Services Sector Growth in Bangaru Telangana

Services Sector in Telangana

The services sector is a dominant sector of the State’s economy in terms of GSDP contribution and growth. The sector grew at double digit in last decade resulting in an increase in its contribution from 54 percent in 2004-05 to 63 percent in 2014-15. The services sector is the largest employment provider in Urban areas as 62.3 percent of the total urban workforce are dependent on services sector for employment in 2013-14.

Sustaining growth momentum in this sector at present level is important for following reasons: (i) employment elasticity in some of the sub-services sector such as tourism, real estate sector are high and waiting to be tapped, (ii) there has been increasing in the number of highly skilled professionals in the state seeking employment in the sector (iii)growth of services sector is important for the burgeoning urban population in the State, which is about39 percent at present.

Structure and Performance of Services Sector in Telangana

Major services in Telangana include trade, hotels and restaurants, transport, storage & communication, real estate and business etc. As per National Account Statistics data released by the Central Statistical Organisation (CSO), trade, hotels & restaurants account for about one-fourth of total services sector GSDP in the State, followed by real estate and business services (21 percent) and transport, storage and communications (21 percent). Details of sub-services sector contribution are given in Figure 5.1.

An analysis of growth in this sector using Compound Annual Growth Rate (CAGR) reveals that five out of nine sub-sectors in services have registered a double-digit growth in last decade in Telangana. Communications sector experienced the highest growth (CAGR of 24 percent) during 2004-05 to 2014-15. Other services grew at double-digit are banking & insurance sector (20 percent), transport, storage & communication (15 percent), transport by other means (14 percent) and trade, hotels and restaurants (10 percent) during the same period. Information Communication Technology (ICT) sector which is clubbed with business services and real estate has grown at 8 percent in last decade (See Table 5.1).

Table 5.1: Growth in Sub-Services Sector GSDP in Telangana during 2004-05 to 2014-15

Sl.No	Sub-Services Sector	CAGR during 2004-05 to 2014-15
1	Transport, storage & communication	15.47
2	Railways	-1.04
3	Transport by other means	14.03
4	Communication	24.25
5	Trade, hotels and restaurants	10.51
6	Banking & Insurance	20.01
7	Real estate, ownership of dwellings and business services	8.01
8	Public administration	7.01
9	Other services	6.23
	Services	11.03

Note: (i)CAGR implies Compound Annual Growth Rate, (ii) Base year 2004-05.

Source: CSO, Government of India

Companies doing business in Services:

As services sector include diverse activities, they are regulated by different departments of State and Central Government resulting in the lack of comprehensive information on the sector. While information on unorganised services sector such as laundry, barbers etc.are not available, data related to organised sector services such as enterprises, registered as companies are available with the Ministry of Corporate Affairs, with whichPerformance of services sector is assessed. Companies which filed their annual returns and profit and loss account with MCA-21 for the year 2014-15 (as on 21.01.2016) is considered for the analysis.

Note: Number of companies and turnover is based on annual filing done with MCA-21 of the Ministry of Corporate Affairs for 2014-15.
There are about 10,085 companies in the State doing business in the services sector,whose turn over is about Rs. 89,257 crore in 2014-15. The majority of the sub-services sectors in the State include business services (which predominantly consist of IT & ITeS companies), real estate and renting, trading, finance, insurance etc. In terms of a number of companies and turnover, business services (IT&ITES etc.) stands first; there are about 5,470 business services companies in 2014-15 with the turnover of Rs. 41,488 crore followed by community, personal & social services, trading etc.

Important Services Sectors in Telangana

I. Information and Communication Technology (ICT)

Information and communication technology is converging cutting edge technologies of Information Technology (IT) with telecommunications to manipulate and to transfer information. ICT industry in Telangana State consists of Business Processing Organisations and Knowledge Processing Organisations, providing professional services across the globe. State’s ICT services are mainly oriented towards foreign markets and contributes hugely to India’s IT exports. Over a period of time, Hyderabad has become an a premier global destination for IT and ITeS industry of India, next only to Bengaluru.

The IT industry in the State has grown by leaps and bounds in recent years. There are 1,300 IT units employing about 3.7 lakh professionals in the state, with an annual export turnover of Rs. 68,258 crore in 2014-15. About 89 new units were established during 2014-15 (see Table 5.2).

Table 5.2: Performance of ITIndustry in Telangana in 2014-15

Source: Department of Information Technology, Electronics and Communications, Government of Telangana.

Proactive initiatives were taken by the state Government to create state-of-the-art physical infrastructure for the growth of the Sector. However, in the wake of global economic slowdown, resulting in weak global demand for software exports, companies have adopted various methods such as diversification of market base towards emerging and developing countries, product diversification and cost reduction etc.

Major Initiatives to boost ICT Sector in Telangana:

S. No.	Description	Total
1	Total number IT units in Telangana State	1300
2	New units registered during 2014-15	89
3	Total Employment engaged	3,71,774
4	Exports earnings from IT (in Rs. crore)	68,258

The State Government aims to provide a congenial environment to services companies to start and grow their business in Telangana. In this direction, policy initiatives have been undertaken, some of them are mentioned below:

1. T-HUB: T-Hub was launched on November 5, 2015, as a unique public/private partnership between the government of Telangana, three of India’s premier academic institutes (IIIT-H, ISB & NALSAR) and key private sector leaders. T-Hub aims to be the catalyst for building Hyderabad as a start-up city and Telangana, as a start-up state.

Located in The Indian Institute of Technology Hyderabad (IIIT-H) campus, in Gachibowli, Hyderabad dedicated solely to entrepreneurship. An overwhelming number of startups registered to be a part of the T-Hub community. Extending to various fields like agri-tech, life sciences, financial technology, smart cities, IoT, clean technology etc, the startup community in Hyderabad has shown their interest in being a part of T-Hub. Within a short span of time, over 900 applications were received by the T-Hub team from startups across the country. T-Hub aims to become of the largest innovation ecosystems in the country and eventually globally. The project aims to build upon Hyderabad's natural strengths in IT & entrepreneurship and intends to nurture a vibrant innovation ecosystem by providing all the requisite support to unleash the latent entrepreneurial spirit amongst the new-age youth, thereby driving job growth and wealth creation.

2. Information Technology Investment Region (ITIR) at Hyderabad: Government of India has cleared Information Technology Investment Region (ITIR), Hyderabad. As per the Draft Project Report (DPR), ITIR would export IT products worth Rs. 2,35,000 crore with additional direct employment to 15 lakh people and indirect employment to 53 lakh people. This is expected to generate about Rs. 30,170 crore additional tax revenues to the State Government.

G.Rajendera Kumar