INDIA AND THE SERVICE SUPPLY CHAIN

Brian Spath

Eeshaan Adiga

Rohit Agarwal

Santhosh Baskar

AGENDA

• Overview

• Gross domestic product-GDP

• What is the service sector?

• IT Services

• BPO

• Tourism

• Challenges and Way Forward

OVERVIEW

• The service industry forms the backbone of the social and economic development of the region.

• Emerged as one of the the largest and fastest growing sectors in the world.

• Higher than that of agriculture and manufacturing sectors.

• The growth of services-sector GDP has been higher than that of overall GDP between the period FY2001- FY2014 

GROSS DOMESTIC PRODUCT-GDP

• Gross Domestic Product(GDP) refers to the market valve of all final goods and services produced within a country in a given period.

• GDP is often considered as an indicator of a country's standard of living.

• The services sector is a vital cog in the wheel of the Indian economy. The sector, accounting for 56 per cent of the gross domestic product (GDP), grew 5 per cent in the FY14.

GDP BREAKDOWN BY SECTOR

WHAT IS SERVICE SECTOR?

• Primary sector: It covers areas such as farming, mining and fishing.

• Secondary sector: It covers manufacturing and making things.

• Tertiary sector or Service Sector: The basic characteristic of this sector is the production of services instead of end products.

INDIA’S SHARE OF SERVICES EXPORT IN THE WORLD

• India’s share of services in the world exports of services, increased from 0.6 per cent in 1990 to 1.0 % in 2000 and further to 3.3 per cent in 2011. It has been increasing faster than any other country’s export rate.

• Since 2006, India allowed FDI in single-brand retail to the extent of 51 per cent.

• The overall openness of the economy reflected by total trade including services as a percentage of GDP shows a higher degree of openness at 55.0 per cent in 2013-14 compared to 38.1 per cent in 2004-5.

• India has the second fastest growing services sector with its compound annual growth rate at nine per cent, just below China’s 10.9 per cent, during the last 11-year period from 2001 to 2012.

KEY STATS

WHAT DOES THIS MEAN TO A SUPPLY CHAIN MANAGER?

WHY IS ALL THIS HAPPENING?

• Economic Affluence

• Cultural Changes

• Rampant Migration

• Development of Markets

• Economic Liberalization

• Healthcare Consciousness

• Booming I.T Sector

IT SERVICES

• The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.5% in 2012.

• Various types of IT services include• IT Hardware and Software

services• IT Business Process

Outsource– IT Education

• Some of the Major IT Hubs of India Are Bangalore, Chennai,

Hyderabad.

IMPACT OF IT GROWTH ON GDP

IT SOFTWARE SECTOR

• Growth of IT in India has been due to Outsourcing, which for many reasons are• Large availability of Work Force.• Experienced and Trained Working force.• Process and Quality.• Affordable workforce and infrastructure facilities.• Unique geographic location.• Investor Friendly government policies.• No Language Barrier.

• Some of the IT services provided are, Client Server Support, Data Analysis, Software Development, Content and Animation Development, Application Development, E- Commerce etc.

• Off late E-Commerce boom has been the major driving force in the growth.eg Flipkart vs Amazon.

SALARY COMPARISON, USA VS INDIA

HOW DOES THIS SECTOR FUNCTION ?

BPO• Business Process Outsourcing , where a firm contracts a certain

process of its operations and responsibilities to a third party service provider.

• Various types of BPO are, ITES-BPO, KPO and LPO.• As of 2012, around 2.8 million people work in outsourcing sector.

Annual revenues are around $11 billion, around 1% of GDP. • What is Fueling the growth ?

• Cheap and Easy access to work force who can speak fluent English

• Inroads into Rural India to expand market and same time Reducing cost.

• 24hr services available.• What are the risks involved ?

• Revealing classified information of the company.• No Talent retention.

MORE ABOUT BPO

• Services Offered by Indian BPO include: • Customer & Tech support services• Telemarketing services• Insurance processing• Data entry, Conversion and data processing• Form processing services

• Interesting facts about the Indian BPO industry• The BPO sector in India is estimated to have reached a 54 per cent

growth • The demand for Indian BPO services has been growing at an annual

growth rate of 50%• 70% of India's BPO industry's revenue is from contact centers, 20%

from data entry work and the remaining 10% from information technology related work

• Indian BPOs handle 56% of the world's business process outsourcing

• Off late, India has been losing a lot of its global market share of the BPO industry to countries like Philippines and certain eastern EU countries.

• India Lost 70% of Call Centre Business to Philippines in the last 2 yrs.

TOURISM• Accounted for 6.6% of GDP in

2012, with expected growth of 7.9% over next decade

• Price competitive

• Good air and ground transport infrastructure

• Few hotel rooms per capita

• Low ATM penetration

• Popular attractions

• Taj Mahal

• Khajuraho Temple

• Lotus Temple

• Popular cities

• Chennai

• Delhi

• Mumbai

MEDICAL TOURISM• In 2011, India saw 850,000 medical tourists

• Industry expected to grow 20 to 30% over next five years

• Most Patients from Middle East, Africa, and Asia – Interest from America is growing

• Chennai known as India’s “Healthcare Capital”

• Reasons for Medical tourism

• Low costs, as low as 1/10th the cost in Europe or US

• Little to no waiting period

• World class facilities and specialty hospitals

• Less likely to face a language barrier

MEDICAL TOURISM• Many Indian Doctors now returning back to India from the UK and

United States

• Tightening salaries

• Increased healthcare regulations

• Steps to making medical tourism easier:

• Continual removal of visa restrictions for foreign visitors

• Some hospitals hiring translators to aid in facilitation of treatment

• Growth of services firms dedicated to matching clients with hospitals to suit their treatment needs

CHALLENGES

• Lack of infrastructure in rural areas and some urban areas.

• Though the growth of the service sector is nearly 57 %, it generates only about 25% of the total employment.

• Etiquettes and good behavior are the hallmarks of the service sector. Indian service sector needs to focus on these areas to maximize the potential in sectors likes banks, hotels, tourism, and hospitals.

• More development needed in airports and railways in the smaller states.

• Steps to reduce corruption, it projects a bad image of the country to the world.

• Finally, the service sector cannot grow alone, it needs backing of primary and secondary sectors. Steps need to be taken to improve these sectors.

FUTURE

• Globally outsourcing industry would continue to grow.

• Following the success of US and UK, more countries in the European Union would outsource their business.

• Technological power shift from the West to the East as India and China emerge as major players.

• Political backlash over outsourcing would come down as companies reap the benefit of outsourcing.

QUESTIONS?