SERVICE SECTORS IN INDIA

The services sector is not only the dominant sector in India’s GDP, but has also attracted
significant foreign investment flows, contributed significantly to exports as well as provided
large-scale employment. India’s services sector covers a wide variety of activities such as trade,
hotel and restaurants, transport, storage and communication, financing, insurance, real estate,
business services, community, social and personal services, and services associated with
construction.The services sector is the key driver of India’s economic growth. The sector has
contributed 54.17 per cent of India’s Gross Value Added at current price in 2018-19*. Net
service exports stood at US$ 60.25 billion in April-December 2018 (P).

Some of the significant service sectors in India are:-

Tourism: Tourism is one of the major engines of economic growth in most parts of the world
including India. Since tourism does not fall under a single heading in the National Accounts
Statistics, its contribution has to be estimated. In 2007-08, the contribution of tourism to the
country’s GDP, and to total jobs (direct and indirect) in the country was estimated at 5.92 per
cent, and 9.24 per cent respectively.

Shipping : Shipping plays an important role in the economic development of the country,
especially in India’s international trade. The Indian shipping industry also plays an important
role in the energy security of the country, as energy resources, such as coal, crude oil, and natural
gas are mainly transported by ship. Further, during crisis situations, Indian shipping contributes
to the uninterrupted supply of essentials, and can serve as second line of defence.

Port services: Being the gateways of international trade, ports play a vital role in the overall
economic development of the country. India is blessed with a long coastline with 13 major ports
and around 200 non-major ports. While around 72 per cent of the total cargo handled by volume
was through India’s major ports and the rest through non-major ports till 2008- 09, with the
development of private ports the share of major ports fell to 67 per cent during 2009-10.
Storage services : The warehousing services sector plays an important role in the economy of the
country. Warehousing services are an important cog both in bound logistics, as raw materials,
parts, and stores have to be stocked, inventory control maintained, and materials which do not
meet specifications returned to suppliers, as well as outbound logistics as the goods produced
have to be stored in different geographical locations before shipping/ dispatch as per
demand/order inflows.

Telecom and related services : The opening of the telecom sector in India has not only led to
rapid growth but also helped a great deal towards maximization of consumer benefits as tariffs
have been falling across the board as a result of increasing competition, with the telecom service
price index falling from 100 in 2004-05 to 85.08 in 2007-08.

Education and training sector : The education sector in India is estimated at US$ 91.7 billion in
FY18 and is expected to reach US$ 101.1 billion in FY19. Number of colleges and universities
in India reached 39,050 and 903, respectively in 2017-18. India had 36.64 million students
enrolled in higher education in 2017-18.

IT services : India has gained a brand identity as a knowledge economy due to its IT sector. The
IT industry has four major components: IT services, business process outsourcing (BPO),
engineering services and R&D, and software products. The growth in the services sector in India
has been led by the IT sector which has become a growth engine for the economy, contributing
substantially to increases in the GDP, employment, and exports.

Research and development (R & D) services : As per the Department of Science and Technology
estimates, the national investment on R&D activities was Rs.37,777.9 crore in 2007-08. Though
India, with a R&D share of 0.8 per cent in the GDP in 2007-08, is ahead of other developing
countries like Mexico, Malaysia, and Chile, it lags behind countries like South Korea (3.5 per
cent), Russia (1.1 per cent), China (1.5 per cent), and Brazil (1 per cent).

Legal services : The legal systems in India, the USA, and in the UK are rooted in British
common law, thus making Indian lawyers competent, without much additional training, to
undertake standard legal work such as vetting of contracts, patent registrations, or reviewing of
documents. India has an estimated 600,000 legal practitioners and is next only to USA in terms
of numbers.

Consultancy services : Consultancy is essentially a knowledge-based profession with an

underlying developmental role spanning a wide range of sectors. Not only do consultancy
services play an important role in the development of the economy, but such consultancy exports
enhance the visibility of Indian technical expertise abroad and boost the external sector in
multiple ways, including foreign exchange revenues, promotion of export of technology and
merchandise (especially capital goods and raw materials), and training of personnel, while
contributing significantly to national development in the host country.
PHARMACEUTICAL SECTOR IN INDIA
The pharmaceutical industry discovers, develops, produces, and markets drugs or pharmaceutical
drugs for use as medications to be administered (or self-administered) to patients, with the aim
to cure them, vaccinate them, or alleviate the symptoms. Pharmaceutical companies may deal
in generic or brand medications and medical devices. They are subject to a variety of laws and
regulations that govern the patenting, testing, safety, efficacy and marketing of drugs.

