Services sector growth is slowing, but there’s a silver lining

The Economic Survey 2018-19 has anything but good news for the services sector. According to the provisional estimates for gross value added (GVA), services sector growth moderated in FY2019 to 7.5%, from 8.1% a year ago. The survey points out that decline was due to a deceleration in the sub-sectors ‘trade, hotels, transport, communication & broadcasting services’ to 6.9% and ‘public administration and defence & others services’ to 8.6% in FY2019.

But there is a silver lining too, with growth in the sub-sector ‘financial services, real estate & professional services’ picking up to 7.4% in FY2019 from 6.2% in FY2018. “Despite the recent growth moderation, services sector growth continues to outperform agriculture and manufacturing sector growth, contributing more than 60 per cent to total GVA growth,” the survey highlights.

Despite the gloom, what catches the eye is the performance of the states which shows that the share of services in total gross state value added (GSVA) was more than 50% in 14 of all states and Union Territories. The share of services is particularly high in Chandigarh and Delhi with over 80% share while Sikkim was at the bottom with 30.2%. In contrast, the services sector accounts for less than 40% of share of services in GSVA in states such as Gujarat, Uttarakhand, Madhya Pradesh, and Chhattisgarh. Even states with a relatively low share of services such as Haryana, Jharkhand, Odisha, Andhra Pradesh, and Uttarakhand have witnessed strong services sector growth in the recent years, the latest economic survey highlights.