India has taken substantial steps towards economic liberalization during last few years, having worked out strategies for bringing about rapid economic development. During these years, a large increase in the middle class category income has been seen and it is estimated that there are about 200 million people in the middle class category. And particularly on the basis of this figure, all the efforts are concentrated.
With increasing standards in education, the Indian government, provided free of cost and compulsory till the age of 14 years. Primary school, secondary and higher secondary school, junior degree colleges-all these institutes are in great demand, with the increase in population and an awareness of the benefits of seeking education. With the establishment of technical institutes even at the district level, these has emerged an increase in demand for the services of professionally qualified technicians.
Banking services are very necessary to meet financial requirement of the public and the national industrial sector. The electric services provide benefits to the society, industry and so no. adequate hospital services are essential for the well beings of the society. The tourism industry is a potential one which has geared itself to make tourists enjoy the holiday in destinations of their choice, and take them away from the monotonous life in cities. The entertainment industry plays an equality important role towards this end. Several major economic and political changes occurred during the 1970s and 1980s, which affected the developing countries and paved the way for the implementation of IMF-sponsored Structural Adjustment Policies (New Economic Policy) in India in 1991. New Economic Policy of 1991 includes globalization, liberalization and privatization (Disinvestment).
The New Economic Policy includes reduction in government expenditure, opening of the economy to trade and foreign investment, adjustment of the exchange rate from fixed exchange rate system to flexible exchange rate system, deregulation in most markets and the removal of restrictions on entry, on exit, on capacity and on pricing. Nowadays, more small and medium scale enterprises contribute significantly to the economy. In post 1991 period, there were several measures undertaken by the government to develop services sector, especially through deregulation of some sub sectors of services sector. Foreign direct investment vary between 26 per cent to 100 per cent in Information Technology sector, Business Process Outsourcing, E-commerce activities, Infrastructure etc has been permitted. The role of restrictive government policy is the role of liberalization, or market-oriented reforms and opening up more areas of activity to the private sector.
Till the liberalization of the early 1990s, the trend in private final consumption expenditure was a straightforward one – the share of services in the total consumption basket (at 1999-00 prices) rose by around 3 percentage points each decade, from around 8 per cent in 1950-51 to 11 per cent in 1960-61, 14 per cent in 1970-71, 17 per cent in 1980-81 and 21 per cent in 1990-91. However, this trend changed dramatically and, by 2000-01, the share of services in private consumption was up by 10 percentage points, to 31 per cent. By 2006-07, it was up another 8 percentage points, indicating that the pace quickened further in the 2000s.
A shift in the consumption pattern of this nature indicates that the demand-side impetus to services growth will continue indeed will get stronger. Between 1965 and 2000, India’s exports of business services rose by 43 per cent a year.