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India’s service sector’s expansion accurately illustrates a classic economic growth paradigm. India gained its independence more than half a century ago. Did you know that India’s service sector now contributes to about 66% of the Indian GDP. India presently possesses the fastest-growing service sector with the highest labour productivity. Let us trace this growth back to when it originated and how it has impacted our country.
The period after India’s independence, from 1950 to 1970, was predominantly an agricultural economy, with the nation seeing a prolonged growth rate of less than 4% in the service sector. Growth began in the mid-1980s and surged in the 1990s because of new reforms and liberalisation. Reforms paved the way for faster growth in the manufacturing and financial sectors, increasing service sectors. Thanks to privatisation and the relaxation of FDI restrictions, the service sector’s growth and success can be seen now.
India’s expansion in the service sector drew international attention because, whereas many countries generally go from agriculture to industries, India went from agriculture to the service sector. Doesn’t it seem amusing? All service subsectors in India have expanded quicker over time, with Information Technology, Communications, and Financial Sectors performing the best. The fastest-growing service activities tend to require more skilled labour, with which India is well known. Because the industrial sector is heavily dependent on infrastructural development, the service sector has surpassed it. We all know that India isn’t very good at it, but deregulation and more exports have opened the road for service sector growth.
India’s service sector is currently the country’s largest and fastest-growing industry, with a bright future ahead of it since it is expected to expand rapidly. India’s overall commerce in services is greater than the world average. However, a few challenges exist, such as the employment rate. The sector couldn’t generate sufficient employment for the country. Exports of services are also lower than in other countries, primarily concentrated in a few markets. Infrastructure is weak, and many people in India don’t even have access to healthcare and education.
There are some bright possibilities for our country’s future, and if all goes well, India’s employment rate will hopefully increase. Despite the pandemic, the service sector has rebounded with a substantial increase in revenues, resulting in the second-fastest growth in commercial activity in over a decade and a half. By 2025, India’s healthcare business is predicted to be worth $372 billion, while the country’s digital economy is expected to be worth $1 trillion. The IT and business services industry is also predicted to rise by 8% to US$ 14.3 billion. India has a promising future if the right reforms are implemented. They will help enhance the productivity and efficiency of the service sector, ultimately leading to inclusive growth.