India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry
supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand
in the US and 25 per cent of all medicine in UK. India enjoys an important position in the global
pharmaceuticals sector. India also has a large pool of scientists and engineers who have the
potential to steer the industry ahead to an even higher level. Presently over 80 per cent of the
antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are
supplied by Indian pharmaceutical firms.
India has an established domestic pharmaceutical industry, with a strong network of 3000 drug
companies and about 10,500 manufacturing units.Out of these, 1,400 units are World Health
Organization (WHO) good manufacturing practice (GMP) approved; 1,105 have Europe’s
certificate of suitability (CEPs); more than 950 match therapeutic goods administration (TGA)
guidelines; and 584 sites are approved by the US Food and Drug Administration (USFDA).The
pharmaceutical industry in India produces a range of bulk drugs, which are the key acting
ingredients with medicinal properties that form the basic raw materials for formulations. Bulk
drugs account for roughly one-fifth of the industry output while formulations account for the
rest. India also has the expertise for active pharmaceutical ingredients (APIs) and sees significant
opportunities for value-creation.

Key players in the industry

India’s generic drug producers hold a strong position in the global supply chain and play an
integral role in developing the pharmaceutical industry. Some of the major domestic players in
the industry include Sun Pharmaceutical Industries, Cipla, Lupin, Dr. Reddy’s Laboratories,
Aurobindo Pharma, Zydus Cadila, Piramal Enterprises, Glenmark Pharmaceuticals, and
Torrent Pharmaceuticals.

Major pharmaceutical clusters

Andhra Pradesh, Gujarat, Maharashtra, and Goa are the major pharmaceutical manufacturing
clusters in the country. The bulk drug clusters are located primarily in Ahmedabad,
Vadodara, Mumbai, Aurangabad, Pune, Hyderabad, Chennai, Mysore, Bangalore,
and Visakhapatnam (Vizag).The pharmaceutical hubs offer investment opportunities in the
production of API or bulk drugs, biosimilars, vaccines, neutrceuticals, as well as food and drug
testing and contract research

Export trends
Reckoned as a high quality generic manufacturer across the globe, India exports half of its total
production of pharmaceuticals to more than 200 countries in the world. In 2017-18, India
exported pharma products worth US$ 17.27 billion. By 2020, the industry estimates the exports
to grow by 30 per cent to reach US$ 20 billion.The US is the most lucrative generics market for
India’s pharma industry. It is valued at around $60 billion and accounts for about 25 percent of
India’s total shipment. In 2017-18, India exported about US$3.21 billion worth of generic drugs
to the US, despite the tough regulatory environment in the country.  With branded drugs going
off patent during 2017-19, research agencies estimate the export of generic drugs to the US to
rise by about US$55 billion.  India’s other important export destination include the United
Kingdom (US$383.3 million), South Africa (US$ 367.35 million), Russia (US$ 283.33 million)
and Nigeria (US$ 255.89 million).

Government Initiatives

Some of the initiatives taken by the government to promote the pharmaceutical sector in India
are as follows:

 In October 2018, the Uttar Pradesh Government announced that it will set up six pharma
parks in the state and has received investment commitments of more than Rs 5,000-6,000
crore (US$ 712-855 million) for the same.
 The National Health Protection Scheme is largest government funded healthcare
programme in the world, which is expected to benefit 100 million poor families in the
country by providing a cover of up to Rs 5 lakh (US$ 7,723.2) per family per year for
secondary and tertiary care hospitalisation. The programme was announced in Union
Budget 2018-19.
 In March 2018, the Drug Controller General of India (DCGI) announced its plans to start
a single-window facility to provide consents, approvals and other information. The move
is aimed at giving a push to the Make in India initiative.
 The Government of India is planning to set up an electronic platform to regulate online
pharmacies under a new policy, in order to stop any misuse due to easy availability.
 The Government of India unveiled 'Pharma Vision 2020' aimed at making India a global
leader in end-to-end drug manufacture. Approval time for new facilities has been reduced
to boost investments.
 The government introduced mechanisms such as the Drug Price Control Order and the
National Pharmaceutical Pricing Authority to deal with the issue of affordability and
availability of medicines.

