Services Sector

Services Sector

Engineering graduates are steering the service industry

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Na

Mains level : mismatch between engineering graduates' skills and service sector demands

Role of Service Sector in Indian Economy - GeeksforGeeks

 

Central Idea:

  • Article discusses the growing significance of the services sector in India’s economy and the demand for skilled manpower. Proposes the introduction of a generic “service engineering” course to address the need for professionals adept at navigating modern service-oriented industries.

Key Highlights:

  • Services sector contributes significantly to India’s Gross Value Added and employment.
  • Engineering graduates increasingly employed in non-technical roles within the services sector due to adaptable skills.
  • Lack of generic courses tailored to service sector needs, leading engineers to fill entry-level service jobs.
  • Proposal for “service engineering” course blending technical proficiency, soft skills, and industry-specific knowledge.
  • Integration of AI and IoT to enhance employability.
  • Emphasis on diverse curriculum covering service delivery fundamentals, process improvement, and client management.

Key Challenges:

  • Resistance from traditional education systems and institutions.
  • Development and implementation of comprehensive curriculum.
  • Ensuring affordability and accessibility, especially in tier 2 and 3 cities.
  • Overcoming societal biases and stereotypes about career paths.
  • Adapting to rapid technological advancements and industry changes.

Main Terms:

  • Services sector
  • Engineering graduates
  • Service-oriented roles
  • Soft skills
  • Technical proficiency
  • Service management principles
  • Process improvement methodologies
  • Client management

Important Phrases for answer writing:

  • “Service engineering”
  • “White-collar service environments”
  • “Dynamic service landscape”
  • “Process reengineering”
  • “Critical thinking frameworks”
  • “Virtual learning environments”
  • “Inclusivity in education”
  • “Services-driven economy”

Quotes:

  • “Engineers are increasingly finding employment not solely based on a precise match of skills but due to the adaptability and problem-solving mindset ingrained in their education.”
  • “Just as an engineering education equips the student with the basic skills to find a vocation in an industrial setup, we need an equivalent services skill education.”
  • “The introduction of such a course — let us call it ‘service engineering’ — holds transformative potential, offering a pathway to enhanced employability, improved service delivery, and sustained economic growth.”

Anecdotes:

  • Example of engineering graduates transitioning into non-technical roles within the services sector, such as banking, insurance, and retail.
  • Mention of the increasing participation of women in the workforce and how a service engineering course could support their work-life balance.

Useful Statements:

  • “The rising prominence of the services sector has opened avenues for engineers to be gainfully employed in white-collar jobs.”
  • “Such a course can offer a holistic blend of technical proficiency, soft skills, and industry-specific knowledge essential for success in service-centric roles.”

Examples and References:

  • Data on employability of engineering graduates.
  • Commissioned report on engineering seat enrollment.
  • Periodic Labour Force Survey (PLFS) data on women’s participation in the workforce.

Critical Analysis:

  • The article effectively highlights the mismatch between engineering graduates’ skills and service sector demands, proposing a “service engineering” course as a solution. However, it lacks in-depth analysis of challenges and implementation strategies, especially regarding soft skills integration.

Way Forward:

  • Collaborate with industry experts for curriculum design.
  • Offer scholarships for affordability and accessibility.
  • Conduct awareness campaigns to challenge biases.
  • Establish partnerships for practical training.
  • Continuously update the curriculum to match industry changes.

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Services Sector

Building an India for manufacturers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : India's services sector growth, key players, Manufacturing sector Potential and Future Prospects

What’s the news?

  • In a major economic development, India’s service exports surged by $60 billion over three years, with diversification beyond IT services. Additionally, domestic tech startups are poised to expand into manufacturing, potentially revitalizing the sector and bolstering job creation.

Central idea

  • Two significant transformations are reshaping India’s services sector, potentially defining the nation’s growth trajectory. These changes involve the rapid evolution of service exports and the transformation of domestic services. As both of these sectors modernize, they are not only changing in form but also venturing into manufacturing, offering exciting prospects for India’s economic future.

India’s services export sector

  • In recent years, India’s service exports have undergone a remarkable expansion, delivering an additional $60 billion in annual revenues compared to just three years ago.
  • The catalyst behind this surge was the COVID-19 pandemic, which spurred a surge in demand for IT services due to the widespread adoption of remote work arrangements.
  • However, India’s service exports have transcended their traditional roles, shedding their identity as merely call centers or software solution providers.
  • Instead, India now proudly offers an extensive array of professional services, encompassing accounting, legal, HR, business development, design, and cutting-edge R&D.

