ECONOMIC HIGHLIGHTS
New Delhi, 29 December 2005
Fast-Growing Industry
SERVICE SECTOR NEEDS MORE
ATTENTION
By Dr. Vinod Mehta
The economic reforms for the past one decade and a
half have mainly focussed on the manufacturing sector and very little attention
has been paid to the service sector. The
time has come to give serious attention to this sector for a number of reasons,
especially the traditional service sector like hospitality, medical care etc.
Firstly, as the experience of many developed
countries has shown that after a certain point of development and with
increasing urbanization it is the service sector which grows at a relatively
faster pace than either the manufacturing sector or the agricultural sector. India can also be said to have
reached a point when its service sector can expect to grow at a relatively
faster pace and this needs to be given the necessary support; the Indian IT
sector is already growing at a very fast pace.
Secondly, it has also been observed that this sector
generates the largest number of jobs and has the capacity to absorb a large
number of the labour force, i.e. to say, it has a relatively largest potential
of employment generation.
Thirdly, the role of imported inputs like machinery,
equipment etc., in the service industry is very limited and most of the
equipment needed can be easily procured from within the country for a large
number of service sub-sectors. It may
need import of certain specialized equipment or some latest equipment which
will not be a drain on foreign exchange.
And the equipment once imported will have less wear and tear compared to
use of equipment in the manufacturing or agricultural sectors.
Fourthly, the service sector has a very good
potential of earning foreign exchange especially the service sector related to
tourism like hotels, travel agencies, restaurants, specialized transport of all
kinds, services of guides and so on. In
fact the foreign exchange used to import certain equipment to modernize the service
industry would be only a small proportion of potential hard currency
earnings. The Thai experience here can be quite
illustrative. The tourist industry of Thailand is the
most important foreign exchange earner.
Compared to Thailand, India is a vast country and
there are a large number of places of historical interest to foreign tourist;
beaches to spend their holidays; India is the birthplace of Buddha, yet large
number of Buddhist pilgrims go to Thailand and rarely come to India. It is because the tourist infrastructure
facilities are not well developed; the good hotel accommodation is limited,
taxis are rickety, domestic flights seldom keep the schedules, facilities for
converting foreign exchange are limited and so on. In Thailand,
every tourist facility, be it hotel, be it a restaurant, or taxis or exchange
bureaus all are of high standard compared to India. For this reason tourists arrive in Bangkok by hordes.
This is just an example of one service industry where
both foreign and domestic tourists expect something much better. The service industry in the wider sense of
the term would include the services of law advisers, artistes, technical
consultants, health clubs apart from the tourist industry, financial sector
like banking and insurance, transport sector covering rail, road, air, river
and sea transport, telecommunications, medical services and so on.
It is high time that attention is paid to the
expansion of this industry in the country.
It will also serve the wider purpose of creating more jobs as well as
earning more foreign exchange. As a first measure there is a need to have a
comprehensive investment policy with regard to each sub-sector of the service
sector and wherever necessary it be supplemented with fiscal concessions etc.
as for instance for development of hotel industry in Bodh Gaya for Buddhist
pilgrims or for development of tourist infrastructure in north-east and so on.
Almost all modes of transport are in need of
modernization, some more than others.
The air sector has been opened up to the private sector and private
investment, yet the quality of service leaves much to be desired. The ground services are not up to the
mark--sometimes the weighing machines are not working and sometimes the luggage
belt is not working and sometimes the bags are mixed up. The behaviour of the ground staff towards the
passengers, whether domestic or international, is far from courteous. Therefore, what is needed in this sector is
upgradation of ground support facilities, proper training of ground staff in
human relations as all this will attract more people which, in turn, will
generate more employment in various sub-sectors of the tourist industry.
The surface transport--whether inter-city or intra-city--
is really in very bad shape. The buses
are rickety, the seats are uncomfortable, doors are missing; so is true of
taxis and other means of transport. All
of these things are manufactured in the country but the technology is very
backward and discarded in almost all the countries. The buses manufactured in the country and in
other countries stand class apart. This
is an area in the service sector which requires up-gradation of technology
either through import of technology or through development of indigenous
technology.
The situation is much worse in the health
sector. One, there is a real shortage of
hospitals and medical care centres relative to the number of patients. Two, though the country can boast of a large
number of good doctors and a few very good hospitals, yet we do not have enough
of technical staff to run and maintain those machines which are invariably
imported. Three, because of the shortage
of funds the cleanliness of the hospitals has become a casualty. All this calls for big investments in this
sector, including investment on the technical staff to run and maintain the
sophisticated equipment.
The infrastructure of financial sector is also
outdated. Even though the nationalized
banks and insurance companies have decided to go in for computerization of their
work, yet they are much behind their counterparts in other countries of the
world. Whereas in other countries
because of extensive computer network it takes a maximum of five minutes to
encash a cheque or to credit a cheque, in India it would take a minimum of
fifteen minutes to encash a cheque and a minimum of two days to credit the
local cheque and anywhere from 15 days to one month to credit an outstation
cheque.
Again exchanging hard currency for rupee can be
frustrating on holidays and Sundays and when the bank employees are on strike;
and on the top of it the tourists are asked to fill up forms. If all the foreign exchange conversion
transactions were to be computerized, just entering the name and the passport
number in the computer and the calculation done instantly would save the
tourist from a lot of frustration.
Similarly ATMs which would exchange a few specified hard currencies
could be set up at vantage points to help the foreign tourist to encash his
money for Indian rupee even on holidays and also beyond banking hours.
All this requires up-gradation of banking technology
so that the normal services to both domestic and foreign customers can be
speeded up. Extensive computerization
would also speed up the settlement of business transactions among various
parties in India
and abroad; the whole business depends upon the flow of funds and
computerization can help considerably in this direction.
Taking an overall view, one can say that the time is
ripe to give an all round big thrust to the service sector in the country. It
is hoped that the next year’s budget will provide some push to the traditional
service sector.---INFA
(Copyright,
India News and Feature Alliance)
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