With the ongoing vaccination drive, the contact intensive services sectors are expected to witness revival, the Economic Survey said on Friday.
Hit hard by the pandemic, the overall services sector has witnessed a contraction of almost 16 per cent in the first half of 2020-21 on year-on-year basis.
In this, the contact intensive services sector was severely impacted, particularly sub-sectors such as tourism, aviation, and hospitality, the document noted.
"This decline was led by a sharp contraction in all sub-sectors particularly 'trade, hotels, transport, communication & services related to broadcasting’, which contracted by 31.5 per cent in H1 FY 2020-21," said the survey.
As per the first advance estimates, Gross Value Added (GVA) of the services sector is estimated to contract by 8.8 per cent in 2020-21, whereas it grew by 5.5 per cent in 2019-20.
"Sub-sectors as 'trade, hotels, transport, communication & broadcasting services', 'financial, real estate & professional services', and 'public administration, defence & other services' are estimated to contract by 21.41 per cent, 3.68 per cent and 0.82 per cent respectively," it added.
However, the survey also said services sector activity, which had contracted for five consecutive months from March after the pandemic, has started to pick up from September 2020.
"This pace of recovery is broadly aligned with high-frequency indicators that point to a pick in economic momentum with the measured opening up of the economy from June 2020," the Economic Survey 2020-21, tabled in Parliament by Finance Minister Nirmala Sitharaman, stated.
In the April-June quarter of 2020-21, the services sector contracted by over 20 per cent and later the contraction narrowed to 11.4 per cent in the July-September quarter.
Indian airlines, which were grounded between March and May, have been showing a gradual recovery from August on a monthly basis, although travel remains muted as compared to the last year.
"According to Directorate General of Civil Aviation (DGCA), 63.54 lakh domestic passengers travelled by air in November, which was 20.54 per cent higher than the passenger traffic in October when 52.71 lakh passengers flew," it said.
However, it also added that the domestic air traffic, stands 50.93 per cent lower in November 2020 as compared to November 2019.
The services sector accounts for more than 50 per cent of the Gross State Value Added (GSVA) in 15 out of 33 states and UTs and at some places such as Chandigarh and Delhi, it contributes a particularly high share of over 85 per cent.
The tourism sector, which is a major contributor in terms of GDP, foreign exchange earnings and employment, also had a debilitating impact. The sector has already undergone a slowdown in 2018 and 2019 before declining sharply in 2020 after pandemic due to travel-related restrictions.
"With the ongoing vaccination drive, the contact intensive service sectors can expect to witness revival," it said.
Tourism contributed 5 per cent share to India’s total GDP in 2018-19. It also supports almost 13 per cent of total employment in India.