Key players

  • Large IT Firms: Large information technology (IT) companies have traditionally been prominent players in India’s services export sector. They continue to play a significant role in providing IT services, software solutions, and technology-related services to clients worldwide.
  • Mid-sized IT Firms: While large IT firms remain influential, mid-sized IT companies have been gaining market share in the services export sector. These mid-sized firms have demonstrated their ability to compete and thrive in the global market, contributing to the sector’s growth.
  • Consulting Firms: Consulting firms are another crucial category of key players. They have expanded their service export portfolios to include a wide range of advisory and consulting services, catering to the needs of global clients.
  • Global Capability Centers (GCCs): India boasts the world’s largest share of Global Capability Centers (GCCs). These entities, initially focused on providing tech support to multinational parent companies, have evolved into offering higher-value-added services such as legal, audit, design, and research and development (R&D). GCCs have become integral to India’s service export landscape.

What are Global Capability Centers (GCCs)?

  • The GCCs are specialized centers or units established by multinational corporations (MNCs) in India to provide a wide range of services to their parent companies and global operations.
  • Originally, GCCs primarily focused on offering technical and IT support services to their parent MNCs.
  • However, over time, they have evolved and expanded their service offerings to include higher-value-added functions and services.
  • In 2022–23, around 1,600 GCCs made up a market of $46 billion, employing 1.7 million.
  • Although professional and consulting services exports account for only a quarter of India’s services exports when compared to IT services, they have experienced the fastest growth with a compounded annual growth rate (CAGR) of 31% over the last four years. This is followed by computer services with a 16% CAGR and R&D services with a 13% CAGR.

Future Prospects

  • Permanent Shift Towards Remote Work: The enduring trend of remote work is expected to drive ongoing demand for IT services.
  • India’s Diverse Skill Portfolio: India’s workforce boasts a wide range of skills, from engineering to design, catering to a broad spectrum of services. This diversity positions India as a versatile service provider capable of meeting evolving global demands.
  • Cost Competitiveness: India’s cost-competitive advantage in providing high-quality IT services is likely to endure. As businesses seek cost-effective solutions without compromising on quality, India remains an attractive destination for outsourcing IT services.
  • Tipping Point for Stronger Growth Trends: India is at a crucial juncture where the growth trends in services exports are expected to become even more robust.
  • Government Support and Policy Initiatives: The Indian government’s initiatives to promote the IT and services sector, such as the Digital India campaign and the development of technology parks, will likely continue to foster an enabling environment for growth.
  • Comparison with Other Economies: India’s growth trajectory resembles that of countries like the US, the UK, Germany, and Ireland, which saw rapid acceleration in services exports once they reached a certain size. This suggests the potential for even higher growth.

Manufacturing Sector Potential

  • Digital infrastructure can alleviate common challenges faced by small manufacturers.
  • Start-ups can facilitate access to formal credit, cheaper raw materials, larger markets, improved warehousing and logistics, and enhanced quality control for small manufacturers.
  • Evidence shows that domestic services sector companies, particularly in transport services, procurement support, and e-commerce, are venturing into manufacturing.

Conclusion

  • India’s services sector is at an exciting crossroads, with both services exports and domestic services undergoing transformation. Embracing this potential requires proactive policy measures and continued innovation in the services sector to propel India toward higher economic prosperity.

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Services Sector

PMI suggests Services activity hit 12-year high

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Tertiary Sector, PMI

Mains level : India's services economy

services

The Purchasing Managers Index (PMI) for the services sector in India rose to 55.3 in February. This marks the highest level of the PMI in the services sector in 12 years, driven by an increase in new business orders and employment.

Service Sector

The service sector, also known as the tertiary sector, includes a wide range of economic activities that are focused on providing intangible goods and services to customers.

Some examples of activities that fall under the service sector include:

  1. Hospitality and tourism: This includes activities such as hotels, restaurants, travel agencies, and tour operators.
  2. Retail and wholesale trade: This includes businesses that buy and sell goods, such as supermarkets, department stores, and online retailers.
  3. Financial services: This includes banks, insurance companies, and investment firms.
  4. Professional and business services: This includes activities such as legal services, accounting, consulting, and advertising.
  5. Information and communication technology: This includes activities such as software development, telecommunications, and data processing.
  6. Healthcare and social assistance: This includes activities such as hospitals, clinics, nursing homes, and social services.
  7. Education and training: This includes activities such as schools, colleges, universities, and vocational training.
  8. Transportation and logistics: This includes activities such as shipping, warehousing, and distribution.

