In the global economic landscape, the role of services has emerged as a pivotal force, propelling nations towards unprecedented growth trajectories. As economies strive to achieve the ambitious milestone of a Five Trillion Dollar Economy, services have become not only a cornerstone but also a catalyst for this transformative journey. In an increasingly interconnected world, the provision of services encompasses a vast array of sectors including finance, healthcare, education, technology, and more. With innovation and digitalization reshaping traditional paradigms, services have transcended geographical boundaries, unleashing immense potential for economic expansion and prosperity. Harnessing the dynamism of the services sector is paramount in the pursuit of a Five Trillion Dollar Economy, as it fosters efficiency, drives productivity, and fosters inclusive growth. Thus, understanding the intricate interplay between services and economic advancement is essential in charting a path towards sustainable development and realizing the ambitious aspirations of nations worldwide.
Essentially, a $5-trillion economy refers to the size of an economy measured by the annual Gross Domestic Product (GDP). GDP represents the total monetary value of all goods and services produced within an economy within a year. It serves as a benchmark among countries to gauge their economic standings.
In 2014, India’s GDP stood at $1.85 trillion. By 2018, it had risen to $2.7 trillion, positioning India as the sixth-largest economy globally.
Beyond its monetary definition, achieving a $5 Trillion Economy entails leveraging all economic growth levers—investment, consumption, exports—across all three sectors: agriculture, manufacturing, and services. This ambitious goal also necessitates improving all three sectors to align with India’s Sustainable Development Goals (SDGs).
By attaining double-digit growth, India can aspire to provide employment opportunities for its burgeoning youth population. Favorable demographics can position India as an upper-middle-income economy, fostering a prosperous and thriving middle class.
Contribution of Different Sectors in achieving the goal of $5 Trillion Economy
Services sector includes improving rail connectivity and seamless connectivity to major attractions; facilitating visa regime for medical travel; allowing expatriate professionals to perform surgeries in identified hospitals; and e-commerce policy and regulatory framework for logistics segment. This sector contributes significantly to India’s GDP, aiming for around 60% contribution by 2024. Exports, job creation, increased productivity, and competitiveness of Champion Services Sectors like IT, tourism, medical value travel, and legal will further boost exports.
- The Commerce Minister has identified 15 strategic overseas locations for the creation of Trade Promotion Organisations (TPOs).Â
- The Multi-Modal Logistics Parks Policy (MMLPs) aims to improve the country’s logistics sector by lowering freight costs, reducing vehicular pollution and congestion, and cutting warehouse costs to promote movements of goods for domestic and global trade.
- In the defence sector, there is a need to identify key components and systems and encourage global leaders to set up manufacturing bases in India by offering limited period incentives, ensuring technology/process transfer.Â
- To promote growth of accounting and financial services, there is a need for FDI in the domestic accounting and auditing sector, transparent regulatory framework, and easing restrictions on client base.Â
- Measures like exploring the introduction of insurance in the film industry, promoting private investments in film schools, exploring franchise business models, and promoting gaming industry value chains aim to push audio-visual services.
- Foreign universities are allowed to set up campuses in India, with an easy visa regime for students and education service providers, removing regulatory bottlenecks, providing recognition of online degrees, and setting up appropriate evaluation techniques for online courses in the education sector.
Initiatives by India
- The Champion Services sector initiative is also underway to accelerate the expansion of select service sectors.
- The 2019 Union Budget discusses plans with a pan-India focus to give a further boost to Sagarmala, Bharatmala, and UDAN projects, besides the dedicated industrial and freight corridors.
- The budget proposes further opening of FDI in aviation sector, media, animation AVGC, and insurance sectors in consultation with all stakeholders. 100% FDI will be permitted for insurance intermediaries.
Challenges
- The primary issue in this sector is that jobs with lower salaries struggle to attract significant employment. This persists as a future dilemma, particularly as India aims for double-digit growth in the near future.
Way Forward
- There is a need to place India’s official statistics on a firmer footing, ensuring that economic policy-making is based on reality. However, achieving accurate numbers will not alone suffice.
- The government alone cannot meet the target of achieving a $5 trillion economy. The private sector must take the lead. Budget 2018-19 included a hike in the disinvestment target, governmental support to NBFCs, and a long-term plan to deepen the corporate bond markets.
- Structural reforms in the agriculture sector are also necessary. Modernizing the farm sector is imperative.
- States should recognize their core competence and aim to increase their economy by 2 to 2.5 times, focusing on raising GDP targets from the district level and working towards growing exports.
- Development should commence at birth, fostering a proactive approach to human development that will ultimately contribute to real economic growth.
- The global healthcare and wellness industry is valued at $8 trillion. India should convert its 600 district hospitals into medical, nursing, and paramedical schools to train 5 million doctors, nurses, and paramedics to meet global requirements.
FAQs
Q: What are services in the context of a five trillion dollar economy?
A: Services refer to intangible goods provided by individuals or businesses to consumers or other businesses. In the context of a five trillion dollar economy, services play a crucial role as they encompass a wide range of sectors including healthcare, education, finance, tourism, IT, and more. Their contribution to GDP growth and employment generation is significant, driving economic expansion and diversification.
Q: How do services contribute to achieving a five trillion dollar economy?
A: Services contribute to a five trillion dollar economy through various means. They foster innovation, productivity, and efficiency, thus enhancing overall economic output. Additionally, service sectors like IT, healthcare, and finance attract foreign investment, stimulate domestic consumption, and create employment opportunities, all of which are essential for sustained economic growth.
Q: What challenges do service sectors face in the journey towards a five trillion dollar economy?
A: Service sectors encounter several challenges on the path to a five trillion dollar economy. These may include regulatory hurdles, infrastructural deficiencies, skill gaps, technological disruptions, and global competition. Addressing these challenges requires strategic policy interventions, investments in infrastructure and human capital, fostering innovation, and enhancing the ease of doing business.
Q: Which service sectors are expected to be the key drivers in achieving a five trillion dollar economy?
A: Several service sectors are anticipated to be key drivers in achieving a five trillion dollar economy. These include Information Technology (IT), healthcare, education, tourism, financial services, logistics, and e-commerce. These sectors have high growth potential, offer substantial employment opportunities, and contribute significantly to GDP through their direct and indirect impacts on other sectors.
Q: What strategies can be employed to boost the growth of service sectors in a five trillion dollar economy?
A: To boost the growth of service sectors in a five trillion dollar economy, policymakers can implement various strategies. These may include investing in digital infrastructure, promoting skill development programs, incentivizing research and development, easing regulatory burdens, facilitating access to finance for startups and SMEs, fostering international collaborations, and promoting tourism and hospitality through marketing initiatives. Such strategies can create an enabling environment for service sectors to thrive and contribute substantially to economic growth.
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