Coupon Accepted Successfully!


Types of Services

While talking about the service sector, services can be classified into three types, viz., business, social and personal services. They are:.
  1. Business Services: These are the services which are used by business enterprises for the management of their activities. For example, banking, insurance, transportation, warehousing and communication services.
Difference between Services and Goods





An event like watching a movie in a theatre.

Physical device like a tape of the movie.





Treatment by a doctor is immaterial

Understandable like the medicines


Different people have different demands

different people having standard demands get satisfied.


Producing and consuming simultaneously

Producing and consuming separately


Cannot be stocked

Can be stocked


Needed by the customers during delivery

Not possible


An Introduction to the GATS

The settlement on trade in services reached in the Uruguay Round is perhaps the most significant single development in the multidimensional trading system. The new General Agreement on Trade in Services (GATS) for the first time assigned internationally approved rules and commitments, largely comparable with those of the General Agreement on Tarrif and Trade (GATT). The most significant thing of GATS is the sorting of services used in making commitments. The GATS
schedule mostly follows a grouping, which recognizes 11 essential service sectors (plus a twelfth sector for various services). These sectors are segmented into around 160 subsectors or different service activities. For example, the tourism department separates into subsectors for hotel and restaurants.
The 12 sectors are:
  1. Business services (including professional and computer)
  2. Communication services
  3. Construction and related engineering services
  4. Distribution services
  5. Educational services
  6. Environmental services
  7. Financial services (Insurance and Banking)
  8. Health related and social services
  9. Tourism and travel related services
  10. Recreational, cultural and sporting services
  11. Transport services and
  12. Other services not included elsewhere
  1. Social Services: These are those services that are usually provided willingly in pursuit of certain social achievements. These achievements may be to develop the status of living for weaker sections of society, to present educational services to their offsprings, or to provide medical care and hygienic surroundings in slum areas. These services are normally provided willingly but for some attention to cover their expenses. For example, Medical care and educational services presented by some Non-government organizations (NGOs) and government bodies.
  2. Personal Services: These services differ from person to person. They cannot be uniform in nature. They differ according to the service provider. They also rest upon the customer's choices and needs. For example, tourism, entertaining services, hotels. In the background of better understanding of the business world, we will be bounding our further talk to the first section of the service sector.

Business Services

There is tough competition in the world today and the survival of the fittest has become the rule. Nonperformance is unacceptable, and hence companies have a tendency to stick to what they can do best. To be competitive, business organizations, have become more and more dependant on expert business organizations. Business organizations look towards banks for convenience of capital; insurance companies for acquiring their plant, technology, commodities, etc., insured; transport companies for transportation of raw goods; and finished goods, and telecom and postal services to get in touch with their vendors, suppliers and customers. Today's globalised world has opened a rapid difference in the service industry of India. India has gained a very competitive edge over other countries when it comes to providing services to the developed economies of the world. Many alien companies are looking to India for having a host of business services. They are even transferring a section of their business operations to be done in India. We will talk about these in detail in the next chapter.
Role of Services in an Economy
  • The services branch - including power, telecom and transport have about 60-65 per cent of the economy in maximum number of OECD (Organisation for Economic Cooperation and Development) countries. It may be surprising that even developing countries have an important proportion of their GDP acquired from this services sector.
  • Continued, high and broad-based development is necessary for economic development and poverty mitigation. What is required for such development is an increase in venture in the economy. There are good signs on both the development and investment fronts in upcoming years. India is the second largest populated country of the world by purchasing power comparision. Its placed among the top 5 economies of the globe and anticipates becoming the third largest economy in the world by 2025.
  • As with any developing economy the sectoral constitution of GDP has been varying with the services showing an increased share of above 50 per cent and that of agriculture coming down to 25 per cent. The services sector continued to be the backbone of the growth during 2003-04, contributing 57.6 per cent to original GDP development. Acing the upgrowth was 'trade, hotels, transport and communication'. This was in accordance with the improved performance of the goods manufacturing sectors. The strong growth in cargo taken care at major ports as well as the rise in cargo and passenger traffic of the railways improved the performance of the transport sector.
  • According to the recent approximations, services account for about 63 per cent of the global economy. Industry accounts for 32 per cent and agriculture just 5 per cent. Nearly 70 per cent of the work force in developed economies is employed in the services sector.

Test Your Skills Now!
Take a Quiz now
Reviewer Name