Purchasing Managers’ Index

  • PMI is an indicator of business activity — both in the manufacturing and services sectors.
  • The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.
  • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
  • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

How is the PMI derived?

  • The PMI is derived from a series of qualitative questions.
  • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

How does one read the PMI?

  • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
  • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
  • If the figure is higher than the previous month’s then the economy is expanding at a faster rate. If it is lower than the previous month then it is growing at a lower rate.

Recent trends in Services PMI

  • For the 19th straight month, the headline figure was above the neutral 50 mark, denoting expansion.
  • There was substantial moderation in cost pressures as input prices increased at the slowest pace in almost two-and-a-half years and output charge inflation softened to a 12-month low.
  • Still, capacity pressures remained mild and jobs rose only marginally.

 

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Services Sector

Consumerism should be replaced by minimalism

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Minimalism as way of life

Consumerism Context

  • The COVID-19 pandemic brought shifts in consumer behaviour. The world witnessed a shrinkage of demand. But post-pandemic recovery and suppressed consumerism is now leading to ‘revenge shopping’.

What is consumerism?

  • Consumerism is a social and economic order that encourages the acquisition of goods and services in ever-increasing amounts.

What is minimalism?

  • Minimalism is owning fewer possessions. It is intentionally living with only the things we really need those items that support our purpose. Removing the distraction of excess possessions to focus more on those things that matter most.

ConsumerismWhat Is Revenge Shopping?

  • Revenge shopping occurs when a customer who previously could not get access to certain goods or services for a period of time suddenly has access. It can also occur when customers have been deprived of other events or happenings.

ConsumerismThe symptoms of excessive consumerism

  • You buy more than you planned: if you set out with a plan of what you need to purchase but consistently come back with more than you anticipated, then you’re falling in the consumerist trap.
  • You run out of storage space for your stuff: sometimes it can’t be helped if you live in a tight area or you’re disorganised. But suppose you’re in a reasonable situation and things you bring in don’t have an allocated home. In that case, you’re likely living excessively.
  • You rely too much on return policies: returning an item is useful. Particularly if you need to test a product for the intended purpose, be it sizing for clothes or a tool for a building project. However, suppose you’re depending on returns for purchases. In that instance, you’re not sure you need it, or if you can’t afford it, then you’re probably suffering from too much consumerism.
  • You routinely seek approval for your purchases: getting feedback on purchases can be reassuring, especially if you’re indecisive. Yet, there’s a difference between picking someone’s brain before buying and looking to justify your purchase after the fact. If you’re seeking post-acquisition approval, you probably don’t need the item.
  • You mistakenly buy things you already have: not much to say here. If you’re getting things only to realise you already have it, then you’re probably deep in a consumerist cycle.
  • You buy things on credit: if you’re strategic and disciplined, you can buy things on credit cards to acquire points and benefits. However, if you’re like the majority of us, then you’re vulnerable to buying things you can’t afford.
  • You constantly go over your budget: sometimes, you miss-forecast how much you need to spend each month. But if you set a realistic budget and find that you’re still going over, then you’re probably consuming excessively.
  • You regret your purchases: the most obvious sign that you have a shopping habit is you regret things you bought. Buyer’s remorse is an overwhelming feeling and one we want to avoid.

ConsumerismNegatives of consumerism

  • Causes more pollution: Consumerism as a system can have devastating effects on the environment.
  • A major contributor to resource depletion: The second main negative of consumerism is resource depletion.  Simply put, resource depletion refers to the idea that human beings are using up the resources on the earth as an ever increasing rate such that we will ‘deplete’ or completely use up some resources.
  • Leads companies to develop low quality products: Modern companies practice a technique called ‘planned obsolescence’. In general, planned obsolescence is best understood as products that are designed to fail. Modern companies do this to encourage consumers to repurchase a product over and over again.
  • Does not necessarily lead to increased happiness beyond a certain point: The main negative aspect of consumerism is that it does not necessarily lead to higher levels of happiness for people.
  • Global inequality: The huge rise in resource consumption in wealthier countries has led to an ever widening gap between the rich and the poor. As the age old saying goes, “the rich get richer and the poor get poorer.”

