Issues and challenges of services sector
A few important issues and challenges, the service sector confronting are discussed below:
i) Infrastructure is vital to the proliferation of service sector. The infrastructure like electricity, telecommunication net work, and other basic utilities are required to be available by the government both for public and private sector in order to enhance contribution of service sector to economic growth. Marketing complexes, go-downs, and similar other infrastructure are required to be constructed for enhancing the effectiveness of service sector in an economy.
ii) The effective operation of service sector requires skilled manpower. Therefore, in recent year demand for management and IT professional is on the rise because of the rise in service sector in the economy. In the developed countries, service sector provides employment to more than 75% of the total employment in their economies. The developing countries are required to generate skilled manpower for the proliferation of service sector in their economies. To produce required amount of skilled manpower for the effective proliferation of the service sector is a challenge before the developing economies.
iii) Tax administration, governance and corruption are challenges to services sector. A simple taxation system with minimum hassle will entice the entrepreneurs to venture into service sector activities. The corruption in the developing countries is the main hurdle in the path of growth of service sector. Good governance is necessary pre-requisite and bad governance a challenge for service sector.
iv) Low wages and less employment are features of services sector in the developing economies. Despite its enhanced contribution to GDP, the rate of employment in the service sector particularly in developing countries has not been substantially enhanced as it is happening in developed countries of North America and Europe. Another woe of service sector in developing countries is low wage rate for people employed in the service sector. The low wage rate particularly in the service sector operating in urban areas is affecting the quality of life of people engaged in service sector.
v) Formation of appropriate regulatory mechanism is also a challenge before the government of developing countries. Urban management is a big problem. The functioning of local self-government institutions and effective implementation of urban development programmes are also a big challenge for effective administration of urban development projects and programmes.
vi) One of the important challenges before the service sector is the measurement of the performance of service sector. Unlike the two other sectors like agriculture and industry, it is very difficult to measure service sector output. Therefore, the performance of service sector in the economic development progress is scantly known to the lay man.