Performance of pharmaceutical sector in India (2018-19)

Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various
vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. India
contributes the second largest share of pharmaceutical and biotech workforce in the world. The
pharmaceutical sector in India was valued at US$ 33 billion in 2017. India’s domestic
pharmaceutical market turnover reached Rs 1,29,015 crore (US$ 18.12 billion) in 2018, growing
9.4 per cent year-on-year (in Rs) from Rs 1,16,389 crore (US$ 17.87 billion) in 2017. In
February 2019, the Indian pharmaceutical market grew by 10 per cent year-on-year and market
stood at Rs 11,244 crores (US$ 1.61 billion) for the month of May 2019.
With 71 per cent market share, generic drugs form the largest segment of the Indian
pharmaceutical sector. Based on moving annual turnover, Anti-Infectives (13.6 per cent),
Cardiac (12.4 per cent), Gastro Intestinals (11.5 per cent) had the biggest market share in the
Indian pharma market in 2018.
Indian drugs are exported to more than 200 countries in the world, with the US as the key
market. Generic drugs account for 20 per cent of global exports in terms of volume, making the
country the largest provider of generic medicines globally and expected to expand even further in
coming years. Pharmaceutical exports from India, which include bulk drugs, intermediates, drug
formulations, biologicals, Ayush & herbal products and surgicals reached US$ 19.14 billion in
FY19 and US$ 5.17 billion in FY20 (up to August 2019). The exports are expected to reach US$
20 billion by 2020. In FY18, 31 per cent of these exports from India went to the US.
The ‘Pharma Vision 2020’ by the government’s Department of Pharmaceuticals aims to make
India a major hub for end-to-end drug discovery. The sector has received cumulative FDI worth
US$ 15.98 billion between April 2000 and March 2019. Under Budget 2019-20, total allocation
to the Ministry of Health and Family Welfare is Rs 62,599 crore (US$ 8.96 billion). Rs 6,400
crore (US$ 915 million) has been allocated to health insurance scheme Ayushman Bharat-
Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). As per Union Budget 2019-20, Rs 1,900
crore (US$ 0.27 billion) have been set aside for research of the total amount and Rs 62,659 crore
(US$ 8.96 billion) allocated for Ministry of Health and Family Welfare.
As per Economic Survey 2018-19, government expenditure (as a percentage of GDP) increased
to 1.5 per cent in 2018-19 from 1.2 per cent in 2014-15 for health. Indian pharmaceutical sector
is expected to grow at a CAGR of 15 per cent soon and medical device market expected to grow
US$ 50 billion by 2025.

Road ahead/ future of pharmaceutical sector in India :

FICCI analysis shows that the Indian pharmaceuticals market will grow to USD 55 billion by
2020 driven by a steady increase in affordability and a step jump in market access. At the
projected scale, this market will be comparable to all developed markets other than the US, Japan
and China. Even more impressive will be its level of penetration. In terms of volumes, India will
be at the top, a close second only to the US market. This combination of value and volume
provides interesting opportunities for upgrading therapy and treatment levels. Pricing controls
and an economic slowdown can wean away investments and significantly depress the market,
allowing it to reach only USD 35 billion by 2020. On the other hand, the market has the potential
to reach USD 70 billion provided industry puts in super normal efforts behind the five emerging
opportunities, and enhances access and acceptability in general. The mix of therapies will
continue to gradually move in favor of specialty and super-specialty therapies. Notwithstanding
this shift, mass therapies1 will constitute half the market in 2020. Metro and Tier-I markets2 will
make significant contributions to growth, driven by rapid urbanization and greater economic
development. Rural markets will grow the fastest driven by step-up from current poor levels of
penetration. On balance, Tier-II markets will get marginally squeezed out. The hospital segment
will increase its share and influence, growing to 25 per cent of the market in 2020, from the
current 13 per cent. Medicine spending in India is projected to grow 9-12 per cent over the next
five years, leading India to become one of the top 10 countries in terms of medicine
spending.Finally, the five emerging opportunities will grow much faster than the market, and
will have the potential to become a USD 25 billion market by 2020. Over the past 5 years, the
distinction between local players and multinational companies has increasingly blurred. We
believe that if market leadership is the aspiration, the implications and imperatives will be
common for both groups of players. They will need to strengthen three sets of commercial
capabilities: marketing excellence, sales force excellence, and commercial operations. In
addition, players will need to put in place two enablers: strengthen the organization to be able to
sustain performance and manage rising complexity; and collaborate with stakeholders within and
outside the industry to drive access and shape the market. The government will need to make
investments to expand access to healthcare, while ensuring that industry remains viable and
competitive.