What can we do?

  • Extend the lifespan of your things: Repairing your things is not only an effective way to reduce your consumption, but it’s also beneficial to the environment.
  • Reframe shopping as a skill: When you focus on the role the thing you’re buying will play in the overall experience instead of the experience of shopping itself, you’ll be able to shift away from a consumerist mind-set.
  • Do the deathbed test: Not to get too dark, but if you were hypothetically on your deathbed today, and you were reflecting on your life, what would be your fondest memories? The quality of our lives is generally measured by moments of “that was a good time”, not “that thing I had was awesome”.
  • Borrow or rent instead of buy: A simple method for getting your consumerism under control is to rent or borrow items instead of buying them.
  • Practice minimalism: What’s the ultimate alternative to consumerism? Minimalism. A minimalist is someone who naturally rejects consumerism and sees value in having fewer things over more things. Minimalism is a powerful philosophy that impacts how you view material things, your relationships, commitments, and digital inventory.

Conclusion:

  • The M.K. Gandhi once said: “The Earth provides-enough to satisfy everyone’s needs but not any one’s greed.” We shall find that Gandhian call to curtailment of wants is relevant in the rapidly depleting natural resources, bio-diversity and eco-system and its contemporary relevance

Mains question

Q. What do you understand by the term consumerism? Discuss importance of minimalism as there is rise in revenge shopping in post covid19 era.

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Services Sector

What is Purchasing Managers Index (PMI)?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PMI

Mains level : Not Much

India’s services firms saw growth in new business and output accelerate to a 11-year high in June, as per the survey-based S&P Global India Services Purchasing Managers Index (PMI).

What is the news?

  • The index rose to 59.2 last month, from 58.9 in May, signalling a strengthening in demand across the services sector, which had borne the brunt of the COVID-19 pandemic.

Purchasing Managers’ Index (PMI)

  • PMI is an indicator of business activity — both in the manufacturing and services sectors.
  • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
  • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
  • The PMI is compiled by IHS Markit based on responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

How is the PMI derived?

  • The PMI is derived from a series of qualitative questions.
  • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

How does one read the PMI?

  • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
  • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
  • If the figure is higher than the previous month’s then the economy is expanding at a faster rate.
  • If it is lower than the previous month then it is growing at a lower rate.

What are its implications for the economy?

  • The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available.
  • It is, therefore, considered a good leading indicator of economic activity.
  • Economists consider the manufacturing growth measured by the PMI as a good indicator of industrial output, for which official statistics are released later.
  • Central banks of many countries also use the index to help make decisions on interest rates.

 

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Services Sector

[pib] Guidelines for Other Service Providers (OSP)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Other Service Providers (OSPs), Sectors of economy

Mains level : Not Much

The Union Minister for Electronics & Information Technology has further liberalized the guidelines for Other Service Providers (OSPs).

Do you remember quaternary and quinary sectors of Economy from NCERTs?

What are OSPs?

  • These entities are business process outsourcing (BPO) organizations giving Voice based services, in India and abroad.
  • The term Business Process Outsourcing or BPO as it is popularly known, refers to outsourcing in all fields.
  • A BPO service provider usually administers and manages a particular business process for another company.
  • BPOs either use new technology or apply an existing technology in a new way to improve a particular business process.
  • India is currently the number one destination for business process outsourcing, as most companies in the US and UK outsource IT-related business processes to Indian service providers.

Main features of the liberalized guidelines

  • Distinction between Domestic and International OSPs has been removed. A BPO centre with common Telecom resources will now be able to serve customers located worldwide including in India.
  • EPABX (Electronic Private Automatic Branch Exchange) of the OSP can be located anywhere in the world. OSPs apart from utilising EPABX services of the Telecom Service Providers can also locate their EPABX at third Party Data Centres in India.
  • With the removal of the distinction between Domestic and International OSP centres, the interconnectivity between all types of OSP centres is now permitted.
  • Remote Agents of OSP can now connect directly with the Centralised EPABX/ EPABX of the OSP/ EPABX of the customer using any technology including Broadband over wireline/ wireless.
  • No restriction for data interconnectivity between any OSP centres of same company or group company or any unrelated company.

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