Galore
The state of agriculture research and extension or communication in the
country, however, is the major stumbling block for the further growth of the
sector. Unless agriculture research reaches the doorstep of farmers, any amount
of relaxation in terms of subsidies and credit will be of no avail . With the help of
IT, the extension technology must be revamped. IT should be deployed much more
in providing timely guidance to the farming community. The agriculture sector
should take advantage of the emerging technologies that are capable creating
wonders, to sustain its due place in the economy. Exploring hi tech activites in the
farm sector would certainly be a viable option to sustain the effectiveness of this
sector to secure a respectable place on the Indian economic scenario.
CONCLUSION
Our country is blessed with diverse agro-climatic conditions and enormous
unexploited resources and untapped human potential. With the opening of the
economy, Indian agriculture has been transformed from its subsistence level to
commercialised nature. In view of its many advantages in the global market, Indian
agriculture has become a focal point for application of hi-technology.
I would like to conclude this paper with the remarks of the Hon'ble Finance
Minister of India, Shri P. Chidambaram “Double-digit growth is simply a function
of three numbers. Agriculture must grow at 4, services at 12, manufacturing at 12, in
order to achieve 10% growth.”
246
About The Institute About The Author
National Institute for Micro, Small and Medium D r. G . U . K . R a o , c u r re n t l y
Enterprises (ni-msme), a pioneer researcher and a designated as Director for
premier Institute in the field of MSME, is playing a major School of Enterprise
role in leading the MSME towards success and prosperity
Development (SED) of National
by assisting the Government in formulating policies and
helping the practicing and potential entrepreneurs Institute for Micro, Small and
through a host of services like research, consultancy, Medium Enterprises [NI-
information, training, education and extension. The MSME] is a result oriented
Institute is a training ground for senior technocrats, professional with over 38 years
bureaucrats and bankers who come here to gain expertise experience across Training,
and knowledge in order to equip themselves with latest Te a c h i n g , R e s e a r c h &
developments and streamline their operations. Development Studies in MSME sector
Set up in 1960, ni-msme has made valuable contributions Dr. Rao has a wide range of expertise spanning across
by creating an impressive record of achievements in the study of regional planning, promotion of agro and food
developing world, enabling other developing countries processing industries, development of small and micro
to get the benefit of the Institute's facilities and expertise. enterprises, quantitative analysis, feasibility studies,
The Institute updates its activities from time to time to project formulation, etc. He has led and participated in a
meet the demands of emerging situations. number of research studies and projects especially
The Institute has contributed several research and impact studies, project evaluation and industrial
consultancy services in MSME area apart from training. potential surveys, coordinated scores of long-term and
Among its many achievements are its partnering with short-term training programmes and is active in other
UNIDO and other organs of the UN, leading MSMEs domains too guiding research scholars, delivering guest
towards success through all weathers, and continuing to lecturers in his areas of expertise, etc. He has been
maintain the Institute in self-supporting mode for the past involved in preparing vision document for empowerment
ten years. of women through enterprise development in Mauritius.
Coordinated with the project “SME policy in India”
ni-msme has made many significant contributions sponsored by UNESCO. Conducted study on “Impact of
towards enterprise promotion both nationally and
WTO on Glass and Ceramic Industry in India” as
internationally. The Institute facilitates information that
helps potential entrepreneur who requires it for UNIDO National Expert, 2002-03 on individual
promotion of business activities through its capacity.
Documentation Centre (SENDOC). He has been trained by UNIDO on cluster development
The Entrepreneurship and Skill Development and monitors activities of National Resource Center for
Programmes, meant to encourage starting up self and Cluster Development (NRCD) giving direction to the
wage employment ventures under ATI scheme of Ministry core team members in their day-to-day functions based
of MSME for the educated unemployed youth are also on his rich experience in the field of enterprise
being conducted by the Institute. promotion. He coordinated a National Seminar on
MSME Cluster Development organized at New Delhi
Located in a sprawling and enthralling campus amidst a during January 2008.
rich natural setting, ni-msme is well equipped with both
physical and academic state of-the-art infrastructure. He is honorary visiting faculty at several prestigious
institutions. Dr. Rao has published over 30 research
The Management of the Institute rests with the Governing
papers in reputed Indian journals on a variety of
Council appointed by the Government
enterprise related topics, attended and contributed
of India. The governing body acts through the resident papers at seminars and workshops, authored/co-
Director General. The Present Director General is authored several published and unpublished works and
Mr. M. Chandrasekhar Reddy has a wide range of secular interests. His other
publication is a book on “Sustainable Development of
SMEs: New Policy Initiatives”, which is well received by
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EMERGING TRENDS

