Ans: (a) Trends in
service sector growth
Meaning of service sector: The portion of the economy that produces
intangible goods. Service industry companies are involved in retail, transport, distribution, food services, as well as other
service-dominated businesses.
A service is an act or performance
offered by one party to another. They are economic activities that create value
and provide benefits for customers at specific times and places as a result of
bringing desired change.
According to Sir William B “Service refers to social efforts which
includes the Govt. to fight five giant evils – wants, disease, ignorance,
squalor and illness in the society”.
Characteristics of services
Service is an act or performance offered by one party to another.
They are economic activities that create value and provide benefits for
customers at specific times and places as a result of bringing about a desired
change in or on behalf of the recipient of the service. The distinct
characteristics of services are mentioned below.
1.
Intangibility: Services are intangible we cannot touch them are not physical
objects. According to Carman and Uhl, a consumer feels that he has the right
and opportunity to see, touch, hear, smell or taste the goods before
they buy them. This is not applicable to services. The buyer does not have any
opportunity to touch smell, and taste the services. While selling or promoting
a service one has to concentrate on the satisfaction and benefit a consumer can
derive having spent on these services.
For e.g. An airline sells a flight ticket from A destination to B
destination. Here it is the matter’
of consumer’s perception of services than smelling it or tasting it.
2.
Perishability: Services too, are perishable like labor, Service has a high degree
of perish ability. Here the element of time assumes a significant position. If
we do not use it today, it labor if ever. If labor stops working, it is a
complete waste. It cannot be stored. Utilized or unutilized services are an
economic waste. An unoccupied building, an unemployed person, credit
unutilized, etc. are economic waste. Services have a high level of perish
ability.
3.
Inseparability: Services are generally created or supplied simultaneously. They are
inseparable. For an e.g., the entertainment industry, health experts and other
professionals create and offer their service at the same given time. Services
and their providers are associated closely and thus, not separable. Donald
Cowell states ‘Goods are produced, sold and then consumed whereas the services
are sold and then produced and consumed’. Therefore inseparability is an
important characteristic of services which proves challenging to service
management industry.
4.
Heterogeneity: This character of services makes it difficult to set a standard for
any service. The quality of services cannot be standardized. The price paid for
a service may either be too high or too low as is seen in the case of the
entertainment industry and sports. The same type of services cannot be sold to
all the consumers even if they pay the same price. Consumers rate these
services in different ways. This is due to the difference in perception of
individuals at the level of providers and users. Heterogeneity makes it
difficult to establish standards for the output of service firm.
5.
Ownership: In the sale of goods, after the completion of process, the goods are
transferred in the name of the buyer and he becomes the owner of the goods. But
in the case of services, we do not find this. The users have only an access to
services. They cannot own the service.
For e.g. a consumer can use personal care services or medical services or can
use a hotel room or swimming pool, however the ownership remains with the
providers.
According to Philip Kotler, “A service is an activity or benefit
that one party can offer to another that is essentially intangible and does not
result in the ownership of anything. “From this it is clear that the ownership
is not affected in the process of selling the services.
6.
Simultaneity: Services cannot move through channels of distribution and cannot be
delivered to the potential customers and user. Thus, either users are brought
to the services or providers go to the user. It is right to say that services
have limited geographical area. According to Carman, “Producers of services
generally have a small size area of operations than do the producers of items largely
because the producer must to get the services or vice- versa.”
When the producers approach the buyer time is taken away from the
production of services and the cost of those services is increased. On the
other hand it cost time and money for the buyers to come to producers directly.
Here the economics of time and travel provide incentives to locate more service
centers closer, to prospective customer, resulting in emergence of smaller
service centers for e.g. aeroplane cannot be brought to customer, etc.
7.
Quality Measurement: A service sector requires another tool for measurement. We can
measure it in terms of service level. It is very difficult to rate or quantify
total purchase. E.g. we can quantify the food served in a hotel but the way
waiter serves the customer or the behavior of the staff cannot be ignored while
rating the total process.
Hence we can determine the level of satisfaction at which users are
satisfied. Thus the firm sells good atmosphere convenience of customers,
consistent quality of services, etc.
8.
Nature of demand- Generally, the services are fluctuating in nature. During the peak
tourist seasons there is an abnormal increase in the demand of services.
Therefore, while identifying the salient features of services one cannot ignore
the nature of demand. E.g. tourists go to hill stations during summer season
wherein public transport utilities are used substantially. This indicates that
flexibility is the important feature of service.
Key service Businesses in India:
1. Education
and Health Services
2. Financial
Activities
3. Government
4. Information
5. Leisure
and Hospitality
6. Professional
and Business Services
7. Transportation
and Warehousing and utilities
8. Wholesale
and Retail Trade
Trade and investment in
Services
India’s Trade in
Services
Trade
in services has been growing rapidly in the past two decades (1990-2010). In
1980s India’s services trade was valued at $6 billion and in 2010 it reached
$240 billion. India’s services exports not only grew more rapidly than the
country’s merchandise exports, but it also grew faster than global services
exports. For the period 1980-2010, India’s service exports grew at a CAGR of 13.2%,
while world exports of services have grown at the rate of 7.84%.
Substantial part of this growth has been in
the post reform period (1991-2010) – 21.7%. In the 1980s and 1990s, India had a
negative trade balance in services but from 2004 onwards, it has a positive
trade balance in services. India’s share in world trade in services has
increased from less than one percent to over 3% between 1980 and 2010, while it
share in goods trade remained constant at one per cent during the same period.
While the world’s trade in services is still dominated by the developed
countries, emerging economies like China and India are now among the top ten
exporters and importers of services among WTO member countries. In 2011, India
was the eighth largest exporter and seventh largest importer of services. Comparatively,
China was the fourth largest exporter of services.
