India’s great leap into services: 

India’s great leap into services

Context:

The emergence of e-commerce platform is an example of how digital revolution can lower transaction costs, increase productivity as well as make it more inclusive.

India and China comparison:

China and India are two of the fastest growing economies in the world. But they are following very different growth paths:

  • China is an exporter of manufactured goods.
  • India has acquired a global reputation for exporting services, leapfrogging the manufacturing sector

Services sector in India

  • Services contribute more than manufacturing to India’s output growth, productivity growth and job growth. India’s growth pattern resembles that of the US.
  • This raises big questions that can services contribute more than manufacturing to output growth, productivity growth and job growth.
  • The new industrial revolution and digital technological changes have changed the growth drivers in developing and developed countries.
  • These technological changes have enabled services to be the new driver of growth.
  • The digital revolution, by lowering transaction costs in services and overcoming problems of asymmetric information, has made services more dynamic than in the past.
  • The emergence of e-commerce platforms is an example of how digital revolution can lower transaction costs, increase productivity as well as make it more inclusive.
  • Internet-based businesses or services, fixed up-front costs can be high initially, but once the physical infrastructure is in place, each additional customer, user, or transaction incurs very little extra cost.
  • Developing countries are relying more on services and less on manufacturing as drivers of growth and job creation.
  • The relationship between income and economic structure has shifted over time, with countries across the income distribution uniformly increasing the share of labour in service sector.
  • While global growth convergence in manufacturing was a clear and strong trend some decades ago, it is no longer as strong in recent decades.
  • Service show stronger growth convergence in recent decades.

Services-led growth

  • Drivers of structural transformation and growth, either services-led growth or manufacturing-led growth, are similar but also changing.
  • These include trade policy, urbanization, and investments in physical and human infrastructure, and are country-specific.
  • Global trade in goods has never fully recovered since the global financial crisis of 2007-08.
  • Services, which account for more than 70% of global output, are still in their infancy. The long-held view that services are non-transportable, non-tradable, and non-scalable no longer holds for a host of services that can be digitized.
  • The globalization of services provides new opportunities for India to find niches beyond manufacturing, where it can specialize, scale up, and achieve explosive growth.
  • As the services produced and traded across the world expand with globalization, the possibilities to develop based on services will continue to expand.
  • Global internet usage has grown globally. But this growth is much faster in developing countries. India alone adds one million new users every month to a booming mobile phone market.
  • Unlike, in the manufacturing sector, investment in human infrastructure, education and skills, matter much more.
  • India needs accelerated investments in both physical and human infrastructure to support new drivers of growth and job creation.
  • A young population is generally more connected with technological changes. So, India’s demographic dividend should be an asset for the digital revolution and services-led growth.
  • Job growth is important, as ten million more people will join the labour force every year in India and Agriculture and manufacturing create fewer jobs today compared to the past.

Digital revolution:

  • Expansion of digital technology can play a big role in improving rural access to banking.
  • Financial inclusion can be achieved through last-mile connectivity.
  • Financial services will help in medium-size cities, small towns, and villages to become new drivers of growth.
  • The digital revolution means it is possible for the services sector to deliver rapid growth and jobs more sustainably than the manufacturing sector.

Government’s initiatives for digital revolution:

  • The Governments’ Digital India initiative is also proving a number of schemes for the benefit of the farmer. Some of the schemes in the agriculture sector include, ‘mkisan’, ‘farmer portal’, ‘Kisan Suvidha app’, ‘Pusa Krishi’, ‘Soil Health Card app’ , ‘eNAM’, ‘Crop Insurance Mobile APP’ , ‘Agri Market app’ and ‘Fertilizer Monitoring App.
  • Keeping in mind women’s safety, applications like ‘Nirbhaya app’ and ‘Himmat app’ have been launched that facilitate sending of distress calls. There are also apps for law enforcement agencies, courts and judiciary.
  • Thus, several initiatives by Government in various sectors are not only an attempt to revolutionise the society but also focus on utilizing the digital technologies to elevate the down trodden and bridge the gap between the different social strata.

Conclusion:

  • Digital revolution in India is significant as it promises to bring a multi-dimensional metamorphosis in almost all sectors of the society including service sectors. From digitization in governance to better health care and educational services, cashless economy and digital transactions, transparency in bureaucracy, fair and quick distribution of welfare schemes all seem achievable with the digital India initiative of the present Government.
  • A look at Government initiatives in various sectors in past three years show how digital revolution in India is not only changing the way society functions but also bridging the gap between the haves and the have-nots of the country.
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