National Institute for Micro, Small and Medium Enterprises (ni-msme)

National Institute for Micro, Small and Medium Enterprises

Copyright  2013, ni-msme

No part of this publication may be reproduced or distributed in any form or by any

Taking note of this, the Government of India, over the past

In this context, the volume “Emerging Trends in Services Sector”, a

Publishing a volume always calls for coordination and cooperation on various

I am grateful to the Ministry of MSME, New Delhi for graciously enabling

Dr. G.U.K. Rao

S No Title Page Nos

Table 1: Indian Economy – Snapshot

Chart-1: Indian Economy

II. Devising a proper Classification of Services

The National Industrial Code (NIC) classification of the Central Statistical

Organization's (WTO's) List of Services sheds important light on the various

According to Williamson and Lindert (1980) “services sector is defined more

International trade in goods is a relatively simple idea to grasp: a product is

also defines four ways (or “modes”) of trading services:

III Services Sector Contribution to Indian Economy

Table-2: Sectoral Shares in GDP (in per cent)

# includes forestry and logging, fishing, including mining and quarrying;

Chart -2: Sectoral Shares in GDP (During1950-51 to 2010-12) (in %)

Chart-3: Rate of Growth of GDP at factor cost

Table4: Services sector's share in GDP (in per cent)

Chart –4: Service sector share in GDP of India [2001 - 2012]

In the above diagram it is displaying regression equation i.e.

Table-5: Share of different services categories in GDP at factor cost

2000-01 2005-06 2006-07 2007-08 2008-09 2009-10^ 2010-11@ 2011-12* 2012-13**

Six of the seven major components of non-factor services in the invisibles

Chart-5: Share of different services categories in GDP at factor cost

IV. Key drivers of the services sector

Information Technology Industry

services, telecommunications, computer and information services, and personal,

According to the World Trade Organization, India ranked sixth in exports of

In contrast, India ranked 19th for its share of merchandise exports,

The Information Technology industry has achieved phenomenal growth

Financial Services-Banking and Insurance

Some of the prominent insurance companies are:

 ICICI Prudential Insurance Co Ltd

Chart- 6: Growth rates of Services Sector in Indian Economy

The remarkable performance of the services sector as a whole has been

Table- 6: Sectors attracting highest FDI flows (Rs. crore)

Sector Amount of FDI Inflows Cumulative

Source: Department of Industrial Policy & Promotion.

Chart-7: Cumulative Share of FDI In-flows in Services Sector

Housing & real

V. Services provided and expected outputs

Department of IT (DIT) is the nodal organisation in the country, responsible

 A 'National Taskforce on Information Technology and Software

states and Sikkim for socio-economic development of the region to provide

The Government has identified growth of Electronics and IT Hardware

The rapid advances in ICT have far-reaching effects on both industrial

As per the estimates of NASSCOM, India's IT and Business Process

Table-7: India's Global Trade of Services US $ (Billion)

Chart-8: India's Global Trade of Services

Table -8: India's Services Exports (Share in per cent)

Travel Transportation Insurance Software Non-software Total

2006-07 12.4 10.8 1.6 42.4 32.5 73,780

Chart-9(a): Break-up of India's services during 2000 to 2009 (in %)

Health has been recognised as an important component in the process of

Table -9 : IT-BPO sector and India's Inclusive Growth

Financial services A large chunk of Indian households are unbanked.