Investments in Services
In
the post-liberalisation period, services sector has attracted significant
foreign investment due to the availability of skilled labour at lower wages and
the large and unsaturated domestic
market.
According to AT Kearney Global Services Location Index, in 2011, India was the
leading
outsourcing destination among 50 countries, followed by China. India’s rank is
highest due to human resource (2nd) but it ranked poorly in terms of business
environment (43rd).
The
economic reforms in general and liberalisation of FDI policy in particular have
led to
manifold
increase in FDI inflows since the 1990s. In 1980s, India received $0.08 billion
worth of FDI inflows, which increased to $42.5 billion in 2008 and then
declined due to the global slowdown to $24.6 billion in 2010. The cumulative
FDI equity inflows were $179 billion during April 2000 to August 2012. Bulk of
the FDI inflow into India is routed through Mauritius. Other important
investing countries include Singapore, Japan, the US and the UK.
Over the years, India’s share in world’s FDI
inflows has increased. In 2009, India’s share in
World’s
total FDI inflows were 2.44%, which increased from 0.15% in 1980s. However,
India’s share declined to 1.98% in 2010.
Trends in Service Sector Growth
The
Indian economic growth has slowed down to 6.9% in 2012. Nevertheless, it is
projected to grow at 7.3% in 2013, which is higher than the average projected
growth rate for emerging and developing economies (6%).With the rise in GDP and
per capita income, the number of people below the poverty line has declined
while those in high and middle-income group have increased. McKinsey &
Company (2007) forecast that if the Indian economy grows at the rate of 7.3%
between 2005 and 2025, then by 2025, 583 million Indians will be in the middle
class, which is equivalent to the current population of Australia. The share of
middle class in the total population will increase from around 5% in 2005 to
41% in 2025. They will account for 59% of the country’s total consumption by
2025. With increase in income, there has also been an increase in the literacy
rate, which is expected to increase further.18
Moreover, India has one of the youngest
populations in the world - with 54% of Indians below 25 years of age. All this
is leading to a change in the consumption pattern with an increase in demand
for discretionary services like education, private health, personal care and
hotels and restaurants. The Indian market is large and unsaturated and majority
of services has been opened up for foreign investment. India wants to develop
as a knowledge-based hub and the government is promoting exports of services.
All these factors will drive the future growth of services in India.
Indian government projection show that
services sector will continue to grow at a fast pace. The Planning Commission
estimates that the economy will grow at 9.5% in the XIIth
Five Year Plan (2012-2017). The services
sector is projected to grow at the rate of 10% during 2012-2017. Certain
services like trade, hotels and restaurants and transport, storage and
communications and financing, insurance, real estate are expected to grow
faster than overall services growth while others like community social and
person services may grow at a slower pace.
Ans: (b)
Business
opportunities in the rural sector
Meaning of Rural Sector: In general, a rural
area is a geographic area
that is located outside cities and towns. Rural areas are also known as
'countryside' or a 'village' in India. It has a very low density of population.
In rural areas, agriculture is the chief source of livelihood along with
fishing, cottage industries, pottery etc. The quest to discover the real rural
India still continues in great earnest. Almost every economic agency today has
a definition of rural India. Here are a few definitions: According to the
Planning Commission, a town with a maximum population of 15,000 is considered
rural in nature.
Rural development
in general is used to denote the actions and initiatives taken to improve the
standard of living in non-urban neighborhoods, countryside, and remote
villages. These communities can be exemplified with a low ratio of inhabitants
to open space. Agricultural activities may be prominent in this case whereas
economic activities would relate to the primary sector, production of
foodstuffs and raw materials.
Characteristics of Rural sector
(i) Labor Intensive:
Rural industries are
labor intensive because they give more employment of labor than machines. Rural
entrepreneurs are generally labor intensive because they give much stress on
human capital.
(ii) Use of traditional Skill:
Rural entrepreneurs
give much emphasis on use of traditional skill during the course of production.
They have no capacity to apply modern skill and technology in their industry.
(iii) Less Capital:
Rural entrepreneurs
generally invest less capital to produce goods and commodities in their
industry. As they have no capacity to afford for much capital investment, they
emphasize on less capital investment.
(iv) Decentralized Production:
As rural industries
are scattered and operated in a small scale, it encourages decentralized
production.
(v) Use of Local Raw Materials:
Rural entrepreneurs
make better use of local raw materials during the course of production. They
usually make better and effective use of local raw materials because its
transportation cost is less.
Business Opportunities in Rural Sector
In the rural area of your city for finding new business
opportunities you must keep safety and environment issues creating another
opportunities for the products. Build your ideas for the marketing the product
and promoting in local area is a good start for your new business. Try to
produce the products as local and keep marketing and don’t hide the flavor the
thinks you make from your company. Buy the local products in rural area for
your business and this will reduce the cost of transportation. Make the products
with local area and high quality, safety products with strict
Standards.
Here are the new businesses opportunities for surviving in
rural area are:
·
1) Local clothing: create
clothing with your idea promote them in local area, then go beyond in rural
area and find how the business runs. Create clothing with your thinking and promote
into variety of clothing and market in local area.
·
2) Local photography business: take photos in your area by visiting
the most unknown areas make into posters, mounted and frame art, postcards and
sell towards tourists, students, or visitors who visit your area. You can make
the blog for photography business and sell it.
·
3) Local food business in rural area: start
new business by preparing new food stuffs and market them into restaurant, food
markets, it will make huge commercial production for food business. It is
better for foods business because in rural area as for lower transportation
distances
4) Local tour guide: be a
local tour guide in online by creating a website about your area. Guide the
visitors who visit your area and living places this can be set up your own
business. Target the visitors, tourists, or any school trips visiting your area
this can make you some of the money.
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